Simplified Explanation of the Judgment
In a key ruling, the Patna High Court has dismissed an appeal filed by a former company director, thereby upholding the auction sale of assets conducted by the Bihar State Credit and Investment Corporation Limited (BICICO). The appeal, filed under Letters Patent Appeal No. 344 of 2017, challenged the order of a Single Judge dated 10.01.2017 that had directed BICICO to execute and register a sale deed in favour of a third-party auction purchaser.
The appellant, who was the Managing Director of M/s Kiran Re-rollers Private Limited, had obtained financial assistance of ₹90 lakhs from BICICO in 1989-90. However, the company failed to repay the loan. BICICO initiated recovery proceedings under Sections 29 and 30 of the State Finance Corporation Act, 1951. After issuing a demand notice and receiving no repayment, BICICO took possession of the company’s mortgaged assets and initiated an auction sale in June 2011.
The company first approached the High Court in 2011, challenging the sale and seeking a direction for One-Time Settlement (OTS). The writ petition (CWJC No. 9994 of 2011) was dismissed, and the appeal (LPA No. 1244 of 2011) was also rejected, with the court noting that the company failed to act on the OTS directions and had not submitted the required documents.
Later, when the auction purchaser (Respondent No. 5) moved the High Court again in CWJC No. 2930 of 2015 to compel BICICO to register the sale deed, the appellant filed an application seeking to be added as a party. Although allowed to be impleaded, his objections to the sale were rejected by the learned Single Judge, who upheld the purchaser’s right and directed BICICO to complete the sale process.
In the present LPA, the appellant contended that the auction was collusive and that BICICO did not offer the company a fair chance at rehabilitation. He alleged procedural irregularities in the valuation and claimed the sale was arbitrary. However, the Division Bench noted that all these issues had already been considered and rejected in the earlier litigation and could not be reopened.
The court concluded that once the sale had been lawfully conducted, confirmed, and possession handed over, there remained no valid ground to challenge the transaction. The appellant, having actively participated in earlier rounds of litigation and lost, could not now re-agitate the same issues in a different capacity.
Significance or Implication of the Judgment
This decision reinforces the principle that courts will not entertain repeated litigation over issues that have already been adjudicated. For industrial units that default on institutional loans, it underscores the importance of compliance with OTS procedures and timelines. Once a lawful auction is completed and the purchaser has taken possession, courts are unlikely to set aside such transactions unless clear illegality is proven.
The ruling also strengthens the enforcement powers of financial corporations like BICICO under the State Finance Corporation Act, ensuring timely recovery and promoting financial discipline in the lending system.
Legal Issue(s) Decided and the Court’s Decision
- Was the auction sale by BICICO legal and valid?
✔ Yes, it was held to be lawful and in compliance with the Finance Corporation Act. - Did the company get a fair chance under the OTS scheme?
✔ Yes, the court held that the company failed to comply with OTS requirements despite several opportunities. - Can issues already decided in previous litigation be raised again?
❌ No, the court reiterated that repeated litigation on the same grounds is not permissible. - Was there any illegality in the sale process or collusion with the purchaser?
❌ No, the court found no evidence of procedural irregularity or collusion.
Case Title
Awadhesh Prasad Sinha v. The State of Bihar & Others
Case Number
LPA No. 344 of 2017 in CWJC No. 2930 of 2015
Citation(s)
2020 (1) PLJR 161
Coram and Names of Judges
Hon’ble Mr. Justice Ashwani Kumar Singh
Hon’ble Mr. Justice Anil Kumar Sinha
Names of Advocates and who they appeared for
Mr. Siddhartha Prasad — For the Appellant
Mr. Rakesh Ambastha (AC to AAG 7) — For the State
Mr. Kumar Abhimanyu Pratap — For BICICO (Respondents 2 to 4)
Mr. Sunil Kumar Sharma — For Respondent No. 5 (Auction Purchaser)
Link to Judgment
https://patnahighcourt.gov.in/viewjudgment/MyMzNDQjMjAxNyMxI04=-lk60Q1rdHNc=
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