Dr. D.Y Chandrachud, J.:— Three Petitions have been instituted before this Court under Article 226 of the Constitution in order to challenge an order of the Debts Recovery Appellate Tribunal (DRAT) at Mumbai dated 3 March, 2011. The DRAT has, while setting aside an order of the Debts Recovery Tribunal (DRT), restored the confirmation of sale of immovable property in favour of the first respondent.

2. A Company by the name of Jay Electric Wire Corporation Ltd., which is now in liquidation, had its factory at Mysore on land admeasuring about 4.4 acres, comprised in Plots 44 and 47 in Serial Nos. 55 and 69 in the Industrial area of village Habal and Sr. No. 22 of Metagally, Hobla Kasba. The Company employed about 149 workers. The factory closed down in February, 1995 and the workers claimed that their services were illegally terminated. On 5 January, 2001, an award was passed by the Industrial Tribunal at Mysore in a reference under section 10 of the Industrial Disputes Act, 1947, directing the employer to pay backwages to the workmen with effect from 6 February, 1995 and to continue payment during the subsistence of the relationship of employer and employee between the parties. On 18 December, 2006, a recovery certificate was issued by the Deputy Labour Commissioner at Bangalore in the amount of Rs. 4.44 crores towards the dues of the workmen under the award of the Industrial Tribunal. These dues, according to the Union, have been computed until 1999. Proceedings for the winding up of the Company were initiated before the Company Judge of this Court in 1996 (Company Petition 336 of 1996). Subsequently, on a reference made by the BIFR under section 20(1) of the Sick Industrial Companies (Special Provisions) Act. 1985, the Company Court held that it was just and equitable for the Company to be wound up. The Official Liquidator was appointed as provisional Liquidator by an order dated 6 October, 2005 of the Company Judge to take charge of the books, assets and business of the Company and to exercise all necessary powers under the Companies' Act, 1956. By an order dated 15 October, 2008, the Company Judge made the Petition absolute by directing that the Company be wound up. The Official Liquidator was accordingly directed to proceed in the matter, in accordance with law, in relation to the assets of the Company in liquidation.

3. In the year 1999, ICICI Bank had instituted a suit before this Court, on its Original Side, for the recovery of its dues against the Company, Jay Electric Wire Corporation Ltd. By an order of a Learned Single Judge dated 8 July, 1999, the Court Receiver was appointed as Receiver inter alia of the assets of the Company with liberty to sell the assets by a public auction or by private treaty and to apply the net sale proceeds as between the ICICI Bank and the Central Bank of India (impleaded as the Second Defendant to the suit) in satisfaction of their respective charges on the immovable property. The suit was transferred to the DRT upon the enactment of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The DRT by its order dated 26 August, 2003, allowed the application filed by ICICI Bank Ltd. in the amount of Rs. 1.12 crores together with future interest at 12% per annum. The Tribunal directed that upon the failure of the borrower to repay the amount within six months, the immovable property would be sold and the net sale proceeds would be paid to the applicant Bank and to the Central Bank of India in proportion to their respective charges. The Receiver appointed by the Tribunal was, by an order dated 19 April, 2004, continued in the recovery proceedings.

4. In June, 2004, a public notice was issued for the sale of the moveable and immovable properties of the borrower. A notice of the proposed sale was published in the newspapers. Though moveables of the borrower came to be sold, no offer was received for the sale of its immovable property. On 24 July, 2006. a meeting took place before the private receiver, who had been appointed by the DRT as receiver. The Receiver recorded that two offers were received, one in the amount of Rs. 1.10 crores, while another of the first and second respondents in the amount of Rs. 80 lakhs. The Central Bank of India stated that the offers were not acceptable to it. At that stage, the Standard Chartered Bank appeared before the Receiver stating that ICICI Bank Ltd. had assigned its debts to it. The meeting was adjourned to 9 August, 2006. Before the Receiver, proceedings were adjourned on 9 August, 2006 to 21 August, 2006. On 21 August, 2006 bidding took place inter se between the two bidders, who submitted private offers, when the first and second respondents enhanced their bid to Rs. 2.50 crores. The meeting was adjourned to 5 September, 2006 and the successful bidder was directed to make up an amount representing 25% of the offer by 28 August, 2006. The Central Bank was not present.

