Supreme Court of India
DEENADAYAL NAGARI SAHAKARI BANK LTD. & ANOTHERversusMUNJAJI AND OTHERS
- Citation
- 2022 INSC 191
- Decided
- 16 February 2022
- Disposal
- Appeal(s) allowed
- Bench
- M R SHAH
Holding
The auction sale was valid because the borrower failed to apply within the statutory period to set aside the sale and did not show substantial injury, and the procedural requirements of the MCS Rules were satisfied.
Summary
The borrower, a director of Vaishnavi Hatcheries, defaulted on loans from two cooperative banks and mortgaged four properties. After a recovery certificate was issued, the appellant bank conducted a public auction, issuing a sale certificate and deed in favour of the highest bidder. The borrower failed to apply within thirty days under Rule 107(13) to set aside the sale on grounds of material irregularity, nor did he demonstrate substantial injury as required by Rule 107(14)(i). The High Court had set aside the auction sale, holding that procedural breaches existed in the proclamation and deposit requirements. The Supreme Court held that the revision under s.154 was not maintainable, the High Court could not entertain the writ petition, and the auction complied with the MCS Rules, thereby quashing the High Court order.
Issues considered
- Whether a revision application under s.154 of the Maharashtra Co-operative Societies Act, 1960 is maintainable when the borrower has not applied under Rule 107(13) to set aside the sale.
- Whether the High Court could entertain a writ petition after finding the revision application non‑maintainable.
- Whether the auction complied with MCS Rules 107(11)(e), (f), (g) and (h) regarding proclamation, fresh proclamation after adjournment, and timely deposit of 15% and the balance 85% of the sale price.
- Whether the borrower sustained substantial injury sufficient to justify setting aside the sale under Rule 107(14)(i).
- Whether the issuance of the sale certificate after thirty days barred any subsequent challenge.
Legislation cited
- Maharashtra Co-operative Societies Act, 1960s. 101, s. 154
- Maharashtra Co-operative Societies Rules, 1961s. 107(11), s. 107(13), s. 107(14)
Subjects
auctionmortgageco-operative societiesrevision under s.154proclamationsale certificaterecovery proceedingsprocedural compliancesubstantial injurysetting aside sale
Judgment
948 [2022]REPORTS
SUPREME COURT 8 S.C.R. 948 [2022] 8 S.C.R.
A DEENADAYAL NAGARI SAHAKARI BANK LTD. &
ANOTHER
v.
MUNJAJI AND OTHERS
B (Civil Appeal No. 818 of 2022)
FEBRUARY 16, 2022
[M. R. SHAH AND B. V. NAGARATHNA, JJ.]
Maharashtra Co-operative Societies Act, 1960: s.154 –
C Auction – Respondent no.1-borrower borrowed loan from two banks
and as a security mortgaged four properties – Default in payment –
Both the banks initiated separate recovery proceedings – Appellant-
bank published proclamation in the daily newspaper and thereafter,
tendered a notice to sell the mortgaged properties – Appellant-
D auction purchaser was found to be the highest bidder – Sale
certificate was issued in favour of the auction purchaser on
17.01.2011 and the sale deed was also executed on 19.01.2011 –
No further steps were taken by respondent no.1 immediately – He
also did not come forward to deposit 5% of the amount equal to the
purchase money within 30 days from the date of the sale so as to
E seek setting aside of the sale in terms of r.107(13) of the MCS Rules,
1961 – No objection was raised before the Recovery Officer about
any irregularity or fraud as required under r.107(14) of the MCS
Rules, 1961 – When the officers of the bank went to take possession
of the property, they were attacked – FIR reporting attack lodged
F on 24.02.2011 – Thereafter, respondent no.1 challenged the auction
proceedings before the Divisional Joint Registrar by way of revision
under s.154 of the MCS Act, 1960, which was dismissed – Order of
Divisional Joint Registrar was challenged before High Court, which
was allowed and auction was set aside – On appeal, held: Once the
revision application before the Divisional Joint Registrar under s.154
G was held to be not maintainable, High Court ought not to have
considered the writ petition on merits – The borrower never applied
to the recovery officer to set aside the sale on the grounds of material
irregularity, mistake or fraud in publishing or conducting it,
therefore, once the borrower failed to apply to the Recovery Officer
H to set aside the auction sale within a period of thirty days from the
948
DEENADAYAL NAGARI SAHAKARI BANK LTD. & 949
ANOTHER v. MUNJAJI AND OTHERS
date of sale of immovable property, it was not open for the borrower A
to challenge the sale on the ground of material irregularity – U/
r.107(14)(i) of the MCS Rules, 1961, no sale shall be set aside unless
the Recovery Officer is satisfied that the applicant had sustained
substantial injury by reason of such irregularity, mistake or fraud
– In the present case, there is no finding recorded by the High Court
B
that the borrower had sustained substantial injury – Setting aside
of auction sale by the High Court was just contrary to the proviso
to r.107(14)(i) of the MCS Rules, 1961 – Maharashtra Co-operative
Societies Rules, 1961 – r.107(11)(f) .
