ANNAN STEELS (P) LTD. Vs. CANARA BANK LTD.

JUDGEMENT

(1.) Can the earnest money deposited by the promoter of a company prior to its incorporation, be treated as an earnest money deposit made on behalf of a bidding company at an auction? The aforesaid question primarily arises for consideration in this writ petition under Article 226 of the Constitution of India. The challenge is against an auction sale held under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, 'the Act').

(2.) Initially, the writ petition was filed, challenging the auction notice issued under the Act. During the pendency of the writ petition, since the auction took place, an amendment was effected assailing the auction sale itself.

(3.) The facts, in a nutshell, are as follows: An amount of Rs.190.00 Crores was borrowed by the petitioners from a consortium of two banks comprising the first and second respondents. When repayment was defaulted, proceedings for recovery were initiated apart from filing an application under the Recovery of Debts and Bankruptcy Act, 1993, as O.A. No.147/2016. In the meantime, proceedings were initiated under the Act, which was challenged in S.A. No. 111/2017 before the DRT, Ernakulam. Later, when possession of the secured asset was proposed to be taken, W.P.(C) No.21892 of 2021 was filed by the petitioners, which was dismissed by judgment dtd. 3/1/2022. Thereafter, petitioners submitted a proposal for a one-time settlement, and since the initial proposal was not acceptable to the consortium of banks, a revised proposal was submitted, all of which ended in rejection. While so on 14/6/2022, the impugned sale notice was published, notifying the sale of one of the secured assets to be held on 30/7/2022 at 11.30 am.