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Rajiv Kumar Jindal & Others vs. BCI Staff Colony Residential Welfare Association & Others

Civil Appeal · 2023 INSC 439Decided 27 Apr 2023
Civil Appeal Nos. 10128 of 2011

Background

M/s Bharat Commerce & Industries Limited (BCI), a sick company, had its assets put up for sale by IDBI (acting as the "Operating Agency") on directions of the Board for Industrial and Financial Reconstruction (BIFR). For one plot of land (Block IV of BCI's Rajpura unit, where company staff colony residents lived), Rajiv Kumar Jindal and others submitted the sole bid of about Rs. 2.84 crore in 2004, which was conditionally accepted subject to furnishing a bank guarantee and paying the price in instalments under the Asset Sale Committee's (ASC) guidelines. The bidders failed to furnish the bank guarantee or pay any instalment on time, leading BIFR to refuse to confirm the sale: a decision the Appellate Authority (AAIFR) later reversed in the bidders' favour. The residents' welfare association then challenged that reversal in the Punjab and Haryana High Court, which set aside the AAIFR's order and restored BIFR's refusal to confirm the sale, directing a fresh sale process and refund of the bidders' deposited money with interest.

Decision Breakdown

The Supreme Court dismissed both connected appeals and upheld the High Court's decision. It found the entire auction process fatally flawed at the outset because the Operating Agency never obtained a proper valuation of the property or fixed a reserve price before inviting bids, as required by Sections 18(2)(k) and 21(c) of the Sick Industrial Companies (Special Provisions) Act, 1985, meaning there was no genuine competitive bidding, just a solitary, unchecked bid. The Court reiterated that the purpose of a public auction is to secure the maximum realizable value through fair competition, and that a lone bidder who then also fails to meet the payment and bank-guarantee conditions set by the ASC cannot have that bid confirmed merely because they eventually paid up after the AAIFR wrongly ruled in their favour. The Court also rejected the argument that residents who never participated in the original bidding had no standing to challenge the sale, holding that persons directly and adversely affected by an auction (such as long-term residents of the property) can invoke the High Court's writ jurisdiction even without having bid themselves.

Lesson Learnt

A public auction or tender process is only valid if it is genuinely competitive and preceded by a proper valuation and reserve price; a solitary, unchallenged bid, especially one where the bidder later fails to meet the agreed payment conditions, can be set aside even years later, and people directly affected by such a sale (not just rival bidders) have the right to challenge it in court.

Official source (sci.gov.in)View Judgment (PDF)

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