It is further noted that the e-auction sale procedures are user friendly in nature. It is also noted that the intending purchasers could utilize the services of technically qualified persons or agencies, in making their bids. We are conscious of the fact that e-auction sale procedures, being followed by the respondent banks, have not been challenged by the purchasers, in the present batch of writ petitions. Further, nothing has been shown on behalf of the petitioners to substantiate their claims that the intending purchasers would suffer certain impediments in making their bids, for the properties in question, due to their illiteracy. While so, it would not be open to the petitioners to claim, without furnishing sufficient materials before this Court, to show that the persons who had availed the financial facilities, including those who had been the guarantors and those who had created the mortgages or pledges, in respect of the properties in question, would be at a disadvantage due to the use of the e-auction sale procedures, which involves the use of digital technology. On the contrary, we are convinced that the e-auction sale procedures followed by the respondent banks and the authorities concerned would go a long way in reducing the unhealthy practices being followed by the cartels and the syndicates, in the public auction sales of the secured assets. Further, there is no specific prohibition, either in the provisions of the the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, or in the Security Interest (Enforcement) Rules, 2002, prohibiting the conducting of e-auction sales of the secured assets.
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Madras High Court
4 S.Anandaraj vs State Bank Of India on 20 February, 2014
Coram: THE HONOURABLE MR.JUSTICE M.JAICHANDREN and THE HONOURABLE MR.JUSTICE K.KALYANASUNDARAM 2. Heard the learned counsels appearing for the parties concerned.
3. The learned counsels appearing for the petitioners had submitted that the impugned e-auction sale notices, issued by the authorised officers of the respondent banks concerned, are arbitrary, illegal and void. The terms and conditions prescribed in the e-auction sale notices in question are not in tune with the Security Interest (Enforcement) Rules, 2002. The procedures prescribed under the Rules, especially, those which are enshrined in Rule 8 of the said Rules, have not been followed by the authorised officers of the respondent banks concerned, while issuing the impugned e-auction sale notices.
4. It had been further submitted that a number of onerous terms have been incorporated in the impugned e-auction sale notices, including the requirement of digital signatures. It had also been stipulated that the respondent banks and the authorities concerned cannot be held liable for the discrepancies or irregularities, if any, that may occur during the process of e-auction sales. In fact, it could be noted that the requirement of the digital signature owes its origin to the Information Technology Act, 2000. The definition of Digital Signature is found in Section 2 (p) of the said Act. Clause (q) of Section 2 of the Act, states that a "Digital Signature Certificate" means a Digital Signature Certificate issued under sub Section (4) of Section 35 of the Act. Section 3 of the Act, provides the procedure for the authentication of electronic records.
5. The learned counsels appearing for the petitioners had also pointed out that Section 1(4) of the Information Technology Act, 2000, states that nothing in the Act shall apply to the documents or transactions specified in the First Schedule, provided that the Central Government may, by notification in the Official Gazette, amend the First Schedule, by way of addition or deletion of the entries therein.
6. It had also been pointed out that the First Schedule of the Information Technology Act, 2000, describes the documents or transactions to which the Act shall not apply. In the item 5 of the First Schedule, it has been stated, specifically, that the Act shall not apply to any contract for the sale or conveyance of an immovable property or any interest in such property. While so, the transactions that would take place, as per the terms and conditions prescribed in the impugned e-auction sale notices, cannot be sustained in the eye of law, as an e-auction cannot be conducted with regard to a contract for the sale or conveyance of an immovable property, as per the provisions of the Information Technology Act, 2000.
7. It had been further stated that there is no specific provision, either in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, or in the Security Interest (Enforcement) Rules, 2002, permitting the respondent Banks to bring the mortgaged properties for sale, by way of e-auction.
8. It had been further submitted that an e-auction is different from that of a public auction. When the procedures to be followed by the respondent banks and the authorised officers concerned fall under the public law domain, they should act only in the manner prescribed by the law and in no other manner. There is no doubt that an e-auction can only be held, as provided under the relevant provisions of the Information Technology Act, 2000, and in no other manner. Authentication of the procedures, while conducting an auction, by using the electronic mode, can only be by the use of the digital signature. Such a procedure had not been contemplated, either under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, or in the Security Interest (Enforcement) Rules, 2002.
9. The learned counsels appearing for the petitioners had further submitted that, on a deeper analysis of Rule 8 of the Security Interest (Enforcement) Rules, 2002, it could be noted that, before a sale of the immovable property in question is effected, the authorised officer concerned shall obtain the valuation of the said property, from an approved valuer. Thereafter, he shall fix the reserve price of the property, in consultation with the secured creditor and may sell the whole or any part of the immovable secured asset, by obtaining quotations from the persons dealing with similar secured assets, by inviting tenders from the public, by holding a public auction or by way of a private treaty. It also provides that the authorised officer shall serve to the borrower a notice of 30 days for the sale of the immovable secured assets and by causing a public notice in two leading newspapers, one of which should be in the vernacular language, having sufficient circulation in the locality, by setting out the terms of the sale, including the description of the immovable property to be sold, the secured debt for the recovery of which the property has been brought for sale, the reserve price and the time and place of the public auction or the time after which the sale by any other mode shall be completed.
10. It had also been submitted that Rule 9 of the Security Interest (Enforcement) Rules, 2002, prescribes a number of conditions for the completion of the process of sale by way of public auction. Such procedures have been prescribed only with the aim of getting the best price possible for the secured assets that had been brought for sale.
11. It had been further stated that it is clear that an e-auction is distinct from a public auction. From a clear reading of the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, it could be seen that no legal sanction had been accorded for conducting an e-auction, for the sale of the secured assets. As such, it is clear that the e-auction proposed to be conducted, in respect of the properties in question, has not been authorised by law, even though it might not be specifically prohibited.
12. It has been further stated that e-auction sale procedures followed by the banks concerned are arbitrary in nature, as it creates a disadvantage for the intending purchasers of the secured assets brought for sale, who are living in rural areas, as they would not have the necessary facilities to participate in the e-auction sale. Further, they would not have the necessary skills or the knowledge to participate and to make their bids in the e-auction sale. The disadvantage caused to the intending purchasers, who are living in rural areas and to those who are illiterates, would result in the infringement of Article 14 of the Constitution of India. The purpose for which public auctions are held is to get the best price possible for the properties that are brought for sale.
13. It had been further submitted that, as per Section 12 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the Reserve Bank of India is to determine the policy and to issue the necessary directions to regulate the financial system and to prevent the affairs relating to securitisation and reconstruction of companies from being conducted in a manner detrimental to the interests of the investors and the public interest. It is not for the respondent banks concerned to adopt their own method of bringing the secured assets for sale, by way of e-auction, without any specific directions having been issued by the Reserve Bank of India, by way of circulars or notifications. The auctions conducted by the financial institutions concerned ought to be circumscribed by the directions issued by the Reserve Bank of India. Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, relates to the enforcement of security interests. The said section prescribes the modalities in dealing with the security interests created in favour of the secured creditors.
14. It has also been stated that Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, contains the provisions with regard to the taking of possession of the secured assets, by the secured creditors. Section 34 of the Act specifies that no civil court shall have the jurisdiction to entertain any suit or proceeding in respect of any matter, which a Debts Recovery Tribunal or the Appellate Tribunal is empowered to determine, as per the provisions of the said Act. Section 35 states that the provisions of the Act shall override the other laws, which are in force, if they are inconsistent with the provisions of the said Act. It has been further stated that Section 40 of the Act states that the Central Government may pass appropriate orders to remove the difficulties, if any, in giving effect to its provisions.
15. The learned counsels had further stated that, from the various provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, it could be seen that the Banks concerned have sufficient powers to bring the secured assets for sale, by way of public auction. However, there are no clear guidelines provided under the Security Interest (Enforcement) Rules, 2002, to sell the secured assets, by way of e-auction. In fact, amendments have been made in the various enactments mentioned in Section 41 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, for the purpose of giving effect to the provisions enshrined in the Act. As such, it would not be open to the secured creditors to borrow the procedures found in other enactments for bringing the secured assets for sale. The secured creditors can invoke the specific provisions incorporated in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, for bringing the property concerned for sale, by way of public auction. It is clear that the authorised officers concerned would not be empowered to bring the properties for sale by way of e-auction, as no guidelines are available for the said officers to choose the procedures for selling the secured assets. Thus, the e-auction procedures adopted by the authorised officers concerned, for selling the secured assets, would be arbitrary in nature.
16. It has been further stated that the banks concerned would have to follow the procedures prescribed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the Security Interest (Enforcement) Rules, 2002, strictly. They cannot go beyond the four corners of the provisions found in the Act and the Rules. Thus, it is clear that it would not be open to the authorised officers concerned to exercise their discretion in such matters, without having the necessary guidelines to do so.
17. It has been further submitted that the process followed by the secured creditors, for bringing the secured assets for sale, by way of e-auction, is arbitrary and illegal. The respondent banks cannot utilize the services of private service providers, as they cannot be described as intermediaries or as authorised officers. E-auction, per se, as a mode of selling the secured assets, is not really the appropriate method for conducting public auction , as per the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. In fact, the e-auction process is contrary to the Rules, which prescribes the procedures for conducting public auctions. As per Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, an authorised officer alone can conduct a public auction. Such an authority cannot be delegated to a service provider, who is a private person or an entity.
