Dr. Mandeep Sethi v. Union Bank of India

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    Dr. Mandeep Sethi v. Union Bank of India
In the Supreme Court of India
CWP 21862/2012
Before Justice Hemant Gupta and Justice Ritu Bahri
Decided on February 26, 2013

Relevancy of the case: Validity of e-auctions conducted by the Debt Recovery Tribunals

Statutes & Provisions Involved

  • The Information Technology Act, 2000 (Section 4, 10-A)
  • Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (Section 29)
  • Income Tax (Certificate Proceedings) Rules, 1962 (Rule 56)

Relevant Facts of the Case

  • The Government of India, Ministry of Finance issued instructions directing the Presiding Officers of the Debt Recovery Tribunals to conduct all auctions electronically. The writ petition has been filed against these instructions. The orders passed by the Debt Recovery Tribunal are also challenged in the matter of attachment and sale. However, the Hon’ble court has limited itself to the challenge of e-auction only.

Prominent Arguments by the Advocates

  • The learned counsel for the petitioner, Mr I.P. Singh, contended that auction where the interested bidders do not give their bid personally but through an electronic medium, in a proper format, do not fall under the definition of public auction under Rule 56 of the Income Tax (Certificate Proceedings) Rules, 1962. The counsel placed reliance on a judgment (Chairman and Managing Director, SIPCOT, Madras & others vs. Contromix Pvt. Ltd. by its Director (Finance) Seetharaman, Madras & another (AIR 1995 SC 1632)) of the Hon’ble Supreme Court where it was held that the dominant consideration is to secure the best price for the property to be sold. It can be achieved only when there is maximum public participation in the process of a sale.
  • The counsel contended that in remote areas where there is an absence of a computer facility or computer professionals, e-auction will frustrate the intention of obtaining the maximum price for the property to be sold. Therefore, such a process of auction is not legal and valid.
  • The learned counsel for the respondents relied on Section 4 and 10-A of the Information Technology Act (2000). The counsel contended that the electronic scheme is an alternative for anything required in a written or printed format.

Opinion of the Bench

  • 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. The court observed that e-auction is another form of the public auction, which is deemed to be included in Rule 56 of the said Rules. It should be treated as a preferred mode of auction.

Final Decision

  • The Hon’ble court held that there is no provision in the statute which confers jurisdiction on the Central Government to issue directions to the Debt Recovery Tribunals. Hence, the government was not competent to issue any direction in the purview of discharging its functions by the Debt Recovery Tribunals to order public auction in a particular manner only. The instructions issued on 13.06.2012, should be treated as a worthy suggestion by the Debt Recovery Tribunals to conduct transparent and fair auctions.
  • The Debt Recovery Tribunals are, therefore, directed to adopt the process of e-auction in the case of property being sold in municipal areas. However, concerning properties in rural areas, the court allowed the discretion of the tribunals to order e-auction as it may consider appropriate.

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