5. A letter was addressed by the Receiver on 29 September, 2006 to the Advocates for the two Banks enclosing a report seeking the confirmation of sale in favour of the first and second respondents in terms of their offer of Rs. 2.50 crores. The Banks were informed that the matter stood adjourned to 27 October, 2006 when the sale may be confirmed. The sale in favour of the first and second respondents was confirmed on 27 October, 2006.

6. On 30 October, 2006, an application was filed by Central Bank of India for setting aside the sale. The Central Bank in its application complained that though the usual procedure which was followed by the Receiver was to intimate its Advocate of the next date of hearing, and though on 24 July, 2006 the Bank had opposed the acceptance of the offers which had been submitted, it had no intimation of the proceedings until it received a letter dated 29 September, 2006 of the Receiver stating that the property had been sold to the first and second respondents for Rs. 2.50 crores and that the sale was to be confirmed on 27 October, 2006. The Central Bank claimed that in the absence of intimation, it had been unable to remain present when the bidding took place on 21 August, 2006 before the Receiver. The Central Bank in its application further stated that it had made efforts and obtained an expression of interest in the property from two parties who had indicated offers in the amount of Rs. 2.55 crores and Rs. 3 crores for the purchase of the property at Mysore. According to the Central Bank, upon receipt of the letter of the Receiver dated 29 September, 2006, their Chief Manager had personally visited the office of the Receiver on 17 October, 2006 and had informed him of the expression of interest by at least two other bidders who were willing to pay a higher price. According to the Bank, the Receiver had called upon its Chief Manager to remain present at 4 p.m on 27 October, 2006 and the Bank was, therefore, led to believe that the confirmation would take place at that time. However, a meeting was held by the Receiver at 11 a.m on 27 October, 2006. The Bank was unable to contact its Advocate due to a strike of public sector Banks on that date. But on 27 October, 2006 when both the interested bidders arrived at the office of the Receiver, they were informed that the sale had been confirmed in the morning. A protest was registered by a letter dated 27 October, 2006. By its application, the Bank sought the setting aside of the order confirming the sale dated 27 October, 2006 and a direction to the Receiver to conduct a fresh auction and to consider the offers submitted by the two bidders who had expressed interest in the purchase of the property.

7. At this stage, it would also be necessary to note that the Official Liquidator had filed a report dated 1 December, 2006 before the DRT stating that an application has been received from the workers contending that the sale which had been conducted in favour of the first and second respondents was at a price which was not fair and reasonable. The Official Liquidator further submitted that the sale which was conducted by the Receiver in favour of the first and second respondents be set aside since no notice had been furnished to the Liquidator though the Registrar had directed that the Liquidator be brought on the record.

8. By an order dated 5 December. 2006, the Recovery Officer set aside the confirmation of sale holding that it was obligatory to ensure that a higher price is fetched for the property and assets of a Company in liquidation, if the sale price offered by an auction purchaser is inadequate. The Recovery Officer held that he was entitled to set aside the confirmation in view of the higher offer which was received within a few days and before the sale deed was executed. Moreover, the Official Liquidator who had submitted a report dated 29 March, 2005 was also required to be associated with the sale proceedings. Accordingly, the Recovery Officer directed, while setting aside the sale, that a fresh auction be conducted in the presence of all secured creditors, the Receiver and the Official Liquidator after notice.