18. The learned counsels had relied on the decision of the Supreme Court, in Ashoka Smokeless Coal India (P) Ltd Vs. Union of India and others, 2007 (2) SCC 640, to state that the e-auction procedures followed by the respondent banks are not in tune with the decision of the Supreme Court. Paragraphs 132 and 133 of the said decision read as follows:
"Advantages or Disadvantages of E-Auction :
132. We may at this juncture notice the purported advantages of E- Auction as submitted on behalf of the Union of India.
i) The system of E-Auction is simple, easily accessible, transparent also offers equal opportunity to all coal customers/intending buyers.
ii) Any citizen of India can participate and purchase coal through E-Auction by sitting in his home/office from any part of the country. iii) A bidder need not require to meet any formalities such as obtaining licence/quota/sponsorship/linkage etc. and is not required to meet any such formalities.
iv) Even a buyer located in the remote part of India without electricity/computer is free to reach the nearest village/town with a cyber cafi and can participate in the E-Auction without requiring to come to the coal company/coalfield as earlier under OSS
v) A bidder is free to choose the source/quality/quantity and purchase coal at a price determined by him on the basis of demand and supply.
vi) To purchase coal the buyer need not depend on intermediaries/middlemen and can directly purchase through E-Auction. This will reduce the chances of black marketing, if not totally eliminate it. vii) The buyer saves on middleman's commissions and other incidental charges.
viii) The incidental benefit is also shared by coal company in the form of improved returns i.e. by diverting intermediary's share to coal companies.
ix) There are a large number of outlets for small consumers which enable them to draw their coal supplies from any of the companies/sources instead of limited outlets/coal companies as was the case in earlier schemes. x) The sale on the auction is held even in remote areas therefore is not subject to any manipulation/influence of antisocial elements. xi) The system provides for official channel of supplies to all categories of buyers without classification who were otherwise dependent on secondary market (black market)
xii) The premium under the old system being appropriated by unscrupulous elements got checked/restricted.
xiii) Any buyer of coal under non core-sector including SSI units is able to avail of this opportunity by payment of a little more than the notified price. The system of E-Auction is not aimed at obtaining higher price but endeavours to create an equal opportunity amongst the buyers of non core sector.
133. However, we may notice that the said claim of the Union of India or the coal companies is not justified. The aforementioned claim of the Central Government is refuted by the consumers stating that the figures given by the Union of India are misleading. Price range of all the subsidiaries have been taken cumulatively instead of taking subsidiary-wise figures. The consumers belonging to core sectors, like power, steel, iron and chemical etc. are big companies like Grasim, Hindalco, Jindal and Haldia Steel who are taking part in the E-Auction as a result whereof the price of coal has shot at the cost of SSI units. Thus, even the linked consumers of core and non- core sectors have been participating therein. Participation of core sector in E-Auction is destructive of its own policy as would appear from the letter of the Ministry of Coal dated 08.04.2005 and, thus, it cannot be justified on the ground of profiteering wherewith the survival of SSI units is involved."
19. It has been submitted that the Supreme Court has held that, as the e-auction was being held on-line, no other bidder was aware of the contents of the bids submitted by the bidders. No eligibility criterion having been fixed, any person, including the traders could participate in the bid in the e-auction. As the highest price and the highest quantity are the only factors for the sale and the allocation of coal to a bidder, as per the terms of the scheme, e-auction results in traders buying large quantities of coal. Consequently, the manufacturers in hard coke and smokeless coal, as also the other small units, have to buy coal at prohibitive rates, from the traders. Thus, the methodology of allocation of coal to a bidder, by way of e- auction, is inequitable, irrational and fortuitous. It had also been submitted that, unless the bids made by the intending purchasers are made known, there cannot be higher bids, in respect of the secured assets brought for sale, by way of e-auction.
20. The learned counsels had further submitted that a public auction is a better method for obtaining the best price possible, in respect of the secured assets, as compared to that of sale of the assets by way of e-auction. Further, the methodology followed by the respondent banks has not been demonstrated before this Court and therefore, the procedures followed by them cannot be tested in an appropriate manner. It is a well settled position in law that the stand of the respondent banks cannot be improved by way of a counter. There is nothing shown before this Court to substantiate the claim of the respondent banks that the process followed in conducting the e-auction sale is authorised by the law applicable to such auction. The respondent banks have not placed any materials before this Court to support their claim that the necessary information, with regard to the sale of the secured assets, by way of an e-auction sale, would reach a large number of persons, by way of publicity, in order to get the best price for the assets brought for sale. The e-auction sale process would stand vitiated due to the existence of similar factors and elements which had been considered by the Supreme Court in its decision, reported in Ashoka Smokeless Coal India (P) Ltd Vs. Union of India and others, 2007 (2) SCC 640.
21. It had also been submitted that Section 1(4) of the Information Technology Act, 2000, read with item 5 of the First Schedule of the said Act, makes it clear that the e-auction process followed by the respondent banks would be an unauthorised process and therefore, it is invalid in the eye of law. Further, there is no consultation process conducted as per Rule 5 of the Security Interest (Enforcement) Rules. The e-auction process followed by the respondent banks would not be similar in nature to the process followed for conducting public auctions. Due to the high prevalence of illiteracy, the e-auction sale process adopted by the respondent banks would not serve the purpose of getting the best price possible for the secured assets brought for sale. In the absence of sufficient materials to show that a substantial number of persons at large are well acquainted with the e-auction sale process, the process of bringing the secured assets for sale, by way of e-auction, cannot be held to be valid. Therefore, the administrative decision taken by the respondent banks, to sell the secured assets, by way of e-auction, is perverted and invalid in the eye of law.
22. It has also been submitted that contemporaneous legislations have to be looked into for discerning the intention of the legislature in enacting the various provisions of the given statutes. The intention of the legislature would be clearly seen from the provisions of the various statutes, for arriving at a conclusion that e-auction is different from public auction and that the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Security Interest (Enforcement) Rules, 2002, do not provide for the conducting of e-auction. As such, it is clear that the sale of the secured assets, by way of e-auction, has been specifically excluded from the provisions of the said Act and the Rules.
23. The learned counsels appearing for the petitioners had submitted that the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Security Interest (Enforcement) Rules, 2002, do not permit the sale of the secured assets by way of e-auction sale. No procedures had been contemplated, either in the Act or in the Rules for conducting e-auction, for selling the secured assets. Whereas, the Smugglers and Foreign Exchange Manipulators (Receipt, Management and Disposal of Forfeited Property) Rules, 2006, provide for the conducting of e-auction. However, even the subsequent amendments made in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, does not provide for such a process. Even though Rule 9 of the Security Interest (Enforcement) Rules, 2002, laid down the procedure for bringing the secured assets for sale, by way of public auction, there is no provision for the secured creditors to conduct the sale of the secured assets by way of e-auction. As per Section 38 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the Central Government is empowered to issue notifications for carrying out the provisions of the Act. However, it would not be open to the respondent banks to act on a circular, said to have been issued by the Central Government, for conducting e-auctions. Further, the services of the service provider, who is a private party, cannot be utilized for conducting the e-auction sales. Rule 2(a) of the Security Interest (Enforcement) Rules, 2002, gives the definition of the "authorised officer". The procedures to be followed by the authorised officers for conducting the sale of the secured assets, by way of public auctions, cannot be delegated to an agency which is a third party to the transactions. There is no accountability on the part of such agencies as they do not come under the purview of the Act and the Rules. Thus, the safeguards provided under the Act and the Rules have been disregarded. Further, the purpose of holding a public auction is that it should fetch the best price possible for the secured assets brought for sale. A public auction should enable a large number of participants to make the bids, for the purchase of the properties in question. It should be accessible to all persons. However, the process followed by the respondent banks, for bringing the properties in question for sale, by way of e-auction, would not serve the purpose, especially, when a large number of the Indian population is illiterate.
24. The counsels appearing on behalf of the petitioners had submitted that the e-auction, proposed to be conducted by the respondent Banks, is not a public auction, as per the provisions of the Security Interest (Enforcement) Rules, 2002. As an e-auction is different from a public auction, the respondent Banks and the other authorities concerned are not complying with the requirements of Rules 5 and 6 of the Security Interest (Enforcement) Rules, 2002.
25. It has been stated, in the e-auction sale notices, that e-training would be given to those who require the same. This would also create a hurdle for a number of people who may intend to participate in the sale of the secured assets concerned. It is known, by way of statistics, that only five percent of the population in India has the necessary knowledge to use the internet. Power failures can also cause serious hindrance to those who want to participate in the auction sales.
26. It has also been stated that the sale of the secured assets, by way of an e-auction, by using certain service providers, is contemplated in the Information Technology Act, 2000, by way of an amendment made to Section 2(w) of the Information Technology Act, 2000. Further, the Smugglers and Foreign Exchange Manipulators (Receipt, Management and Disposal of Forfeited Property) Rules, 2006, provide for the conducting of e-auction. When such a provision has been made in the Smugglers and Foreign Exchange Manipulators (Receipt, Management and Disposal of Forfeited Property) Rules, 2006, no such provision has been introduced, providing for the conducting of an e-auction, in respect of the secured assets, in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Security Interest (Enforcement) Rules, 2002. This makes it clear that the legislature did not contemplate the holding of e-auction, under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Security Interest (Enforcement) Rules, 2002. Thus, it is clear that the conducting of an e-auction, under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Security Interest (Enforcement) Rules, 2002, have been consciously omitted by the legislature. Therefore, conducting of e-auction, in respect of the secured assets, by the respondent Banks and the authorities concerned, is arbitrary and invalid. It is also made clear that, as per Rule 9(3) of the Security Interest (Enforcement) Rules, 2002, the highest bidder should be intimated about the status of his bid. It has also been stated that the provisions of Rule 9 of the Security Interest (Enforcement) Rules, 2002, are not being followed, while conducting an e-auction sale. Rule 9(3) provides that, on every sale of an immovable property, the purchaser shall immediately make a deposit of 25 percent of the amount of the sale price, to the authorised officer conducting the sale and in default of such deposit being made, the property shall be sold again, forthwith. However, such a procedure cannot be followed, while conducting an e-auction sale.
27. It has also been stated that the service provider, who provides the platform for conducting the e-auction sale is an intermediary. The word `intermediary is defined under Section 2(w) of the Information Technology Act, 2000, as introduced by Act 10 of 2009, with effect from 27.10.2009. However, the service providers made use of by the respondent Banks and the authorities concerned, for conducting the e-auction sale of the secured assets, do not follow the guidelines laid down in the Information Technology (Intermediaries) Guidelines Rules, 2011. In such circumstances, it would be open to the service providers, utilized by the respondent Banks and the authorities concerned to tamper with the crucial data, statistics and the information, which may be made available through such service providers.
