MANDEEP SINGH SETHI V. UNION OF INDIA AND ORS

CWP/21862/2012

AI Insights

The case revolves around a challenge to the instructions issued by the Government of India for conducting e-auctions for the sale of properties by Debt Recovery Tribunals (DRTs). The petitioner argued that e-auction does not constitute a public auction as required by Rule 56 of the Income Tax (Certificate Proceedings) Rules, 1962, and that the Central Government cannot direct a quasi-judicial tribunal in its judicial functions. The respondents defended the use of e-auction citing the Information Technology Act, 2000, which recognizes electronic records and communications. The court examined whether e-auction qualifies as a public auction and whether the Central Government could mandate its use by the DRTs.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 724082 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 26-02-2013
• Assessment Year: misc
• Other Referred Cases: Chairman and Managing Director, SIPCOT, Madras & others Vs. Contromix Pvt. Ltd. by its Director (Finance) Seetharaman, Madras & another, Secy. Of State Vs. Sunderji, Vishal Builders (P) Ltd. Vs. Delhi Development Authority, M/s Raman and Raman Ltd. Vs. The State of Madras & others, Inter State Transport Commission Vs. P. Manjunath Kamath
• Laws Referred To: Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Income Tax Act, 1961, Income Tax (Certificate Proceedings) Rules, 1962, Information Technology Act, 2000
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: KARMINDER SINGH; N C SAHNI
• Assessee Lawyers: I P SINGH
• Keywords: Debt Recovery Tribunal; E-auction; Electronic records; Public Auction; Legal recognition of electronic records
• Section: 56; 4; 10(a); 29; 35