9. Immediately after the sale was set aside on 5 December, 2006, the Recovery Officer conducted a sale on the very same day. No fresh notification of sale was published. Bids were not invited from the parties. In his roznama dated 5 December, 2006, the Recovery Officer noted that the original auction purchasers did not participate in the fresh bidding process. Two bids appear to have been privately received by the Recovery Officer. The highest bid in the amount of Rs. 6.45 crores was of Umrah developers. The Recovery Officer directed that the bid of Umrah developers in the amount of Rs. 6.45 crores be accepted and the successful bidder was directed to pay the purchase consideration.

10. Umrah Developers deposited the full consideration of Rs. 6.45 crores on 10 November, 2006 and 11 December, 2006. After the sale in favour of the first and second respondents was set aside, and the Recovery Officer declared Umrah developers as the successful bidder, the first and second respondents filed an appeal before the Debts Recovery Tribunal. The Tribunal by its order dated 6 February, 2007 noted that on 5 December, 2006, the Recovery Officer while setting aside the sale had immediately conducted an auction amongst the bidders who were present in which the highest offer was Rs. 6.45 crores. The property had been valued between 2004 and 2005 at Rs. 80 lakhs for which the last offer now received was Rs. 6.45 crores. In the circumstances, the Tribunal held that “there was something wrong” on the part of the valuer. The fact that an offer of Rs. 6.45 crores was received when bids were conducted only amongst a few persons and not in the public realm was indicative of the fact that the property could fetch a higher value. The Tribunal was of the view that instead of selling the property by private negotiation, the Recovery Officer should have issued a public notice and ought to have invited fresh offers. The Tribunal found fault with the Recovery Officer proceeding in a sale of the property immediately after he had set aside the earlier sale. Consequently, there was a finding that the sale, right from the inception, had not been conducted properly. Accordingly, the Tribunal directed that while retaining the offers which were received until 5 December, 2006, the Recovery Officer should publish a public notice to determine as to whether offers higher than the bid of Rs. 6.45 crores of Umrah Developers were realised. If no further offers were received, the Recovery Officer was directed to accept the highest bid after inter se bidding between the earlier bidders.

11. The order of the Tribunal was challenged in appeal by the first respondent. The DRAT granted a stay on 26 February, 2007 as a result of which the entire process of holding a fresh auction came to a stand still. Thereupon, an application was filed by Umrah Developers before the DRT to permit it to withdraw the amount which it had deposited. The application was rejected by the Tribunal. Thereafter, Umrah Developers took out an application before the DRAT for permission to withdraw the amount which was deposited. The DRAT by an order dated 20 March, 2007 allowed Umrah Developers to withdraw 90% of its bid amount of Rs. 6.45 crores, leaving in balance Rs. 64.5 lakhs in deposit before the Recovery Officer. In support of the order, the DRAT furnished the following reasons:

“When the order was passed directing holding of a fresh auction in respect of the property, the party, whose bid has not been accepted as the highest bid or sale in his favour has been set aside cannot be in law as well as in equity prevented from withdrawing his deposit, specially when the entire purchase price was deposited by that party and the offer given by him cannot be said to be not genuine.”

These observations of the DRAT indicate that it proceeded on the basis that the offer by Umrah Developers was a genuine offer. However, as a result of the pendency of the proceedings before the DRAT, the sale process was stalled. The DRAT consequently directed a refund of 90% of the bid amount to Umrah Developers. Subsequently, Umrah Developers moved the Tribunal for withdrawal of the balance representing 10% of the total bid amount on 23 June, 2009, inter alia on the ground that though more than two and a half years had elapsed, the property had not been put up for auction.