28. It has been further stated that certain procedures are contemplated for conducting a public auction. If an e-auction is included in the definition of a public auction, it would lead to an anamoly. A public auction is meant to reach the public at large to enable a number of participants, to participate in the sale of the secured assets. It should also be transparent in nature and it should be possible for the public to witness and to understand the procedures being followed during the auction sale of the secured assets.
29. It has also been contended that there is no notification or circular which is of a binding nature, to compel the banks concerned to conduct the sale of the secured assets, by way of e-auction. Unless the procedures prescribed for conducting an e-auction are issued, by way of notification or circular recognised by law, such procedures could be arbitrary and invalid. The provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, cannot be amended, abridged or circumvented by the issuance of notifications and circulars, which do not have the sanction of law. The plain language of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Security Interest (Enforcement) Rules, 2002, cannot be construed to include e-auction. The holding of e-auctions, by the respondent Banks and the authorities concerned, creates a barrier between the intending purchaser and the process adopted for the conducting of such auctions. It does not create an appropriate atmosphere for fetching the best price for the secured assets brought for sale, by way of e-auction. It creates an ambiguity in the minds of the intending purchasers and therefore, the procedures followed by the respondent banks and the authorities concerned, while conducting e-auctions, cannot be held to be valid in the eye of law. Further, it is clear that it is not possible for the respondent banks or the authorised officers concerned to announce the time and the place of the public auction, as contemplated under Rule 8 (6) (d) of the Security Interest Enforcement Rules, 2002, if an e-auction sale is conducted. Further, the e-auction sale procedures do not contemplate the immediate payment of the amounts, by the purchaser, and the procedures that are to be followed on his failure to comply with the necessary requirements.
30. It has also been contended that the provisions of Rule 9 of the Security Interest (Enforcement) Rules, 2002, especially, with regard to the schedule of payments to be made by the successful bidder cannot be followed during the e-auction sale of the secured assets. The number of online participants would not be the same as compared to that of a public auction, conducted in the usual course. The participation of the intending purchasers of the secured assets would be less in number, due to the various hurdles and impediments caused by the procedures that are followed while conducting the e-auction sale of the secured assets. Rule 8(7) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, contemplates that every notice of sale shall be affixed on a conspicuous part of the immovable property and may, if the authorised officer deems it fit, be put on the website of the secured creditor, by the use of the internet. The affixing of the notice of sale, as per the said provision, cannot be made, while holding an e-auction sale.
31. It has also been contended that the executive orders issued, as per Articles 73 and 162 of the Constitution of India, cannot modify or abridge the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Security Interest (Enforcement) Rules, 2002. Unless the provisions of the said Act or the Rules are amended, by the legislature concerned, by following the procedures established by law, it would not be appropriate for the respondent Banks and the authorities concerned to conduct the sale of the secured assets, by way of e-auction. While so, a letter issued by the Department of Revenue, Ministry of Finance, Government of India, cannot have the effect of amending the statute, which contemplates certain procedures to be followed while conducting a public auction. When the specific statute, relating to the conducting of public auctions, does not contemplate the holding of e-auctions, for selling the secured assets, such a procedure cannot be followed by the respondent banks and the authorities concerned. The power to conduct the e-auction sale of the properties in question cannot be traced to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Security Interest (Enforcement) Rules, 2002. In fact, such procedures have been omitted, consciously, in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, while it has been inserted in the Information Technology Act, 2000. All the three procedures, namely, e-auction, public auction and auction by way of calling for tenders have been contemplated under the relevant provisions of the Information Technology Act, 2000. As such, it is clear that an e-auction and a public auction are different concepts and therefore, an e-auction cannot be equated with a public auction.
32. The learned counsels appearing on behalf of the petitioners had relied on the following decisions in support of their contentions:-
32.1. The Punjab and Haryana High Court, in C.W.P.No.21862 of 2012, by order, dated 26.2.2013 (Dr.Mandeep Sethi Vs. Union Bank of India and others), had held that the Central Government was not competent to issue any directions to the Debts Recovery Tribunals, to conduct public auctions, only in a particular manner. The circular, dated 13.6.2012, issued by the Central Government could only be treated as a suggestion to conduct auctions, electronically, so as to make it free, fair and transparent. In fact, the circular issued by the Central Government had only given an option to the Debts Recovery Tribunals to conduct the sale of the secured assets through the preferred mode of e-auction.
32.2. The Supreme Court, in Civil Appeal No.5675 of 1985, by order, dated 23.4.1987, (Khargram Panchayat Samity and another Vs. State of West Bengal and others), had held that the rules or the absence of it do not detract from the substantive power conferred by a statute. It had also held that it was well accepted that the conferral of statutory powers on local authorities must be construed as impliedly authorizing everything that could fairly and reasonably be regarded as incidental or consequential to the power itself. The doctrine of ultra vires is not to be applied narrowly. The Supreme Court had stated that the House of Lords has laid down the principle that whatever may fairly be regarded as incidental to or consequent upon, those things which the Legislature has authorised, ought not (unless expressly prohibited) to be held, by judicial construction, to be ultra vires .
32.3. The Supreme Court in Civil Appeal No.5898 of 2012, by order, dated 17.8.2012, (M/s.Michigan Rubber (India) Limited Vs. The State of Karnataka and others), had held as follows:
Where a particular mode is prescribed for doing an act and there is no impediment in adopting the procedure, the deviation to act in a different manner which does not disclose any discernible principle which is reasonable itself shall be labeled as arbitrary. Every State action must be informed by reason and it follows that an act uninformed by reason is per se arbitrary.
If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities and adopt trade policies. As noted above, the ultimate test is whether on the touchstone of reasonableness the policy decision comes out unscatched. 32.4. In B.Premanand and others Vs. Mohan Koikal and others, (2011) 4 SCC 266, the Supreme Court, relying on a number of its earlier decisions, had held that, in construing a statutory provision the first and the foremost rule of construction is the literal construction. If the provision is unambiguous and if the legislative intent is clear, the court need not call into aid the other rules of construction of statutes. The language employed in the statute is the determinative factor of the legislative intent. The presumption is that the legislature had intended to say what it has said. Hence, the departure from the literal rule should only be done in very rare cases.
32.5. In the decision of the Supreme Court, reported in The Commisioner of Sales Tax Vs. M/s.Parson Tools and Plants, Kanpur, (1975) 4 SCC 22, it had been held as follows:
If the Legislature willfully omits to incorporate something of an analogous law in a subsequent statue, or even if there is a casus omissus in a statute, the language of which is otherwise plain and umabiguous, the Court is not competent to supply the omission by engrafting on it or introducing in it, under the guise of interpretation, by analogy or implication, something what it thinks to be a general principle of justice and equity. To do so would be entrenching upon the preserves of Legislature, the primary function of a court of law being jus dicere and not jus dare.
The will of the Legislature is the supreme law of the land, and demands perfect obedience. Judicial power is never exercised for the purpose of giving effect to the will of the Judges; always for the purpose of giving effect to the will of the Legislature; or in other words, to the will of the law. 32.6. In Sardar Associates and others Vs. Punjab and Sind Bank and Others, 2009(8) SCC 257, the Supreme Court had held that a public sector Bank is bound by the guidelines issued by the Reserve Bank of India 32.7. In M.Rajendran Vs. Authorised Officer, AIR 2012 Madras 21, a Division Bench of this court had held that, when the notice of sale had not been affixed on a conspicuous part of the immovable property brought for sale, as mandated under Rule 8(7) of the Security Interest (Enforcement) Rules, 2002, the lapse would render the sale invalid.
32.8. In SIL Import Vs. Exim Aides Silk Exporters, (1999) 4 SCC 567, the Supreme Court had held that, when the legislature had contemplated that, with regard to the notice to be given in writing, as prescribed by the statute, the court concerned has to apply a construction that would allow for changes in its application to more modern methods of communication. If the courts were to interpret the words giving notice in writing , in the section, as restricted to the customary mode of sending notice through postal service or even by personal delivery, the interpretative process would fail to cope up with the change of time.
32.9. In M/s. Bombay Salt and Chemical Industries Vs. L.J.Johnson and others, AIR 1958 SC 289, the Supreme Court had held that it cannot be contended that whenever there is an auction, the sale must be deemed to be completed. Whether the transfer of the property in question had taken place depends on the conditions of the auction. There may be certain conditions to be fulfilled for the completion of the same and for the transfer of the property in question.
33. Per contra, the learned counsels appearing on behalf of the respondent Banks had submitted that Rules 5 to 9 of the Security Interest (Enforcement) Rules, 2002, deal with the valuation and sale of the secured assets, both movable and immovable. Rule 9(6) of the said Rules states that, on confirmation of sale, by the secured creditor, the authorised officer shall issue a sale certificate, for the immovable property concerned, in favour of the purchaser, as per the format prescribed in Appendix V of the Rules. It is only a formal confirmation of the sale, at the end of the various procedures followed, as prescribed under the Rules. Even though the terms public auction had not been specifically defined under the Act or the Rules, the word public is defined under the General Clauses Act, 1897. Accordingly, if any person, out of the indefinite class of persons, can participate in the process of auction, it would be a public auction. The learned counsels had relied on the decisions of the Supreme Court, in M/s.Bombay Salt and Chemical Industries Vs. L.J.Johnson and others, (AIR 1958 SC 289) and in SIL Import, USA Vs. Exim Aides Silk Exporters, Bangalore, (1999 4 SCC 567), in support of their contentions.
34. The learned counsels had also pointed out that Section 10-A of the Information Technology Act, 2000, relates to the validity of the contracts formed through electronic means. Thus, it could be seen that contractual liabilities could arise by way of electronic means and that such contracts could be enforced through law.
35. The learned counsels had pointed out that Rule 3 of the Security Interest (Enforcement) Rules, 2002, provides for the issuance of the demand notice to the borrower or to his agent, by way of a fax message or by electronic mail service. While so, it could be assumed that the Rules had been framed by the legislatures concerned, keeping in mind the use of electronic means. Therefore, the use of certain procedures for conducting e-auction sales, by using the e-space provided by the service providers, cannot be held to be arbitrary or invalid in the eye of law.
