SUPREME COURT OF INDIA

Before:- Ruma Pal and C.K. Thakker, JJ.

Civil Appeal No. 599 of 2005. D/d. 17.1.2005.

Himadri Coke & Petro Ltd. - Appellant

Versus

Soneko Developers (P) Ltd. and others - Respondents

Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Sections 25 and 22 - Auction sale - Recovery - Participation in the proceedings - Appellants offer which was not in response to the advertisement could not have been punished to enter into the arena by making an offer - Extension of time beyond period specified in the tender - Held, impermissible - Detailed directions issued for fresh auction.

[Paras 8 and 10]

ORDER

Ruma Pal, J. - Leave granted.

2. Respondent 2 obtained a decree against Respondent 3. For execution of the decree, the property belonging to Respondent 3 was put up for sale. After a series of advertisements pursuant to the last sale notice, Respondent 1 was found to be the highest bidder for the property having bid an amount of Rs 62 lakhs. Respondent 1 deposited 25% of the offered amount. In terms of the conditions of sale, the balance amount was to be deposited on 15-4-2003. It was made clear in the terms and conditions of sale that the payment was to be made by way of bank draft.

3. Undisputedly Respondent 1 did not make payment of the balance amount within the specified time. The Tribunal set up under the Debts Recovery Appellate Tribunal accordingly cancelled the sale to Respondent 1 by order dated 16-6-2003.

4. Respondent 1 filed an appeal before the Presiding Officer. While the appeal was pending, the appellant submitted an offer to the Receiver for purchase of assets of the judgment-debtor for a sum of Rs 64 lakhs. According to the appellant, this offer was placed before the Recovery Officer by 12-9-2003. The appellant then made an application before the Debts Recovery Tribunal offering to purchase Respondent 3's assets for Rs 64 lakhs. DRAT however confirmed the said sale in favour of Respondent 1. The appellant challenged the order of confirmation of sale under Article 227 of the Constitution. The application was disposed of by the High Court by directing the Presiding Officer to dispose of the appellant's application offering Rs 64 lakhs.

5. The Presiding Officer rejected the application filed by the appellant and confirmed the sale in favour of Respondent 1. The appellant filed an appeal before the Appellate Tribunal. The appeal was allowed and the order of the Presiding Officer rejecting the appellant's application was set aside. The sale of the property was confirmed in favour of the appellant for a sum of Rs 70 lakhs. It is the appellant's case that Respondent 1 has been asked to increase his offer of Rs 62 lakhs, but Respondent 1 refused to do so. Respondent 1 challenged the order of the Appellate Tribunal confirming the sale in favour of the appellant under Article 227 before the High Court. The High Court stayed the order of the Presiding Officer relating to the confirmation of sale in favour of the appellant subject to Respondent 1 depositing a sum of Rs 8 lakhs. According to Respondent 1 the amount has been duly deposited. As a consequence, Respondent 1 has deposited a total of Rs 70 lakhs towards the price of the property being sold.

6. The High Court by the impugned order allowed the application of Respondent 1 and confirmed the sale in favour of Respondent 1 for Rs 70 lakhs. The appellant claimed that it had raised its offer by a further sum of Rs 10 lakhs. The High Court did not accept the appellant's offer. Incidentally, the appellant has also deposited an amount of Rs 70 lakhs with the Receiver consequent upon the order of the Appellate Tribunal in his favour. On the basis of the High Court's order allowing the sale of the property in favour of Respondent 1 the Recovery Officer has confirmed the sale in his favour on 27-3-2004.

7. The appellant preferred this appeal in March 2004 when this Court granted an interim order directing the status quo to be maintained. The order is still operating.

8. We are of the view that the sale must be set aside and the property be sold after readvertisement. As far as the appellant is concerned it could not have been allowed to participate in the proceedings as it had not submitted an offer pursuant to the last advertisement. If any person's offer other than the offers received in response to the advertisement has to be considered, then an opportunity must be granted to other offerers pursuant to a fresh advertisement. The appellant could not have been permitted to enter into the arena by making an offer which was not in response to the advertisement. The last date specified in the advertisement resulting in the sale to Respondent 1 has long since expired.

9. As far as Respondent 1 is concerned, we are of the view that it was bound by the terms and conditions of sale as was the authority concerned. It was not up to them to extend the dates for submission of the balance price when there was no clause in the terms and conditions of the sale allowing the authority to extend the time beyond the period specified in the advertisement for making the initial deposit or the balance price.

10. Consequently, we are of the view that the entire sale should be set aside. We note that the appellant has offered now to purchase the property for Rs 1 crore. Although we will not accept the offer of the appellant at this stage but we will use it as a benchmark for the purpose of directing a fresh sale to be held by the Recovery Officer. The sale shall be advertised in two newspapers, one having circulation throughout the country and one having circulation in the local area. The advertisements may be made in local language for the local newspaper but the advertisements in the national newspaper shall be made only in English. The terms and conditions of sale shall specify that the lowest acceptable offer for the purchase of the property in question is Rs 1 crore. Both the parties before us will also be entitled to participate and bid for the property. If there are bids over and above Rs 1 crore, the sale will be made to the highest bidder. If on the other hand the bids do not reach Rs 1 crore, the appellant shall be obliged to purchase the property at a price of Rs 1 crore. The parties are at liberty to withdraw any amount which they may have already deposited with the authorities concerned, if they so desire. As far as Respondent 1 is concerned, the earnest money deposited shall be returned, after defraying the cost of the sale. The advertisements shall be made within a period of three weeks.

11. The appeal is disposed of accordingly.

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