The Supreme Court upheld the importance of fairness in public auctions by invalidating the sale due to procedural lapses under the Maharashtra Land Revenue Code.
The Supreme Court Bench of Justice J.B. Pardiwala and Justice Manoj Misra reviewed a bunch of two appeals and observed that procedural lapses, including non-compliance with statutory notice requirements and premature confirmation of an auction sale under the Maharashtra Land Revenue Code, render the sale invalid, emphasizing that fairness and adherence to statutory mandates are paramount in public auctions. The Court further held that constitutional remedies under Article 226 must ensure procedural integrity and accountability in public administration.
The Supreme Court addressed a contentious dispute arising from the auction of a property under the Maharashtra Land Revenue Code, 1966, consolidating two appeals due to common issues and facts. The appeals stemmed from the rejection of writ petitions by the Bombay High Court, which had upheld an order by the Additional Commissioner, Konkan Division, invalidating the auction sale conducted for recovering land revenue arrears. The property, originally owned by Prestige H.M. Polycontainers Ltd., was sold to the appellant, who subsequently acquired a sale certificate. However, the auction process was marred by procedural lapses, including a failure to adhere to statutory notice periods under Section 193 of the Revenue Code and premature confirmation of the sale.
The appellant, arguing that the property was lawfully purchased and developed into an industrial unit employing over 200 workers, contended that undoing the sale would cause irreparable harm. Conversely, the respondent, Asset Reconstruction Company (India) Ltd. (ARCIL), alleged collusion and fraud in the auction process, including undervaluation of assets, non-compliance with statutory provisions, and procedural irregularities. The respondent emphasized that the sale violated Section 208 of the Revenue Code and relied on precedents such as Mathew Varghese v. M. Amritha Kumar to highlight the mandatory nature of auction sale notices.
The Supreme Court evaluated the applicability of Order XXI Rule 90 of the Code of Civil Procedure (CPC) in writ proceedings under Article 226 of the Constitution. Drawing from cases such as Chilamkurti Venkateswarlu v. State Bank of India, the Court reaffirmed that material irregularity or fraud in an auction sale must be substantiated by evidence of substantial injury. It also distinguished constitutional remedies under Article 226 from statutory procedures, emphasizing procedural flexibility while upholding strict standards of fairness and reasonableness in public auctions.
The Court highlighted significant procedural flaws in the auction, including inadequate notice, premature confirmation, and disregard for statutory mandates under Sections 192, 193, and 208 of the Revenue Code. It underscored the constitutional mandate for fairness and transparency in public dealings, reiterating the High Court’s duty to scrutinize administrative actions for compliance with Article 14 of the Constitution.
Regarding jurisdiction, the Court upheld the Additional Commissioner’s decision under Section 247 of the Revenue Code, finding the remedy under Section 210 illusory given the premature finalization of the sale. It refused to revive the Additional Collector’s order, which was deemed illegal, relying on principles established in Gadde Venkateswara Rao v. Govt. of Andhra Pradesh to avoid perpetuating injustice.
Balancing equities, the Court granted the appellant an opportunity to preserve its industrial unit by depositing ₹4 crore with ARCIL within six months. Failure to comply would result in repossession and a fresh auction. The appeals were allowed in part, with no costs, and pending applications were disposed of, emphasizing accountability and adherence to statutory and constitutional principles in auction proceedings.
Mr. P.S. Patwalia, Senior Advocate represented the Appellant.
Mr. Amar Dave, Senior Advocate appeared for the Respondent.
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