12. By an order dated 2 July, 2008, the DRAT dismissed the appeal filed by the first respondent, principally on the ground that the offer of Rs. 6.45 crores was higher than the offer of Rs. 2.50 crores furnished by the first and second respondents. The first and second respondents challenged the order of the DRAT in writ proceedings before this Court. During the pendency of the writ proceedings, an application filed by Umrah Developers for refund of the balance representing 10% of the bid amount was allowed and the remaining amount was released on 15 September, 2009. The Writ Petition filed by the first and second respondents challenging the order of the DRAT was disposed of by consent by a Division Bench of this Court by an order dated 11 August, 2010 in terms of agreed Minutes. The agreed order records that one of the principal factors which weighed with the DRAT was that at the relevant time, an offer for the purchase of the property at Rs. 6.45 crores had been made. However, since that offer had been withdrawn and the bid consideration also had been refunded, this Court remanded the proceedings back to the DRAT for a fresh decision. On remand, the DRAT by its order dated 15 October, 2010, allowed the appeal filed by the first and second respondents and directed the Recovery Officer and the Tribunal to restore the confirmation of sale in favour of the first and second respondents on 27 October, 2006. This order of the DRAT was questioned by the Union representing the workers in a writ proceeding before this Court. By an order dated 20 December, 2010, this Court set aside the order of the DRAT and remitted the proceedings back for fresh consideration. Following the order of remand, the DRAT has passed its impugned order dated 3 March, 2011 allowing the appeal filed the first and second respondents and restoring the confirmation of sale made in favour of the first and second respondents on 27 October, 2006.

13. Both the Banks who are secured creditors before the Court have filed Petitions under Article 226 of the Constitution for questioning the order passed by the DRAT. As a matter of fact, the first Petition chronologically was instituted by the workers Union to challenge the order of the DRAT. During the course of the hearing of these proceedings, the Court has been informed that an effort has been made by the first and second respondents to settle the outstanding dues of the workers through an out of Court settlement. Counsel appearing on behalf of the workmen submitted that the workmen would abide by the result of the Petitions which have been filed by the secured creditors and it is only in the event that the Petitions filed by the Banks are dismissed that the workers would be inclined to enter into an out of Court settlement with the first and second respondents. Counsel for the first and second respondents stated that his clients would be able to resolve the dispute with the workmen only if the Petitions filed by the secured creditors challenging the sale in favour of his clients fail. Counsel appearing on behalf of the first and second respondents submitted that while the first and second respondents are ready and willing to negotiate with the workmen, they are not in a position to do so until the litigation which has been instituted by the secured creditors attains finality. The Central Bank of India and the Standard Chartered Bank who are two secured creditors have pressed their challenge to the order of the DRAT, submitting that there is a material irregularity and the sale has been conducted in a manner lacking in transparency and fairness.

14. On behalf of the two Petitioning Banks it has been urged that the sale in the present case, in favour of the first and second respondents has been conducted in a manner which is totally lacking in transparency. Counsel appearing on behalf of the Central Bank of India while drawing support from the application that was made for setting aside the confirmation of sale urged that the Central Bank of India had, as a matter of fact, appeared before the Receiver in the first instance on 24 July, 2006 and had opposed the acceptance of the bids inter alia of the first and second respondents. Counsel submitted that thereafter, on 21 August, 2006, bidding took place inter se between the existing bidders who had furnished individual bids when the first respondent increased the bid to Rs. 2.50 crores which was accepted. Counsel submitted that it was only on 29 September, 2006 when the Receiver intimated the Bank of the acceptance of the bid and of the process of sale confirmation to take place on 27 October, 2006 that the Bank obtained knowledge of the circumstances that had transpired. On 27 October, 2006, the sale was confirmed behind the back of the Bank at 11 a.m and when the representative of the Bank moved the Receiver, he was informed that the sale had already been confirmed. Accordingly the Bank filed an application on 30 October, 2006 which was allowed by the Recovery Officer on 5 December, 2006. The Recovery Officer, however, embarked upon a wholly improper course of action by holding a fresh bidding process amongst a few bidders, who remained present before him, without a public notice, on the very same day. In the circumstances, it was urged that the Tribunal had, for valid reasons, come to the conclusion that a public notice should be issued inviting fresh offers and an effort should be made to realise the best price. The valuation of the property was obviously flawed and even without a public notice, a bid with full payment of price in the amount of Rs. 6.45 crores was realized as against Rs. 2.50 crores offered by the first and second respondents. The submissions which were urged on behalf of Central Bank were supported by Counsel appearing on behalf of Standard Chartered Bank. The Standard Chartered Bank had, during the pendency of the proceedings, communicated by its letter dated 27 October, 2006 that it was consenting to the confirmation of sale at a price of Rs. 2.50 crores. Counsel submitted that this letter was addressed by the Bank before a higher bid in the amount of Rs. 6.45 crores emerged on 5 December, 2006 and consequently, the Bank should not be held down to the consent which it had offered at an earlier stage.

