Auction lost in one second; HC says it is not an expert to decide

The High Court of Karnataka has rejected a petition which sought to address a dispute with regard to technical issue in an auction process saying courts were not experts on such issues.

The petitioner had lost an auction though it was the highest bidder just one second before the expiry of the e-auction.

The HC, however, said, “Complicated nuances of conduct of an electronic auction is sought to be projected by the petitioner, which this Court admittedly does not have such expertise to decipher and assess threadbare. Going by what the documents are produced as certificates by the competent authorities with regard to the conduct of auction, the petition does not merit any indulgence at the hands of this Court and would necessarily meet its dismissal.”

New Horizon Educational and Cultural Trust and KLSR Infratech Limited were both bidders at an auction conducted by The Federal Bank and The South Indian Bank of a property.

The owners of the property had secured loan, which they were unable to repay and as per the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI) Act, the property was put up for auction to recover the Rs 51 crore dues.

The auction took place on February 2, 2023. New Horizon Educational Trust approached the HC with the plea that its bid has not been accepted.

The Trust had bid Rs 52 crore at 3.45 PM and this was the highest bid till the last one second before the closure of the bids.

However, five minutes later the bid of KLSR Infratech at Rs 52.10 crore was accepted which it alleged was arbitrary.

The advocate for the Trust contended that “if the auction was to end in one second, the ninth respondent could not have become the successful bidder at 15:57 hours.”

KSLR Infratech. however, contended before the HC that “what the petitioner alleges is only a figment of imagination and, therefore, would contend that this Court in exercise of its extraordinary jurisdiction under Article 226 of the Constitution of India would not interfere in the auction where there is neither arbitrariness nor illegality and the procedure is strictly followed in terms of what is notified.”

The Court dismissed the allegation of arbitrariness.

“The allegation of the petitioner is that there was a technical glitch, because of which he could not access the website cannot become foundation for arbitrariness, as the other bidder/s have accessed it and submitted its bid up to 15:54 hours and it is then he alleges there was a technical glitch. This cannot be accepted and the e-auction cannot be interfered with for the technical difficulties of the petitioner.”

The Court said the arbitrariness is not palpable or demonstrable in this case.

Further, Justice M Nagaprasanna in his judgment said that this issue was a private one where the Court had no part to play.

“What becomes germane to be noticed is who are the protagonists in this list. The petitioner a private bidder; ninth respondent another private bidder; respondents one and two private banks, all of whom are twined in an auction of private bidding. I fail to understand what is the public function that is involved in the case at hand for this Court to exercise its extraordinary jurisdiction under Article 226 of the Constitution of India,” the Court said rejecting the petition.