36. The learned counsels appearing for the respondent banks had submitted that the procedures followed to bring the secured assets for sale, by way of e-auction, is not prohibited by the provisions of the relevant laws applicable to the sale of the secured assets. They had further stated that an e-auction is a public auction. The discretion to adopt certain procedures, for bringing the secured assets for sale, by way of e-auction, vests with the authorised officers concerned. There is no specific provision, prohibiting the respondent banks to bring the secured assets for sale, by way of e-auction. They had relied on the decision, reported in Khargram Panchayat Samity and Anr. Vs. State of West Bengal & Ors. (1987 SCC (3) 82), in support of their contentions. They had stated that the respondent banks are following a fair procedure in bringing the properties in question for sale, by way of e-auction. The petitioners have not been in a position to show that the e-auction procedures followed by the respondent banks are arbitrary, unfair and contrary to the principles enshrined in Article 14 of the Constitution of India. The powers vested with the respondent banks, which are the secured creditors, under Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, are substantive in nature. The Security Interest (Enforcement) Rules, 2002, are only indicative of the procedures to be followed in enforcing such powers. As long as the procedures followed by the respondent banks, in bringing the secured assets for sale, by way of e-auction, are not against public policy or contrary to law, such procedures cannot be held to be unauthorised or illegal in nature. Administrative actions can only be questioned in certain limited circumstances. As such, it would not be open to the petitioners to challenge the procedures adopted by the respondent banks for bringing the secured assets for sale, by way of e-auction. The decision made in Michigan Rubber (India) Ltd. Vs. The State of Karnataka & Ors. and the order, dated 17.8.2012, made in Civil Appeal No.5898 of 2012, had been relied on by the learned counsels appearing on behalf of the respondent banks in support of their contentions.
37. The learned counsels appearing for the respondent banks had submitted that it is only the authorised officers concerned, who receive the offers during the e-auction procedures followed by the respondent banks, as per Rule 9(2) of the Rules. Therefore, it cannot be said that the service providers utilised in the e-auction sale process, have taken over the role of the authorised officers, without having the sanction of law.
38. The learned counsels appearing on behalf of the respondent Banks had relied on the following decisions in support of their contentions:
38.1. In Secretary of State Vs. Sunderji Shivji and Co. (47 LW. 78) and others (Patna), the Privy Council had held as follows:
The expression public auction in S.55 of the Railways Act means a public sale at which each bidder offers an increase upon the price offered by the preceding bidder, the article put up being sold to the highest bidder. This involves the auction being held in public, all the members of the public having a right to attend, and the valuable element of competition between the persons who are openly bidding which is calculated to produce the highest price. Hence, if a Railway company purporting to sell goods under its right arising by reason of S.55 or S.56 of the Railways Act does not sell the goods by public auction, as above defined, the company is not entitled to plead compliance with the provisions of those sections in answer to a claim by the owner of the goods for any compensation or damages in respect of the sale of the g0ods.
A notice of an intention to sell at a public auction cannot be sufficient or effective, unless it specifies the time and place of the proposed public auction, the nature of the goods intended to be sold and all other particulars necessary to enable the members of the public to appreciate what it is which it is intended to be put up for sale at the public auction. 38.2. In Michigan Rubber (India) Limited Vs. State of Karnataka and others, (2012) 8 SCC 216, the Supreme Court had held as follows:
(a) The basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play. These actions are amenable to the judicial review only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities;
(b) Fixation of a value of the tender is entirely within the purview of the executive and the courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by courts is very limited;
(C) In the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded to the State authorities unless the action of the tendering authority is found to be malicious and a misuse of its statutory powers, interference by courts is not warranted;
(d) Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work; and
(d) If the State or its instrumentalities act reasonably, fairly and in public interest in awarding contract, here again, interference by court is very restrictive since no person can claim a fundamental right to carry on business with the Government;
A court before interfering in tender or contractual matters, in exercise of power of judicial review, should pose to itself the following questions:
(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; or whether the process adopted or decision made is so arbitrary and irrational that the court can say: the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached ? and (ii) Whether the public interest is affected? If the answers to the above questions are negative, then there should be no interference under Article 226.
38.3. In Rao Mahmood Ahmad Khan Vs. Ranbir Singh and others, 1995 Supp (4) SCC 275, the Supreme Court had held that there is an obligation on the purchaser to deposit 25 per cent of the bid amount, immediately, and if he fails to do so, the property shall be resold, forthwith. The word `immediately connotes and implies that the deposit should be made without undue delay and within such convenient time as is reasonably requisite for doing the thing the same day, with all convenient speed, excluding the possibility of rendering the other associated corresponding act and performance of the duty nugatory.
38.4. In Rosali.V Vs. Taico Bank, (2009) 17 SCC 690, the Supreme Court had held as follows:
While applying the principles of interpretation, the courts are also required to keep in mind the following two well-settled principles of law:
(i) Actus Curiae neminem gravabit (an act of Court shall prejudice no man) [See Satyabrata Biswas v. Kalyan Kumar Kisku (1994) 2 SCC 266 Ram Chandra Singh v. Savitri Devi., (2003) 8 SCC 319, Board of Control For Cricket Vs. Netaji Cricket Club and Others (2005) 4 SCC 741 andUnion of India v. Pramod Gupta. (2005) 12 SCC 1]; and
(ii) lex non cogit ad impossibilia (the law does not compel a man to do that what he cannot possibly perform) [See Ram Chandra Singh (supra) and Board of Control For Cricket in India (supra)] The term "immediately", therefore, must be construed having regard to the aforementioned principles. The term has two meanings. One, indicating the relation of cause and effect and the other, the absence of time between two events. In the former sense, it means proximately, without intervention of anything, as opposed to "mediately". In the latter sense, it means instantaneously.
The term "immediately", is, thus, required to be construed as meaning with all reasonable speed, considering the circumstances of the case.
In a given situation, the term "immediately" may mean "within reasonable time. Where an act is to be done within reasonable time, it must be done immediately 38.5. In The Authorised Officer Indian Bank, Mylapore Branch Vs. M/s.Tetrahedron Ltd. Rep. By its Managing Director, CDJ 2012 MHC 6246, a Division Bench of this Court had held as follows:
28. The proceedings in question was initiated by the Bank under the SARFAESI Act. The Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as the Rules) provides for the measures to be taken by the Bank right from the issuance of notification under sub-section (2) of Section 13 of the SARFAESI Act. Rule 8 deals with sale of immovable secured assets. Rule 9 provides for time of sale, issue of sale certificate and delivery of possession, etc. Sub-rule (3) of Rule 9 mandates that the purchaser shall pay 25% of the amount after the sale is concluded and in default of such deposit, the property shall be sold again. Sub-rule (4) of Rule 9 provides that the balance amount shall be paid on or before the fifteenth day of confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the parties. Sub-Rule (5) of Rule 9 clearly gives a mandate that in case the amount is not paid within the time prescribed in the notification or before the extended period, the deposit shall be forfeited and the property shall be re-sold. The Rule makers have only prescribed that the amount would be forfeited. There is no mention that the amount would be forfeited to the Government or to the Bank.
29. The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as RDDBF Act also contains provisions for sale of immovable property. By virtue of Section 29 of the Act, the provisions of the Second and Third Schedules to the Income Tax Act 1961 and the Income Tax (Certificate Proceedings) Rules 1962, were made applicable to a proceeding under the RDDBFI Act. Rule 58 of the Second Schedule to the Income Tax Act, 1961 provides that in case the purchaser failed to deposit 75% of the amount within the period prescribed, the deposit may, after defraying the expenses of sale, be forfeited to the Government. The Security Interest (Enforcement) Rules, 2002 provides only for forfeiture of the amount. The Income Tax Rules made applicable to the Debts Recovery Tribunal (Procedure) Rules, 1993 provides for forfeiture of the amount to the Government, after defraying the expenses of sale.
30. The question is whether the Bank would be justified in its contention that the forfeited amount would go to the income account of the Bank.
31. The Bank issued publications and spent considerable amount for the purpose of bringing the property for sale. According to the borrower, the Bank has claimed a sum of Rs.5.5 lakhs towards such expenses. The said amount was debited in the account of the borrower. However, when it comes to profit, the Bank wanted the forfeited amount to be appropriated into the income account. In case, there is a provision to forfeit the amount to the Government, necessarily, the Government should get the amount. The Legislature very cautiously made a provision in the Security Interest (Enforcement) Rules, that the amount shall be forfeited. There is no specific mention that this amount would go to the Bank. In case the borrower has to bear the expenses of sale, necessarily, any profit derived out of such sale should also go to the account of the borrower. The borrower is not demanding that the amount should be paid to him by cash. The request is to credit the balance amount in the loan account. The contention that the forfeited amount would be appropriated by the Bank is nothing but unjust enrichment. It is true that the borrower has taken a loan. The Bank wanted to realise the loan amount with interest. The sale notification was made with respect to the property owned by the borrower. Therefore, any amount fetched by the Bank on account of such sale, (with reference to the property of the borrower) should be credited in the account of the borrower. The Bank has no justifiable claim to appropriate the forfeited amount by crediting it in the income account. Therefore, we are of the view that the Bank was not justified in its contention relating to the appropriation of the forfeited amount. We also clarify that, in case, the amount is forfeited under the Debts Recovery Tribunal (Procedure) Rules, 1993 read with Income Tax Act, 1961, the forfeited amount should go to the Government only. 38.6. In the decision of the High Court of Orissa, reported in Ajit Kumar Routray and others Vs. State of Orissa and others, CDJ 2013 Orissa HC 048, it had been held as follows:
Undisputedly, both `auction and `e-auction aim at transparency in grant of exclusive privilege. The only grievance of the petitioners is that in case of `e-auction , the physical presence of the bidders is not necessary. In our opinion, such a grievance is hyper technical and in no way detrimental to the object sought to be achieved by settling the exclusive privilege through `e-auction . With the advancement of technology and technical know-how and keeping with the change of time and circumstances more transparency and fair play can be maintained in case of settlement of exclusive privilege.