15. Ms. Cox appearing for the Union representing the Workers urged that it is the workers who have actively opposed the conduct of the sale proceedings as being unfair and unlawful. Counsel urged that even before the DRAT when the impugned order was passed, the workers informed the Chairperson that they had an offer in the amount of Rs. 6.45 crores for the property. Hence, the price realised from the first and second respondents was not the fair market value. The workers, it is urged, are weary of litigation: several have died while others are critically sick. The reason why the workers were ready to settle with the first and second respondents is because of this predicament, though they have maintained that the sale stood vitiated. Hence, if a fresh public auction is ordered, that should be held in an expeditious time frame so that the workmen are disbursed their dues. Counsel has fairly taken the Court through the record of the case.

16. On the other hand, it has been urged on behalf of the first and second respondents that the test which must be applied by the Court must be based on the situation on the date when the sale was confirmed, namely, on 27 October, 2006. Counsel submitted that on 27 October, 2006, the price which was realized through the bid of the first and second respondents of Rs. 2.50 crores was fair and reasonable having regard to the fact that initially the property had been valued at Rs. 1.10 crores which valuation was subsequently reduced to Rs. 80 lakhs. Counsel submitted that on 28 March, 2009, the property was valued at Rs. 2.28 crores. In the present case, it was urged that there was no fraud or irregularity in the conduct of the auction. Further it was urged that none of the parties, as a matter of fact, pressed for the conduct of a public auction for the sale of the property. Insofar as the first and second respondents are concerned, it has been stated that the Recovery Officer handed over possession on 31 October, 2006 though a sale certificate has not been issued. If the Court were to intervene, it was urged, the sanctity of the sale process would be lost.

17. The rival submissions now fall for determination.

18. Standard Chartered Bank had by its letter dated 27 October, 2006 stated that it was consenting to the confirmation of sale at a price of Rs. 2.50 crores. The admitted position, however, is that Central Bank of India did not consent at any stage to the sale in favour of the first and second respondents being confirmed. Central Bank in fact, objected to the confirmation of sale in favour the first and second respondents. The objection by Central Bank was hence, in any event a live objection.

19. The record of the case reveals that the principal borrower, which is a Company incorporated under the Companies' Act, 1956, has been ordered to be wound up. A provisional Liquidator was initially appointed by an order of the Company Judge dated 6 October, 2005. While passing an order of winding up on 15 October, 2008, the Company Judge directed that the Liquidator shall act in accordance with law in relation to the assets of the Company in liquidation. The Official Liquidator placed his report dated 1 December, 2006 on the file of the DRT contending that the sale which has been effected in favour of the first and second respondents ought to be set aside for the reason that no notice had been furnished to him. The DRAT in the course of its impugned order observed that the Liquidator who was appointed under the orders passed by the Company Court only had restricted powers to participate at the stage of the disbursement of the dues of the workmen. This ex facie is not a correct reading either of the order of the Company Judge dated 6 October, 2005 by which a provisional Liquidator came to be appointed or of the final order dated 15 October, 2008 when a Liquidator was appointed upon an order of winding up being passed. As a matter of fact, the record before the Court would indicate that initially it was on 26 February, 2004 that the Official Liquidator was appointed as provisional Liquidator in Company Petition 336 of 2006. The powers of the Liquidator were not restricted by the orders of the Company Judge. The case of Rajasthan State Corporation v. Official Liquidator, AIR 2006 SC 755, which has been relied on by Counsel for the Central Bank of India, is relevant here. In that case, while dealing with a secured creditor constituted under section 3 of the State Financial Corporations Act, 1951, the Supreme Court laid down the propositions that:

“(i) A Debt Recovery Tribunal acting under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 would be entitled to order the sale and to sell the properties of the debtor, even if a company-in-liquidation, through its Recovery Officer but only after notice to the Official Liquidator or the liquidator appointed by the Company Court and after hearing him.