Judgement Text

" IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision : 26.02.2013 C.W.P.No.21862 of 2012 Dr. Mandeep Sethi …Petitioner Versus Union Bank of India & others …Respondents CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON’BLE MS. JUSTICE RITU BAHRI Present: Mr. I.P.Singh, Advocate , for the petitioner. Mr. Karminder Singh, Advocate, for respondent Nos.1 & 2. Mr. N.C.Sahni, Advocate, for respondent No.4. HEMANT GUPTA, J. (ORAL) 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 2 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: “Sale to be by auction 56. 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.” Learned counsel for the petitioner has vehemently argued that e-auction i.e. where the intending bidders give their bids not in person, but through the medium of electronics on computer in a prescribed format, is not a public auction within the meaning of Rule 56 of the Rules. In support of the argument, learned counsel for the petitioner relies upon the judgment of Hon’ble Supreme Court in Chairman and Managing Director, SIPCOT, Madras & others Vs. Contromix Pvt. Ltd. by its Director (Finance) Seetharaman, Madras & another AIR 1995 SC 1632. Mr. Singh has further argued that e-auction may be relevant where the intending bidders are the corporate and educated citizens, but where the property to be sold is located in the remote rural areas without any computer facility or computer knowing personnel or when the intending bidders are not computer literate, the process of e-auction will actually frustrate the intention of obtaining maximum price for the property to be sold. Therefore, such process of auction is not legal and valid. C.W.P.No.21862 of 2012 3 It is further contended that Central Government cannot issue any direction to conduct e-auction to a quasi judicial Tribunal, which is discharging judicial functions, when it orders sale of the immovable property. On the other hand, learned counsel for the respondents have relied upon Sections 4 and 10-A of the Information Technology Act, 2000 to contend that the electronic format is a substitute for anything which shall be required to be done in writing or in the type-written or in the printed form. Both the Sections read as under: “4. Legal recognition of electronic records – Where any law provides that information or any other matter shall be in writing or in the type-written or printed form, then, notwithstanding anything contained in such law, such requirement shall be deemed to have been satisfied if such information or matter is – (a) rendered or made available in an electronic form; and (b) accessible as as to be usable for a subsequent reference.” “10-A. Validity of contracts formed through electronic means – where in a contract formation, the communication of proposals, the acceptance of proposals, the revocation of proposals and acceptances, as the case may be, are expressed in electronic form or by means of an electronic form or by means of an electronic record, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose.” Rule 56 of the Rules contemplates sale by public auction. The question to be examined is; whether e-auction is a public auction within the expression ‘public auction’ appearing in Rule 56. The Supreme Court in Chairman and Managing Director, SIPCOT, Madras case (supra) has held in the matter of sale of public property, the dominant consideration is to secure the best price for the property to be sold and this can be achieved only when C.W.P.No.21862 of 2012 4 there is maximum public participation in the process of sale and every body has an opportunity of making an offer. The Court observed as under: “12. In the matter of sale of public property, the dominant consideration is to secure the best price for the property to be sold. This can be achieved only when there is maximum public participation in the process of sale and every body has an opportunity of making an offer. Public auction after adequate publicity ensures participation of every person, who is interested in purchasing the property and generally secures the best price. But many times it may not be possible to secure the best price by public auction when the bidders join together so as to depress the bid or the nature of the property to be sold is such that suitable bid may not be received at public auction. In the event, the other suitable mode for selling of property can be by inviting tenders. In order to ensure that such sale by calling tenders does not escape attention of an intending participant, it is essential that every endeavour should be made to give wide publicity so as to get the maximum price….” In Secy. Of State Vs. Sunderji, AIR 1938 P.C. 12, it was held to the following effect: “There is no definition in the Act of the words “public auction” and their Lordships are of opinion that there can be no doubt that they must bear the meaning which is ordinarily given to them in the English language. The words mean 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 members of the public having a right to attend, and a valuable element being the competition between the persons who are openly bidding for the subject matter of the sale. This is of importance not only to the Railway Company, but also to the owner of the goods, the competition being calculated to produce the highest price.” Following the aforesaid judgment, the Delhi High Court in Vishal Builders (P) Ltd. Vs. Delhi Development Authority ILR (1977) 1 Delhi 724 has held to the following effect: “14. The public auction means that it is being held in public, all members of the public having a right to attend, and a valuable element being the C.W.P.No.21862 of 2012 5 competition between the persons who are openly bidding for the subject matter of the sale.” By the process of e-auction, none of the 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. There is no provision in the Statute which confers jurisdiction on the Central Government to issue directions to the Debt Recovery Tribunals. Section 35 of the Act confers powers on the Central Government to publish an order in the official gazette not inconsistent with the provisions of the Act, if it appears to be necessary or expedient for removing the difficulty. Even such order could be passed within three years from the date of commencement of the Act. Therefore, the Central Government was not competent to issue any direction to the Debt Recovery Tribunals under the provisions of the Statute. In M/s Raman and Raman Ltd. Vs. The State of Madras & others AIR 1959 SC 694, the Supreme Court while examining Section 43-A of the Motor Vehicles Act, 1939 held that the power with the Government to dispose of cases in a particular way, would be destructive of C.W.P.No.21862 of 2012 6 the entire judicial process envisaged by the Act. The Court observed as under: “8. So far as Section 64-A is concerned, in express terms it confers a judicial power on the State Government to keep a subordinate judicial tribunal within bounds. Section 64-A, along with Sections 45 to 57, 60 and 64, forms a complete code in respect of the quasi judicial disposals of the issue of permits. The permits should be issued in accordance with the provisions of the Act and the rules framed thereunder following the judicial procedure. The words used in Section 43-A are very wide. It says that the State Government may issue orders and directions of a general character in respect of any matters relating to road transport. Divorced from the context and the setting in which the new section appears, it may comprehend any orders or directions of a general character in respect of road transport; and, if so construed, it would not only subvert the other provisions of the Act, but also would be vulnerable to attack on the ground of constitutional invalidity. It would entrust the Government with a naked arbitrary power capable of being used to compel quasi judicial tribunals to dispose of cases in a particular way it would enable them to couch the order in a general way to induce a tribunal to come to a particular decision in a given case; and it would be destructive to the entire judicial procedure envisaged by the Act and the rules framed thereunder in the matter of disposal of specified questions. It would be attributing to the legislature an incongruity, for the State Government could issue directions in respect of which it could make rules ignoring the safeguards provided in the making of the rules…..” In Inter State Transport Commission Vs. P. Manjunath Kamath (1973) 3 SCC 733, the Supreme Court observed that it is essential to fundamentals of fair-play in the administration of law that the decision of the Transport Authorities in the matter of grant of permits should not be clogged by directions indicating the order of preference. It was held to the following effect: “19. This Court in B. Rajagopala Naidu Vs. State Transport Appellate Tribunal, AIR 1964 SC 1573 held that the Transport Authorities in dealing with applications for permits and assessing the respective or rival claims of the parties discharge quasi-judicial functions and their orders are quasi- C.W.P.No.21862 of 2012 7 judicial orders. It is, therefore, essential to fundamentals of fair-play in the administration of law that the decision of these Transport Authorities in the matter of grant of permits should not be clogged by directions indicating the order of preference as happened in the present case. xxx xxx xxx 23. The power of the Inter State Transport Commission under Section 63-A(2)(c) of the Act to issue directions is referable only to directions of executive and administrative nature. The Commission has no power to entrench upon the quasi-judicial functions of the Transport Authorities in the matter of grant of permits. The order of the High Court in quashing the direction is upheld.” 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 13.06.2012 (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 13.06.2012 (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 C.W.P.No.21862 of 2012 8 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, if 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. With the said directions and observations, the present writ petition stands disposed of. (HEMANT GUPTA) JUDGE 26.02.2013 (RITU BAHRI) Vimal JUDGE "