For the reasons stated above, we are of the considered view that grant of exclusive privilege through `e-auction comes within the enabling provision of Section 29(2)(a) and there is no need to bring any amendment to Section 29(2)(a) for grant of exclusive privilege through `e-auction . 38.7. In the decision of the Punjab and Haryana High Court, in C.W.P.No.21862 of 2012, dated 26.2.2013 (Dr.Mandeep Sethi Vs. Union Bank of India and others), it had been held as follows:
In view of the above, we have no hesitation to hold that the Central Government was not competent to issue any direction in the manner of discharging its functions by the Debt Recovery Tribunals to order public auction in a particular manner only. The Circular dated 13.6.2012 (Annexure P-13) at best be treated as a suggestion to conduct auctions electronically, which is worth considering by the Debt Recovery Tribunals to conduct free, fair and transparent auctions. Therefore, the said circular is, in fact, only giving an option to the Debt Recovery Tribunals to conduct the sale through the preferred mode of e-auction.
Though the circular dated 13.6.2012 (Annexure P-13) was not within the jurisdiction of the Central Government, but keeping in view the salutary purpose, which it seeks to achieve, we find that the process of e-auction is a valid option, but such process cannot be adopted in all circumstances and in all situations by the Debt Recovery Tribunals. The Debt Recovery Tribunals are, therefore, directed to adopt the process of e-auction in the case of properties, which are being sold in municipal areas, where the computer knowing personnel would be available to participate in the process. It should be treated as a preferred mode of auction. But in respect of properties situated in rural areas, where the exposure to the computers is less, we leave it to the discretion of the Debt Recovery Tribunals to order e-auction as it may consider appropriate. Even after adopting e-auction, of the Tribunals find that the response is not adequate or for any other reason, the Tribunals are free to choose such method it may consider appropriate for sale of property of the defaulters. 38.8. In Nar Narain Mishra Vs. The State of UP, 2013 (2) ADJ, 166, it has been held as follows:
The word tender is a wide word which shall include e-tendering also. The submission that e-tendering is against the statutory rules cannot be accepted. The contention that several persons living in far off villages would be deprived of the possibility of participating in the process, as they may not be well versed with the electronic modes cannot be accepted. To develop scientific temper is one of the fundamental duties, as recognized by Article 51A(h) of the Constitution of India. Wide-spread use of computers and other modern gadgets is increasing day by day. E-tendering has been resorted to in order to extend the facility and opportunity to persons situated in remote places to participate in the process. Inviting tenders electronically is with the purpose and object of providing the facility to all interested persons to participate in the process unhampered by threats and pressures which were being frequently noticed by the State Government in the process of grant of contracts and leases.
38.9. In M/s.Santkripa Trading Co. Vs. Bank of Baroda and another, CDJ 2013 ALL HC 070, it had been held as follows:
Learned counsel for the petitioners has placed reliance on the Division Bench judgment of Punjab and Haryana High Court in Dr.Mandeep Sethi (Supra). In the case before the Punjab and Haryana High Court, the process of e-auction for sale by Presiding Officers of the Debt Recovery Tribunals was under challenge. Instructions were issued by the Government of India, Ministry of Finance to the Presiding Officers of the Debt Recovery Tribunal to conduct all auctions electronically (E-auction). The said instructions were challenged. The sale by Presiding Officers of the Debt Recovery Tribunal is to be conducted in accordance with the Income Tax Act, 1961 and also Income Tax (Certificate Proceedings) Rules, 1962. Rule 56 of the Rules contemplates sale by public auction. The Division Bench of the Punjab and Haryana High Court noted the facts of the case and Rule 56 in following words.
Challenge in the present writ petition is to the instructions dated 13.06.2012 (Annexure P-13) issued by the Government of India, Ministry of Finance directing the Presiding Officers of the Debt Recovery Tribunals to conduct all auctions electronically (for short the e-auction ). Though the petitioner has also challenged the orders passed by the Debt Recovery Tribunal in the matter of attachment and sale, but we leave that question open to the petitioner to seek their adjudication before the appropriate forum. In the present writ petition, we restrict ourselves to examine the challenge to the conduct of e-auction.
Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short `the Act ) confers power under Section 29 of the said Act with the Debt Recovery Tribunal to sell the property of the certificate debtors in terms of 2nd and 3rd Schedules to the Income Tax Act, 1961 and C.W.P.No.21862 of 2012 also Income Tax (Certificate Proceedings) Rules, 1962 (for short `the Rules ) Part-III of 2nd Schedule to the Income Tax Act deals with attachment and sale of immovable property. Rule 56 of the Rules contemplates sale by public auction. The said Rule reads as under:
56 Sale to be by auction. The sale shall be by public auction to the highest bidder and shall be subject to confirmation by the Tax Recovery Officer: Provided that no sale under this Rule shall be made if the amount bid by the highest bidder is less than the reserve price, if any, specified under clause (cc) of rule 53. The Division Bench while considering the above submission held that the e-auction is another form of public auction however, the Central Government could not have issued direction to the Debt Recovery Tribunals in discharge of its quasi judicial functions. Following was laid down by the Division Bench in the above case:
By the process of e-auction, intending bidder is forbidden to participate in the process of sale. Instead of a physical auction at the spot, it is virtual auction in the electronic format. The advantage of e-auction is that every bid is recorded within a specified slot and is free from the errors, which may be committed by the court auctioneer. Therefore, we find that e-auction is another form of the public auction, which is deemed to be included in Rule 56 of the Rules. Having said so, the question required to be examined is; whether the Central Government could direct the Debt Recovery Tribunals to conduct auctions only through e-auction. The argument of Mr.Singh is meritorious that there cannot be any direction by the Central Government to the Debt Recovery Tribunals, in discharge of its quasi judicial functions. Thus, the above judgment of the Punjab and Haryana High Court in the case of Dr.Mandeep Sethi (supra) does not support the submissions raised by the learned counsel for the petitioners, rather it lays down that e-auction is a form of public auction and was well within Rule 56 as quoted above.
In view of the foregoing discussions, we are of the view that the Bank has rightly resorted to e-auction which is well within its power under Rule 8(5) of the Rules, 2002 and the notice dated 25.8.2013 issued by the Bank for e-auction is well within its jurisdiction and cannot be said to be beyond the Rules, 2002. None of the submissions raised by the learned counsel for the petitioners has any substance."
38.10. In M/s.Lavanya Enterprises, West Godavari District Vs. Sri Durgamalleswara Swamyvaarla Devasthanam, Indrakeeladri, Vijayawada, Krishna District and others, (W.P.No.7108 of 2012, order dated 15.03.2012), it had been held as follows:
The whole question is, whether Rule 3(1) of the Rules can be construed as prohibiting the other methods also to be adopted or followed along with public auctions. The answer to this question lies in understanding or giving full meaning to the expression public auction . As was noticed supra, public auction is a method where at, all people who have a stake or who are interested in securing a right or a privilege are entitled to participate at bidding with each other and bid to their hearts content. Whoever comes up with the best offer, will be entitled to secure the right or privilege which is put to offer. Therefore, transparency, fairness of procedure and an equal opportunity for all interested to participate are some of the salient features that are associated with the exercise of public auction. So long as these features are retained, any other method can also answer the description of the expression public auction .
38.11. In Arunodaya Magaswargiya Mazdoor Vs. The State of Maharashtra, (W.P.No.6372 of 2012), the Bombay High Court had held as follows:
The entire process has been assailed only on the ground that the e-auction should have been permitted to come to an end naturally i.e. logically by permitting each bidder to revise his bid further, after getting knowledge of higher bid offered by his competitor. Thus, contention is, till a bidder backed out of the process and only one person remained, the auction process should have been continued. The fact that process was not devised for the said purpose, was within the knowledge of the petitioner. The State Government for reasons disclosed, wanted to complete the auction of all sand ghats in a single day and this could not have been possible without dividing the sand ghats into lots and without stipulating the time period for such auction. Thus a best possible decision has been taken by the State Government to augment its revenue and at the same time to keep the process transparent and open to all. We find that the decision cannot be said to be malafide, arbitrary or contrary, only because the process necessitated the time period as prescribed. As auction process has been permitted to law for 1.30 hours, the same cannot be labeled either as arbitrary or malafide or opaque. The petitioner has taken full part and after having failed in such process, he cannot be heard to make a grudge in that respect. 38.12. In State of Maharashtra Vs. Dr.Praful B.Desai, (2003) 4 SCC 601, the Supreme Court had held as follows:
Video-conferencing is an advancement in science and technology which permits one to see, hear and talk with someone far away, with the same facility and ease as if he is present before you i.e in your presence. In fact he/she is present before you on a screen. Except for touching, one can see, hear and observe as if the party is in the same room. In video-conferencing both parties are in the presence of each other. So long as the accused and/or his pleader are present when evidence is recorded by video-conferencing, that evidence is being recorded in the presence of the accused and would thus fully meet the requirements of Section 273 Cr.P.C. Recording of such evidence would be as per procedure established by law .
38.13. In State of Punjab Vs. Amritsar Beverages Ltd, (2006) 7 SCC 607, the Supreme Court had held as follows:
The Act was enacted in the year 1948. Information Technology at that time far from being developed was unknown. The Constitution is a living organ. It had been interpreted differently having regard to different societal situations. Creative interpretation had been resorted to by the Court so as to achieve a balance between the age-old and rigid laws on the one hand and the advanced technology, on the other. The judiciary always responds to the need of the changing scenario in regard to development of technologies. It uses its own interpretative principles to achieve a balance when Parliament does not respond to the need to amend the statute having regard to the developments in the field of science.
Internet and other information technologies brought with them the issues which were not foreseen by law as, for example, problems in determining statutory liabilities. It also did not foresee the difficulties which may be faced by the officers who may not have any scientific expertise or did not have the sufficient insight to tackle with the new situation. Section 14 of the Act although has been amended, the problem should be dealt with keeping in view the fact that the procedural laws should be construed to be ongoing statues similar to the Constitution and, thus, creative interpretation according to the circumstances is permitted. The court in view of development of science has to meet and contend with challenges as an intermediary between the litigant and the court.