(iv) In a case where proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 or the SFC Act are not set in motion, the concerned creditor is to approach the company Court for appropriate directions regarding the realization of its securities consistent with the relevant provisions of the companies act regarding distribution of the assets of the company-in-liquidation.”

The proposition of law that the case lays down is that the Official Liquidator must be involved in the sale proceedings of the property of a company in liquidation so as to assure compliance with all relevant law, including the Companies Act, 1956. The impugned order of the DRAT stated that the Official Liquidator had been given only restricted powers to participate at the stage of disbursement of the dues of the workmen. This is incorrect in light of the law laid down by the Supreme Court judgment cited above.

20. Be that as it may, the fundamental question that arises before the Court is as to whether the procedure that was followed in the sale of the property in favour of the first and second respondents was fair and proper or whether there was fraud or material irregularity. Initially a public notice had been issued for the sale of the assets of the principal borrower. While the movable assets were sold, the immovable property could not be sold. On 24 July, 2006, a meeting was convened by the Receiver appointed by the DRT at which there were two private bids in the amount of Rs. 1.10 crores and Rs. 80 lakhs respectively. The Central Bank which is a secured creditor opposed the acceptance of the bid. On 21 August, 2006, bidding took place inter se between the two bidders at which the first and second respondents enhanced their bid to Rs. 2.50 crores. On 29 September, 2006, a letter was addressed by the Receiver to the Central Bank stating that the proceedings would come up on 27 October, 2006 for confirmation of sale. According to the Central Bank, it had in the meantime, received two bids respectively in the amount of Rs. 2.55 crores and Rs. 3 crores for the purchase of the property. The Central Bank in its application dated 30 October, 2006 made a serious grievance of the fact that the confirmation of sale on 27 October, 2006 took place behind its back because though it was informed by the Receiver that the confirmation hearing would take place at 4 p.m, the Receiver proceeded to confirm the sale at 11 a.m prior to the appointed hour. The Recovery Officer in his order dated 5 December, 2006 was of the view that a fresh auction should be conducted in the presence, inter alia, of the secured creditors and the Official Liquidator. This part of the order of the Recovery Officer was unexceptionable. The Recovery Officer took note of the fact that higher bids had been placed in the fray prior to the execution of the Sale Deed and within a few days of the confirmation of sale. However, having set aside the sale in favour of the first and second respondents, the Recovery Officer immediately thereafter proceeded to hold a sale proceeding among a few bidders who were present at the hearing. No public notice was issued nor was any effort made to widely publicise the sale process. Umrah Developers offered the highest bid of Rs. 6.45 crores. Umrah Developers, as a matter of fact, deposited the entire sale consideration of Rs. 6.45 crores. Hence, within a period of two months of the confirmation of sale in favour of the first and second respondents on 27 October, 2006, a fresh bid was realised for the very same property in the amount of Rs. 6.45 crores as opposed to a bid of Rs. 2.50 crores of the first and second respondents. Even without a public notice inviting offers, the price for the property had more than doubled. The process adopted by the Recovery Officer was, however, faulty for the reason that when the earlier sale was set aside on 5 December, 2006, no fresh notice was issued to enable participation amongst bidders drawn from the public at large. This was noticed in the order of the DRT dated 6 February, 2007. The DRT directed that a fresh process of bidding be concluded after the issuance of a public notice. The reasons which weighed with the DRT were eminently proper. The Tribunal found that the valuation was flawed, and that instead of a private negotiation, a fair public auction should be held. It is this order of the DRT which was carried in appeal to the DRAT and which was set aside.

