Tamilnadu Organic Pvt Ltd v State Bank of India Stressed Asset Management Branch
In the High Court of Judicature at Madras
W.P. No. 34376 of 2013
Before Justice M. Jaichandren and Justice K. Kalyanasundaram
Decided on February 20, 2014

Relevancy of the case: Validity of e-auction

Statutes & Provisions Involved

• The Information Technology Act, 2000 (Section 1(4), 2(w), 10A)
• The Constitution of India, 1950 (Article 14)

Relevant Facts of the Case

• Writ petitions are filed to issue a writ of Certiorari calling for the records of the respondent with respect to the e-auction Sale.

Prominent Arguments by the Advocates

• The learned counsels appearing for the petitioners 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 and therefore, it is invalid in the eye of law.
  • 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 and skills to participate 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.
  • 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.
• The learned counsels appearing on behalf of the respondent Banks had submitted 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.
  • It is seen that the respondent banks are utilising the services of the government authorised service providers, for providing the services necessary for conducting the e-auction sales of the secured assets.
  • Further, 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.
  • The novel method of e-auction has been adopted by the respondent banks to facilitate the sale of secured assets with a view to eliminating the unethical practices.
  • There is no specific provision of law prohibiting the respondent banks from bringing the secured assets for sale, by way of e-auction.
  • E-auction is public auction conducted with the aid of certain technical procedures.

Opinion of the Bench

• As such, we are of the considered view that the petitioners have not shown enough cause or reason for the court to interfere with the e-auction sales, being conducted by the respondent banks. 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.
• Advanced countries have used 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.
• 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.

Final Decision

• Writ petition stands dismissed. Consecutively connected all miscellaneous petitions are thereby closed.

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