39. In reply to the contentions raised on behalf of the respondent banks, the learned counsels appearing for the petitioners had submitted that the e-auction sale notices issued by some of the respondent banks contain the condition that if the successful tenderer does not deposit 25 percent of the purchase price, immediately, on the same date, or within 24 hours of the conveyance of the acceptance letter, it would be open to the seller to confer the sale on the second successful tenderer. This condition cannot be implemented or fulfilled if e-auction procedures are followed.
40. It had also been submitted that it is a clear and conscious omission by the legislature concerned to exclude e-auction procedures in the sale of the secured assets. When e-auction procedures are followed, they are not transparent in nature and therefore, they cannot be followed by the intending purchasers. The learned counsels had relied on the decision of the Supreme Court reported, in B.Premanand and others Vs. Mohan Koikal and others, (2011 4 SCC 266), in support of such a contention. Paragraph 10 of the said decision reads as follows:
"As held in Prakash Nath Khanna vs. C.I.T. 2004 (9) SCC 686, the language employed in a statute is the determinative factor of the legislative intent. The legislature is presumed to have made no mistake. The presumption is that it intended to say what it has said. Assuming there is a defect or an omission in the words used by the legislature, the Court cannot correct or make up the deficiency, vide Delhi Financial Corporation vs. Rajiv Anand 2004 (11) SCC 625. Where the legislative intent is clear from the language, the Court should give effect to it, vide Government of Andhra Pradesh vs. Road Rollers Owners Welfare Association 2004(6) SCC 210, and the Court should not seek to amend the law in the garb of interpretation."
41. It is also contended that prior to the issuance of the circular, by the Department of Banking, Government of India, no e-auction sale had taken place. Therefore, it is clear, by implication, that the respondent banks had followed the directions issued by the Department of banking, which do not have the authority of law. It is also clear that the Act and the Rules do not recognize e-auction as an acceptable procedure for bringing the secured assets for sale.
42. Denying the claims made on behalf of the petitioners the learned counsels appearing on behalf of the respondent Banks concerned had submitted that the e-auction sale procedures adopted by the secured creditors, for the sale of the secured assets, are similar to the procedures followed for the sale of the properties by way of public auctions. In fact, the e-auction procedures followed by the respondent banks have added advantages to the borrowers, including the guarantors, the mortgagors, the banks concerned and the intending purchasers. The procedures followed by the banks, for bringing the secured assets for sale, by way of e-auctions, have not been prohibited by the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, or the Security Interest (Enforcement) Rules, 2002, or by any other law in force. In reality, all the necessary procedures prescribed under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and the Security Interest Enforcement) Rules, 2002, are being followed, scrupulously, whenever the secured assets are brought for sale, by way of e-auctions.
43. It had also been stated that the specific procedure prescribed under Rule 8(5)(c) of the Security Interest (Enforcement) Rules, 2002, contemplates the sale of the immovable secured assets, by way of public auction. However, the words `public auction have not been defined. Rule 8 is only an enabling provision, which enables the secured creditor to bring the secured assets concerned for sale by way of public auction, which includes e-auction. Even though certain procedures have been prescribed for the sale of the secured assets, there is no specific procedure prescribed for bringing such assets for sale by way of e-auction. There are certain procedures followed by the banks concerned for bringing the properties in question for sale, by way of e-auction, only upto a particular stage. Once the bids have been made and the highest bidder is identified, the contract for sale and the conveyance of the properties in question are concluded only by following similar methods as in the regular public auctions. When no specific procedures have been prescribed for conducting e-auctions, the banks concerned have adopted reasonable procedures for bringing the secured assets for sale by way of e-auctions. The apprehension of the petitioners that the procedures prescribed by the Security Interest (Enforcement) Rules, 2002, would not be followed and that the intending purchasers of the secured assets would suffer certain disadvantages in participating in the process of e-auction sale is unfounded.
44. It had also been stated that the contention raised on behalf of the petitioners that it would not be possible for the purchasers to follow the procedure laid down in Rule 9(3) of the Security Interest (Enforcement) Rules, 2002, cannot be held to be valid. If the highest bidder fails to comply with the procedure prescribed, under Rule 9(3) of the said Rules, the purchaser shall forfeit all claims to the property and he would also forfeit the Earnest Money Deposit, which would be credited to the account of the borrower. On the failure of the highest bidder to complete the process of sale of the property concerned, the said property shall be sold again, forthwith.
45. The learned counsels had also submitted that, unless there is an express prohibition, prohibiting the sale of the secured assets, by way of e-auction sale, it would be open to the secured creditors to bring the assets for sale, by way of e-auction. It had been further submitted that the respondent banks had not relied on the circular issued by the Department Revenue, Ministry of Finance, Government of India, for adopting the e-auction sale procedure. The Banks had decided to follow certain procedures for bringing the secured assets for sale by way of e-auction, on knowing its benefits. As the sale of the secured assets by way of e-auction is one of the modes of public auction, the choice is with the banks concerned for opting the appropriate procedure. Therefore, no amendment to the existing provisions of law is needed for authorizing e-auction sale of the properties concerned.
46. The learned counsels had also submitted that Section 6 of the Information Technology Act, 2000, provides for the use of electronic records and electronic signatures in the various agencies of the government. Further Section 10-A of the said Act validates contracts formed through electronic means. Such provisions enable the use of electronic records and electronic means for the conclusion of agreements, contracts and for other purposes. It cannot be said that the use of certain procedures, by the respondent banks, for bringing the secured assets for sale, by way of e-auction, is bad in the eye of law. The procedures followed by the respondent Banks are not onerous in nature. On the contrary, the procedures followed by the respondent banks would fetch better prices for the secured assets brought for sale. As such, it would be beneficial to the petitioners and to the secured creditors concerned. Therefore, the claims made on behalf of the petitioners that the procedures being followed by the respondent banks, for bringing the properties for sale, by way of e-auction, would have certain adverse effects, are unfounded.
47. The contention raised on behalf of the petitioners that Section 1(4), read with item 5 of the First Schedule of the Information Technology Act, 2000, prohibits the respondent banks from bringing the secured assets for sale, by way of e-auction, cannot be countenanced. In fact, item 5 of the First Schedule of the Information Technology Act, 2000, would only relate to a contract for the sale or conveyance of an immovable property or any interest in such property. Such a restriction would not apply to the procedures followed by the respondent banks in bringing the secured assets for sale, by way of e-auction. The contract for sale and the issuance of sale certificates to the purchasers, resulting in the conveyance of the properties concerned, are done manually. The said fact is also notified in the auction sale notices. It has also been pointed out that the petitioners have not been in a position to show that e-auction sale procedures followed by the respondent banks are prohibited by law. Therefore, the procedures followed by the respondent banks for bringing the secured assets for sale, by way of e-auction, are reasonable in nature and therefore, they are valid.
48. The learned counsels appearing for the respondent Banks had submitted that the issue raised by the petitioners relating to illiteracy cannot be sustained. In fact, the intending purchasers can use the procedures prescribed for the sale of the secured assets by way of e-auction, for making their bids, without any difficulty. Even persons, who do not have any specialized knowledge in e-procedures, can avail the opportunity of making their bids in the e-auction sale, by utilizing the services of persons who have the required knowledge. An e-auction sale is as transparent as a sale by way of public auction. An e-auction sale, which is similar to the sale by public auction, with certain added advantages, is transparent in nature. There is no major distinction between an e-auction and a public auction. The procedures followed by the respondent banks for bringing the secured assets for sale, by way of e-auction, are in fact, more advantageous to the petitioners and the secured creditors concerned. Therefore, the contentions raised by the petitioners against the procedures followed by the respondent banks, for bringing the properties for sale, by way of e-auction, cannot be accepted. In fact, none of the purchasers have come forward to challenge the e-auction procedures followed by the respondent banks.
49. It has been further stated that the service providers cannot be said to be unauthorised persons or entities. The use of a service provider, by the banks concerned, for creating a platform or an e-space for the intending purchasers to make their bids, cannot be said to be contrary to law. The service providers are only providing the software to enable the intending purchasers to make their bids, by using the e-space provided by the service providers. Certain fool proof methods have been evolved to enable the intending purchasers to make their bids without the fear of facing the cartels and the syndicates which could cause serious hindrance for fair and proper procedures being followed during the sale of the properties in question. The procedures being followed during the e-auction sales are secretive in nature and they are meant to prevent unnecessary interference from influencial persons with money and muscle power from causing hurdles in the smooth and successful conduct of the sale of the properties concerned. The notices regarding the sale of the properties by way of e-auction are published in the local newspapers, as per the provisions of the Security Interest (Enforcement) Rules, 2002. Therefore, the procedures followed by the respondent banks, for bringing the properties for sale, by way of e-auction, cannot be said to be invalid in the eye of law.
50. The learned counsels appearing for the respondent banks had further submitted that the objects and reasons for which the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, had been brought into force are being given effect to by respondent banks, by following the procedures for the sale of the properties in question, by way of e-auction. The contractual rights enjoyed by the secured creditors, for bringing the secured assets for sale, on the failure of the borrower or the guarantor in discharging his liabilities, had become statutory rights after the coming into force of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Security Interest (Enforcement) Rules, 2002. The rights, which are vested with the secured creditors are enforceable by following certain procedures enshrined in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the security Interest (Enforcement) Rules, 2002. When there is no specific provision of law prohibiting the respondent banks from bringing the secured assets for sale, by way of e-auction, the claims made on behalf of the petitioners that such procedures are bad in law cannot be accepted. E-auction is public auction conducted with the aid of certain technical procedures. E-auctions are conducted by following the procedures prescribed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Security Interest (Enforcement) Rules, 2002. Certain other procedures are also being followed to ensure that the sale of the secured assets takes place without any undue influence or hindrance being caused by the cartels and the syndicates formed by certain interested parties, with the mala fide motive of purchasing the properties in question for a very low price. In such circumstances, it cannot be said that the procedures followed by the respondent banks, in conducting the sale of the properties in question, by way of e-auction, are disadvantageous to the petitioners.
