Case Note & Summary
The High Court of Judicature at Bombay, Bench at Aurangabad, heard three writ petitions filed by different petitioners challenging the auction sale of a plot and building owned by Parbhani People's Cooperative Bank Ltd., which had gone into liquidation in 2007 due to mismanagement. The Liquidator had auctioned the property measuring 2832.37 sq. mtr with a multi-storey building after fixing an upset price of Rs.10,64,97,000 based on two government-approved valuers' reports and the ready reckoner. E-tender notice was published in newspapers on 03.05.2019, and the auction was held on 28.05.2019. Five bidders participated, including the petitioner in WP 7784/2019. The highest bidder, respondent No.5 Kailash Balaprasadji Ajmera, offered Rs.12.06 crores, which was accepted after negotiation. The petitioners contended that: (i) the upset price was inadequate and the property could have fetched Rs.25 crores; (ii) the condition of negotiation was changed from ‘with all bidders’ to ‘only with the highest bidder’; (iii) the Joint Registrar was not present at the auction; (iv) there was fraud and collusion between the bidders and authorities; and (v) the auction was held behind the back of shareholders. The respondents argued that the upset price was properly fixed, the modification in negotiation condition was based on a CVC circular, the highest bidder's offer was fair, and no irregularity was committed. The Court examined the valuation reports and found the upset price adequate. It held that alteration of the condition regarding negotiation was rational and no prejudice was caused. Allegations of fraud and collusion were unsubstantiated by evidence. The absence of the Joint Registrar was not fatal because an authorized representative attended. Shareholders had not raised objections before the auction and delayed in approaching the court. Relying on precedents emphasizing limited judicial review in tender matters and the principle that an auction will not be set aside for mere inadequacy of price without fraud, the Court dismissed all writ petitions, affirming the auction sale and ordering no costs.
Headnote
A) Co-operative Societies - Liquidation and Auction - Adequacy of Upset Price - Maharashtra Co-operative Societies Act, 1960 - Upset price fixed based on two government-approved valuers' reports and market value as per ready reckoner; court finds no irregularity - Held that mere allegation of inadequacy of price without proof of fraud is insufficient to set aside auction. (Paras 19-21) B) Auctions - Modification of Conditions - Change in Negotiation Condition - Maharashtra Co-operative Societies Act, 1960 - Condition of negotiation with all bidders was modified to negotiation with highest bidder only, relying on a Central Vigilance Commission circular; court finds modification rational and not vitiating auction - Held that the highest bidder was called for negotiation and his offer was accepted, thus procedure was followed. (Paras 14, 22-24) C) Fraud and Collusion - Allegations of Collusion Among Bidders and Authorities - Evidence Requirement - Maharashtra Co-operative Societies Act, 1960 - Petitioners alleged collusion between bidders and auctioning authorities; court finds no material or evidence to substantiate these allegations - Held that bald allegations of fraud and collusion cannot be entertained without proof. (Paras 25-27) D) Auction Procedure - Presence of Joint Registrar - Mandatory Requirement - Maharashtra Co-operative Societies Act, 1960 - Petitioners contended that absence of Joint Registrar vitiated auction; court notes that an authorized representative of the Commissioner was present - Held that non-presence of Joint Registrar does not invalidate auction when there is no prejudice shown. (Paras 28-29) E) Locus Standi - Shareholders - Challenge to Auction by Shareholders - Shareholders of the bank challenged auction; court finds that they were aware of auction through publication and did not object before auction, and their locus to challenge after sale is questionable - Held that delay in filing petition and participation in process by other bidders militate against interference. (Paras 30-32)
Issue of Consideration
Whether the auction conducted by the Liquidator of Parbhani People's Cooperative Bank Ltd. was vitiated by irregularities such as change in auction conditions in the midst of the process, absence of Joint Registrar, inadequate upset price, and collusion?
Final Decision
The writ petitions are dismissed. The auction process was upheld and the sale in favor of respondent No.5 Kailash Balaprasadji Ajmera was confirmed. No order as to costs.
Law Points
- Auction conditions can be modified if there is a rational basis and no prejudice is caused
- upset price fixed based on valuation reports cannot be interfered with casually
- court will not interfere in auction sales merely on allegation of inadequacy of price unless fraud is shown
- presence of Joint Registrar at auction is not mandatory if an authorized representative is present
- shareholders cannot challenge auction after it is concluded when they were aware of it.