21. Both, the Central Bank of India and the Standard Chartered Bank are secured creditors. The Central Bank has a recovery certificate issued by the DRT on 6 November, 2003 in the amount of Rs. 10.99 crores upon which interest is liable to accrue at the rate of 12% per annum. The Standard Chartered Bank as the assignee of the debt of the ICICI Bank Ltd. has an order dated 26 August. 2003 under which the principal borrower is liable to pay an amount of Rs. 1.12 crores together with interest at the rate of 12% per annum. The dues of the workmen arise out of the award of the Industrial Tribunal. The recovery certificate in favour of the workmen shows that an amount of Rs. 4.44 crores was due and payable. The amount due under the recovery certificate dated 18 December, 2006 is, according to Counsel for the workmen, computed as of 1999. The principal borrower has been ordered to be wound up under the orders passed by this Court. The workmen would be entitled to their dues as of the date of winding up. The basic question which has to be addressed by the Court is as to whether the sale process has been fair, proper and transparent and as to whether the price that has been realized is reflective of a reasonable value of the property. We are of the view that the manner in which the sale process was conducted is anything but fair. The Receivers have cast aside every norm of prudence. They failed to act in a transparent manner and elevated a private preference to an overriding priority. As a result, the necessity of selling property at a public auction at which the best possible price could be realised has been an unfortunate casualty. The sale has been conducted evidently without following any principles of transparency or fair dealing. Admittedly no public notice has been issued before the sale which culminated in favour of the first and second respondents was held. The price which was offered by the first and second respondents was Rs. 2.50 crores. The sale was confirmed on 27 October, 2006 and it is a matter of some significance that within a period of a little over a month thereafter, an offer was made to the Recovery Officer for the same property for Rs. 6.45 crores. Even that offer, it must be noted, was without a public advertisement being issued and an opportunity being granted to the public at large to bid for the property. The amount of Rs. 6.45 crores was deposited by the bidder, who had submitted a bid on 5 December, 2006. That bid was, however, withdrawn as a result of the fact that the process of conducting a fresh auction came to be stalled as a result of the order of stay passed by the DRAT. The bid amount was permitted to be withdrawn under orders of the Court, specifically in view of the fact that as a result of the delay that had taken place in the conduct of the fresh auction, the process had been brought to a stand still. Significantly, the Recovery Officer after confirming the sale on 27 October, 2006, proceeded to hand over possession of the property on 31 October, 2006. On 30 October, 2006, the previous day, Central Bank had moved an application for setting aside the confirmation of sale. There has been a material irregularity in the sale which vitiates the sale.

22. Counsel appearing on behalf of the first and second respondents submitted that the Court ought not to interfere in exercise of its writ jurisdiction under Article 226 of the Constitution because otherwise, the sanctity of the sale process would be lost. The sanctity of a properly conducted sale has to be preserved, and a sale would not be set aside merely because, as a result of a lapse of time, a higher price is being realized. The Supreme Court in NGEF Ltd. v. Chandra Developers Pvt. Ltd., (2005) 8 SCC 219 at P. 50. held us much saying:

“The satisfaction as regard adequacy of the price is one of the relevant factors for proper and reasonable exercise of the judicial discretion vested in it. There cannot be any doubt or dispute that when an auction is held upon compliance of the statutory provisions, withholding of auction on the ground that still higher price may be obtained may prove to be self-defeating exercise as has been held in Kayjay Industries Pvt. Ltd. v. Asnew Drums Pvt. Ltd., (1974) 2 SCC 213 : AIR 1974 SC 1331 and State of Punjab v. Yoginder Sharma Onkar Rai and Co., (1996) 6 SCC 173”