51. The learned counsels had also submitted that the sale of the secured assets by way of e-auction is not barred by the provisions of the Information Technology Act, 2000. Section 1(4), read with Item 5 of First Schedule of the Information Technology Act, 2000, would apply only to contracts for sale and to the conveyance of certain interests in the properties concerned. The e-auction sale procedures are followed only during the preliminary stages of the auction procedure. Contracts are concluded and the conveyance of the properties in question takes place only by following the usual modes employed during public auctions. The service providers are not intermediaries, as they are only made use of for the purpose of providing a platform for the intending purchasers to make their bids, for the purchase of the properties in question. While all the procedures prescribed under the provisions of the Security Interest (Enforcement) Rules, 2002, are followed, it cannot be said that the procedures followed by the respondent banks, for bringing the secured assets for sale, by way of e-auction sale, are arbitrary and invalid.
52. Denying the claims made on behalf of the respondent banks, the learned counsels appearing on behalf of the petitioners had stated that an agreement would not, per se, be a contract, as per the provisions of the Indian Contract Act, 1872. Certain further steps had to be taken for an agreement to become a full-fledged contract. In such circumstances, the procedures adopted by the respondent banks, for bringing the secured assets for sale by way of e- auction, cannot be held to be valid, in view of Section 1(4) of the Information Technology Act, 2000, read with item 5 of the First Schedule of the said Act, which states that nothing in the said act shall apply to documents or transactions specified in the First Schedule relating to any contract for the sale or the conveyance of immovable property or any interest in such property.
53. The learned counsels had submitted that the words 'Electronic Auction' cannot be read into the words `Public Auction'. It is noted that the omission of the words `Electronic Auction', in the the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Security Interest (Enforcement) Rules, 2002, ought to be construed as willful omission of such words, by the legislature concerned. Further, the services rendered by the service providers cannot be utilized by the respondent banks or their authorised officers. Such providers are third parties to the contract entered into between the borrowers and the banks concerned. Such service providers are not recognised by the provisions of the relevant laws applicable to such contracts.
54. The learned counsels appearing for the petitioners had further stated that the service providers had not been defined in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. If a service provider is not an intermediary, as contemplated under the Information Technology Act, 2000, the provisions relating to intermediaries would not apply to service providers. Therefore, there is no accountability on the part of the service providers. Such a situation would be detrimental to the interests of the petitioners, who are the owners of the secured assets. Similar provisions, as contained in Section 6 of the Information Technology Act, 2000, are not found in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
55. It has been further stated that the requirements prescribed for a bidder, intending to participate in the e-auction, are onerous in nature. The requirement of a digital signature to participate in the e-auction would dissuade a number of purchasers from participating in the e-auction process. Further, the terms and conditions specified in the e-auction sale procedure are not in tune with the security Interest (Enforcement) Rules, 2002.
56. It has been further contended that the e-auction sale notices would not have the same reach as the auction sale notices, which are issued for conducting a public auction, in respect of the secured assets. Due to the rampant illiteracy prevailing in many parts of the state of Tamilnadu, especially, in the rural areas, the e-auction sale procedures adopted by the respondent Banks would not be conducive for obtaining the best price possible for the secured assets brought for sale, by way of e-auction.
57. It has also been contended that the legislature concerned has consciously omitted to include the e-auction sale procedure in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Security Interest (Enforcement) Rules, 2002. Thus, it is clear that the e-auction sale procedure being followed by the respondent Banks are arbitrary and invalid in the eye of law. The administrative decision taken by the respondent banks to follow the e-auction procedures, for the sale of the secured assets, cannot be held to be valid, as an e-auction sale is not akin to sale by public auction. The respondent banks are following the directions issued by the Department of Revenue, Ministry of Finance, Government of India, and the guidelines issued by the Reserve Bank of India. Such directions and guidelines do not have the mandatory force of law and therefore, they are not binding in nature. Even otherwise, such directions and guidelines cannot be valid when they seek to alter or abridge the procedures established for conducting a public auction, as prescribed under the Security Interest (Enforcement) Rules, 2002. It has been further contended that, when the e-auction sale procedures have no legal sanctity, they cannot be made use of by the respondent banks and the authorities concerned for bringing the secured assets for sale.
58. It has also been contended that the service providers utilised by the respondent Banks, for bringing the secured assets for sale, by following the e-auction procedures, do not have any recognition in law. There is no accountability as there are no rules or regulations guiding their conduct. The powers and the authority vested with the recovery officers and the authorised officers cannot be delegated to the service providers, who are third parties to the contractual obligations arising between the borrowers and the secured creditors. The service providers cannot be acknowledged as `intermediaries , as defined under Clause (w) of Section 2 of the Information Technology Act, 2000. It has been contended that the procedures contemplated under the provisions of the Security Interest (Enforcement) Rules, 2002, ought to be followed, by the respondent banks, in their strict sense.
59. It had also been contended that, unless the bids made by the intending purchasers are in the public domain, the auction process cannot fetch the best price possible for the properties brought for sale. There can be no proper consultation amongst the parties concerned, as provided under Rule 8 of the Security Interest (Enforcement) Rules, 2002. As sufficient materials have not been placed before this court, on behalf of the respondent banks, to show that e-literacy is wide spread in nature and that the administrative decisions taken by the respondent banks, to follow the e-auction sale procedures, for the sale of the secured assets, are based on sufficient statistical materials, such procedures adopted by the respondent banks cannot be permitted.
60. Contemporaneous legislations have to be looked into to discern the real intention of the legislatures, while interpreting the provisions of the statutes. Certain procedures have been introduced in the Smugglers and Foreign Exchange Manipulators (Receipt, Management and Disposal of Forfeited Property) Rules, 2006, for conducting e-auctions. When such procedures had come into force in the year, 2006, no such procedures have been introduced in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Security Interest (Enforcement) Rules, 2002. Further, when the legislature is aware of the different concepts of e-auction and public auction it would be safe to conclude that e-auction procedures have not been authorised, for the sale of the secured assets, by following the e-auction sale procedures.
61. It is to be noted that Section 38 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, empowers the central government to make rules, by way of notifications, for carrying out the provisions of the said act. When the legislature concerned has omitted, specifically, to include the e-auction sale procedure in the provisions of the said Act and in the Security Interest (Enforcement) Rules, 2002, it is clear that such a procedure cannot be followed by the respondent banks to bring the secured assets for sale, by following the e-auction sale procedures. In such circumstances the e-auction sale procedures followed by the respondent Banks and the authorities concerned, for bringing the secured assets for sale, cannot be held to be valid in the eye of law.
62. As a counter to the contentions raised by the learned counsels appearing on behalf of the petitioners, the learned counsels appearing on behalf the respondent Banks have submitted that the e-auction sale procedures followed by the respondent banks are more transparent than the procedures followed by them for the sale of the secured assets, by way of public auctions. By following the e-auction sale procedures, competitive prices are received for the secured assets. It had also been submitted that the service providers engaged by the respondent banks are providing only the platform, which is akin to a website, for the purpose of carrying on the auction sales. The procedures followed by the respondent banks in bringing the secured assets for sale, by way of e-auction, would eliminate unhealthy practices being followed by the cartels and the syndicates, by causing hurdles in getting the best price possible for the secured assets. The services rendered by the service providers would not, in any way, be detrimental to the interests of the parties concerned, including the owners of the secured assets brought for sale. In fact, the relevant information relating to the identity of the bidders is kept confidential. Therefore, there cannot be any manipulation in the process of the e-auction sales of the secured assets.
63. It has been further stated that there is no specific mode prescribed for conducting a public auction, either under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, or the Security Interest (Enforcement) Rules, 2002. Further, there is no specific provision prohibiting the conducting of e-auction by the respondent banks. Therefore, it is understood that the respondent banks could follow a reasonable method to bring for sale the secured assets, by following the procedures which are fair and reasonable. The apprehension of the petitioners that the Security Interest (Enforcement) Rules, 2002, would not be followed, by the respondent banks, during the e-auction process, is ill-founded.
64 It had been further contended that, unless there is a clear prohibition, prohibiting the respondent banks and the authorities concerned from conducting e-auction sale of the secured assets, such a procedure can be followed, lawfully. The respondent banks are not following the directions issued by the Department of Revenue, Ministry of Finance, Government of India, or the Reserve Bank of India or of any other authority, in choosing to sell the secured assets by following the e-auction sale procedures. In fact, e-auction is a mode of public auction. The discretion to choose a particular mode would vest with the respondent banks. No specific amendment is needed, either in the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, or the Security Interest (Enforcement) Rules, 2002, to empower the respondent banks to choose the mode of auction. Authentication of electronic records are usually made by the affixing of digital signatures, as provided under Section 3 of the Information Technology Act, 2000. Section 6 of the Information Technology Act, 2000, permits the use of electronic records and electronic signatures in the working of the government departments and agencies. Section 10-A of the Act talks of the validity of contracts formed through electronic means.
65. The contention raised on behalf of the petitioners that Section 1(4), read with item 5 of the First Schedule of the Information Technology Act, 2000, prohibits contracts for sale and conveyance of immovable properties and the interests therein, would not apply to the e-auction sale process followed by the respondent Banks, as the conclusion of the contracts, in respect of the properties brought for sale and the conveyance of the interests therein are done manually. Such a procedure is contemplated and made known in the auction notice itself.
66. It has also been submitted that the provisions of the Information Technology Act, 2000, cannot be read to restrict the e-auction sale procedures being followed by the respondent banks, as the said act is a statute enacted to enable the use of certain procedures, including e-auctions. It has also been contended that illiteracy cannot be shown as a valid ground to deny the respondent banks the opportunity of following the e-auction sale procedures. In fact, the intending bidders and the purchasers of the properties concerned have not come before this court challenging the e-auction sale process followed by the respondent banks. It is only the owners of the properties in question and the guarantors have challenged the procedures followed by the respondent banks.