Equities which are created in favour of a bidder who submits a bona fide bid which is found at the end of a transparent sale process to be the highest bid have to be preserved. At the same time, it is necessary that the sale process must be conducted with transparency and in accordance with law. In the present case, we find that the element of transparency was completely lacking. The grounds which weighed with the DRAT in setting aside the order of the Tribunal are misconceived. The DRAT, as we have noted earlier, was of the view that the powers of the Liquidator were restricted by the Company Court to participate at the stage of disbursement of the dues. This ex facie is an incorrect reading of the orders passed by the Company Court. The DRAT has found fault with the Central Bank for having remained absent before the Recovery Officer on 9 August, 2006 and 21 August, 2006. This absence of the Central Bank at two hearings which took place before the Receiver can furnish no justification whatsoever for the conduct of the sale in a manner which is not consistent with (air dealing. Further, in Union Bank of India v. Official Liquidator, (2000) 5 SCC 274 : AIR 2000 SC 3642, the Supreme Court has taken cognisance of the fact that a judge must attempt to verify the reliability of a valuation report. The Court had stated that “it appears that learned Judge has not applied his mind to the valuation report itself. He has only considered the last figures given in the valuation report which says that total valuation of the property was Rs. 66,19,032/-. Had the Court considered the report it would have immediately noticed that valuation report was not at all reliable.” Id. at P. 14. In Allahabad Bank v. Bengal Paper Mills Co. Ltd., (1999) 4 SCC 383 : AIR 1999 SC 1715 the Supreme Court, had observed that:

“Upon liquidation, the assets and properties of the company in liquidation vest in the Official Liquidator for the benefit of its creditors. It is only from out of the sale proceeds of these assets and properties that the creditors of the company can hope to recoup their dues. To ensure that the best possible price is realised upon the sale of these assets and properties, the sale thereof by the liquidator is required to be confirmed by the High Court. It is the obligation of the High Court to the creditors of the company in liquidation to make sure that the best possible price has been realised.”

Thereafter, the Court quoted the judgment of Navalkha and Sons v. Sri Ramanya Das. (1970) 3 SCR 1:

“The condition of confirmation by the Court operates as a safeguard against the property being sold at inadequate price whether or not it is a consequence of any irregularity or fraud in the conduct of the sale. In every case it is the duty of the Court to satisfy itself that having regard to the market value of the property the price offered is reasonable. Unless the Court is satisfied about the adequacy of the price the act of confirmation of the sale would not be proper exercise of judicial discretion.”

In the present case, the authenticity of the valuation report is another factor that ought to have been weighed by the DRAT, especially in light of the fact that higher offers were received days after the sale. In light of all the above, the conclusion of the DRAT that there was no material irregularity is specious. A case for interference under the jurisdiction of this Court is made out.

23. For these reasons, we allow the petitions by setting aside the order of the DRAT dated 3 March, 2011. We direct that the Recovery Officer attached to the DRT to issue a public advertisement which shall be published in at least two newspapers, one in English and another in Kannada having circulation in Mysore, inviting bids for the sale of the property. The terms and conditions governing the sale shall be laid down by the Recovery Officer of the DRT, and a fresh valuation shall be carried out on the basis of which the reserve price of the property shall be fixed. We record the statement made on behalf of the Central Bank and the Standard Chartered Bank by their Counsel that both the Banks shall co-operate with the Recovery Officer and shall meet all the expenses of the sale, including towards newspaper advertisements. On the request of the two banks, we further clarify that if the Banks are ready and willing to meet the expenses for the issuance of a publication in any additional newspapers, that shall also be permitted by the Recovery Officer at the expenses which have been agreed to be borne by the Banks. We direct the Recovery Officer to expedite the process of sale and to hold a meeting for fixing the terms and conditions within a period of three weeks from today. The sale process should be completed within a period of three months from the date on which an authenticated copy of this order is placed before the Recovery Officer. Rule is made absolute in these terms. There shall be no order as to costs.

Rule made absolute.