67. It had also been stated that the decision of the Supreme Court, in Ashoka Smokeless Coal India (P) Ltd. Vs. Union of India and others (2007 2 SCC 640), does not lay down any law which may be applicable to the present cases, which are before this Court, as it had been stated that the said decision cannot be quoted as a precedent. However, the Supreme Court had taken note of the advantages in conducting e-auctions, in the said decision. It would not be open to the petitioners to contend that the e-auction procedures followed by the respondent banks are unauthorised and illegal, even though there may not be any specific provision in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Security Interest (Enforcement) Rules, 2002, for conducting e-auctions, to sell the secured assets. There is no specific prohibition, prohibiting such a procedure. The service providers used by the respondent banks and its authorised officers are providing only the software to be used in the e-auction process. In fact, it is only the authorised officer, who conducts the auction. Confidentiality is maintained during the e-auction process. However, it is sufficiently transparent to the bidders to make their best bids. Sufficient secrecy is being maintained in the process, so that the cartels and the syndicates cannot unduly influence the auction process, with the ulterior motive of purchasing the secured assets for a very low price. The e-auction process followed by the respondent banks, has been bringing better prices for the secured assets brought for sale.
68. It had also been stated that all the procedures prescribed by the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Security Interest (Enforcement) Rules, 2002, are followed, scrupulously, during the e-auction process. Therefore, the contentions raised on behalf of the petitioners cannot be sustained. The e-auctions held by the respondent banks are public auctions conducted with the aid of digital technology, using electronic systems. In fact, the e-auction process followed by the respondent banks is in tune with the objects and reasons contemplated by the legislature in enacting the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Security Interest (Enforcement) Rules, 2002. The statistics available with the respondent banks would show that better prices have been obtained for the secured assets brought for sale, by following the process of e-auction. In such circumstances, it is clear that the contentions raised on behalf of the petitioners are without any merits.
69. In view of the submissions made by the learned counsels appearing on behalf of the petitioners and the learned counsels appearing on behalf of the respondents, and on a perusal of the records available, it is noted that the respondent banks have adopted the e-auction sale procedures, in respect of the secured assets. The procedures followed by the respondent banks, as the secured creditors, for selling the secured assets, are under challenge in the present writ petitions.
70. Various contentions have been raised by the learned counsels appearing on behalf of the petitioners stating that the e-auction procedures followed by the respondent banks and the authorities concerned, including the authorised officers, are arbitrary, illegal and unsustainable in the eye of law.
71. It is noted that the banks concerned, which are the secured creditors, had brought for sale the secured assets of the `borrowers', claiming that their liabilities had not been discharged. The properties in question had been brought for sale, by following the e-auction sale process. The petitioners have questioned the e-auction sale process adopted by the respondent banks stating that such procedures are arbitrary and illegal. The respondent banks have contended that the e-auction sale process had been followed with the main object of eliminating the cartels and the syndicates, which are operating in the field, with the mala fide motive of knocking away the properties in question, for a throw away price, causing heavy financial loss to the owners of the properties which had been brought for sale and for the banks concerned. It has also been claimed that the respondent banks have followed the procedures contemplated under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Security Interest (Enforcement) Rules, 2002, during the e-auction sale process.
72. It is also noted that there is no specific prohibition, either under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, or under the Security Interest (Enforcement) Rules, 2002, restraining the respondent banks and the authorities concerned from employing the e-auction sale process, for the sale of the secured assets. There is no doubt that the respondent banks have chosen to adopt the method of e-auction sale, for selling the properties in question, with the bona fide intention of obtaining the best possible price for the said properties. Thus, it is clear that the e-auction sale procedures followed by the respondent banks would only be beneficial to the owners of the properties in question and the banks concerned which are the secured creditors.
73. It is also noted that the petitioners have not placed any materials before this court to substantiate their claim that the e-auction sale procedures, followed by the respondent banks, would be a hindrance to the intending purchasers, in participating freely in the auction process.
74. It is further noted that the e-auction sale procedures are user friendly in nature. It is also noted that the intending purchasers could utilize the services of technically qualified persons or agencies, in making their bids. We are conscious of the fact that e-auction sale procedures, being followed by the respondent banks, have not been challenged by the purchasers, in the present batch of writ petitions. Further, nothing has been shown on behalf of the petitioners to substantiate their claims that the intending purchasers would suffer certain impediments in making their bids, for the properties in question, due to their illiteracy. While so, it would not be open to the petitioners to claim, without furnishing sufficient materials before this Court, to show that the persons who had availed the financial facilities, including those who had been the guarantors and those who had created the mortgages or pledges, in respect of the properties in question, would be at a disadvantage due to the use of the e-auction sale procedures, which involves the use of digital technology. On the contrary, we are convinced that the e-auction sale procedures followed by the respondent banks and the authorities concerned would go a long way in reducing the unhealthy practices being followed by the cartels and the syndicates, in the public auction sales of the secured assets. Further, there is no specific prohibition, either in the provisions of the the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, or in the Security Interest (Enforcement) Rules, 2002, prohibiting the conducting of e-auction sales of the secured assets.
75. Even though specific procedures have not been prescribed, making e-auction sale procedures mandatory, we are of the considered view that the procedures followed by the respondent banks are not arbitrary or invalid in the eye of law. In the absence of specific provisions relating to e-auction, it would be open to the respondent banks to follow a procedure which is fair and reasonable.
76. In the given facts and circumstances, we have no doubt that the e-auction sale procedures followed by the respondent banks would reduce, substantially, the unethical influence of the cartels and the syndicates, which are posing a serious threat to the healthy competition that is expected to take place during public auctions. The respondent banks have adopted the e-auction sale process taking note of the fact that the cancerous growth of the cartels and the syndicates has threatened the basic concept of public auction, making a mockery of the process intended to get the best possible price for the properties brought for sale.
77. Further, it cannot be said that the use of the service providers, in conducting the e-auctions, is contrary to the provisions contained in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Security Interest (Enforcement) Rules, 2002. Sufficient safeguards are available to set right the irregularities, if any, that may occur during the process of e-auction sales.
78. We are of the view that the contentions raised on behalf of the petitioners, with regard to the e-auction sale procedures, are based on mere apprehensions. It is noted that the e-auction sale process has been adopted by the respondent banks mainly with the intention of reducing the undue influence of the cartels and the syndicates, which have the capacity to undermine the value of the properties brought for sale. Even though there may be some difficulties, for some persons, who are the intending purchasers, in operating the system, to log in and to make their bids, to purchase the properties in question, it cannot be said such difficulties are insurmountable in nature. It is always open to the intending purchasers to employ the services of the persons, who have the required knowledge to make their bids, by using the platforms provided by the service providers.
79. It is seen that the respondent banks are utilizing the services of the government authorised service providers, for providing the services necessary for conducting the e-auction sales of the secured assets. Further, from the records available it is clear that the personal details and certain other information regarding the bidders, who are participating in the e-auction sale process, are kept confidential, to the necessary extent. It has also been stated that the final contract and the conveyance of the properties in question are done, manually. As such, it could be seen that the contentions raised on behalf of the petitioners are based on mere apprehensions and therefore, they are liable to be rejected.
80. It is also noted that sufficient amount of secrecy is being maintained, with regard to the identity of the participants, who are the intending purchasers. As such, we are of the considered view that the petitioners have not shown sufficient cause or reason for this Court to interfere with the e-auction sales, being conducted by the respondent banks, in respect of the secured assets in question. Therefore, it cannot be said that the e-auction sale procedures, followed by the respondent banks, are arbitrary and invalid in the eye of law.
81. We are also of the considered view that, if the petitioners have any other grounds to be raised, in addition to the grounds raised by them in the present writ petitions relating to the e-auction sale of the properties in question, it would be open to them to do so before the appropriate forum, in accordance with the procedures prescribed in the Securitisation and Reconstruction of the Financial Assets and Enforcement of Security Interest Act, 2002 and the Security Interest (Enforcement) Rules, 2002. It is noted that the Supreme Court, in United Bank of India v. Satyawati Tondon and others, (2010) 8 SCC 110, has made it clear that the scope of interference by this Court, under Article 226 of the Constitution of India, is limited in nature. It has also made it clear that the statutory schemes provided under the specific enactments should not be defeated by the exercise of the writ jurisdiction, by this Court. As such, the alternative remedies available to the petitioners, under the Securitisation and Reconstruction of the Financial Assets and Enforcement of Security Interest Act, 2002, ought not to be interfered with, by this Court, by invoking its writ jurisdiction, under Article 226 of the Constitution of India. The Supreme Court has reiterated the said position of law, in a recent decision, in GM, Sri Siddeshwara Co-op.Bank Ltd. V. Sri Ikbal, (2013) 6 MLJ 571 (SC).
82. At this juncture, before parting with the matter, we deem it appropriate to make certain observations. India, is said to be a developing country. We have vast natural resources and highly qualified technical man power. However, we have not been utilizing the scientific knowledge and technology, which are at our disposal, to the optimum extent possible, like in the developed countries, for improving the quality of life of the common man. There is no doubt that it would take some time for such technologies to reach the door steps of the common man, to cater to his daily needs. However, it does not mean that the technological developments, especially, in the field of digital technology, should not be put to good use, by the various agencies and entities, as in the present case, with a view to speed up economic growth and for better utilization of the services rendered by them. The novel method of e-auction has been adopted by the respondent banks to facilitate the sale of the secured assets with a view to eliminate the unethical practices followed by the cartels and the syndicates, during the auction sales of the secured assets.
83. Change cannot be static or stagnant. It has to be live and vibrant. Only then there would be progress in the society. Over the years, science and technology has grown in leaps and bounds. Advanced countries have put to use digital technology to enhance their efficiency in their varied endeavours. The need of the hour is to adopt such methods in the functioning of the various authorities and entities in this country, including the instrumentalities of the state. Being digital savvy is the order of the day, given the complex matrix of activities in which digital technology is being used in the present day world.
84. It is said that there are more cell phones in India than toilets, especially, in the rural and backward areas. There is a clear indication that we are moving towards the digital age. Even though India might not have come of age, to compete with the advanced countries in the use of digital technology, we are not far behind.
85. We should take note of the fact that we are in the age of Face book, You Tube and Twitter. We are in an age where man has set his sights on planets which are many light years away. As such, it can be said that the process of e-auction sale, followed by the respondent banks, is only a very small step taken towards adopting modern technologies in implementing the procedures provided by law.
86. In such circumstances, we find it appropriate to dismiss the present Writ Petitions, with the observations and directions, incorporated in this order. Accordingly, the Writ Petitions stand dismissed. Consequently, connected Miscellaneous Petitions are closed. No costs.
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