Allowing the appeals, the Court
C
HELD: 1. In the present case, Sale Certificate was issued
in favour of the auction purchaser on 19.01.2011 after a period of
thirty days from holding the auction sale. Even the Sale Certificate
was issued by the Bank/Recovery Officer only after the receipt
of the approval of the District Deputy Registrar. While approving
D
the sale, the District Deputy Registrar noted in the approval dated
29.11.2010 that the valuation of the land was determined at Rs.
98,10,000/- according to the letter issued by the Government
approved Valuer dated 10.06.2010 which was the upset price and
the amount realised was Rs.1,26,00,000/-, which is higher than
the upset price. Therefore, as such, even the District Deputy E
Registrar also did not doubt the valuation and the amount
realised, i.e., Rs. 1,26,00,000/- against the upset price of
Rs.98,10,000/-. Therefore, once the borrower failed to apply to
the Recovery Officer to set aside the auction sale on the grounds
of material irregularity, mistake or fraud in publishing or
F
conducting the auction sale within a period of thirty days from
the date of sale of immovable property, thereafter it was not open
for the borrower to challenge the sale on the ground of material
irregularity. All the grounds on which the High Court has set
aside the auction sale/sale were available with the borrower and
the borrower did not apply to set aside the sale on the said grounds G
of material irregularity, mistake or fraud. [Para 7.1][962-D-G]
2. Even under Rule 107(14)(i) of the MCS Rules, 1961, no
sale shall be set aside on the ground of material irregularity,
mistake or fraud unless the Recovery Officer is satisfied that the
H
950 SUPREME COURT REPORTS [2022] 8 S.C.R.
A applicant had sustained substantial injury by reason of such
irregularity, mistake or fraud. In the present case, there is no
finding recorded by the High Court that the borrower had
sustained substantial injury and by reason of such irregularity
the auction sale had to be set aside. Under the above
circumstances also, setting aside of auction sale/sale by the High
B
Court is just contrary to the proviso to Rule 107(14)(i) of the
MCS Rules, 1961. One another ground on which the High Court
has set aside the auction sale is that as the auction was postponed
by seven days, fresh proclamation ought to have been issued.
Therefore, according to the High Court, not issuing the fresh
C proclamation and conducting/holding the auction was in breach
of Rule 107(11)(f) of the MCS Rules. The High Court has also
observed and held that as the auction was held/conducted within
a period of thirty days from the date of issuance of proclamation,
the same is in violation of Rule 107(11)(f) of the MCS Rules.
[Paras 7.2 and 8][963-B-E]
D
3. In the present case, the tender notice was issued and
published in the daily newspaper on 9.9.2010. The date fixed for
submission of the tender was 28.09.2010. At the last moment,
i.e., on 28.09.2010, the borrower filed revision application no.
58/2010 before the Divisional Joint Registrar challenging the
E
auction proceedings and the Divisional Joint Registrar granted
stay of the auction proceedings on 28.09.2010. The revision
application came to be dismissed by the Divisional Joint Registrar
vide order dated 23.11.2010. On dismissal of the revision
application and vacating the stay against the auction proceedings,
F the bank/Recovery Officer opened the bids on 29.11.2010 in which
the auction purchaser was found to be the highest bidder who
offered Rs.1,26,00,000/- against the upset price of Rs. 98,10,000/
-. Therefore, as such, within a period of seven days from the date
of vacating stay and dismissal of the revision application, the
auction was held. Therefore, it cannot be said that the auction
G
sale was in breach of Rule 107(11)(f) of the MCS Rules. The
period during which the stay was in operation was to be excluded.
Even otherwise, proviso to Rule 107(11)(f) is applicable to issue
a fresh proclamation in case the sale is adjourned for a longer
period than seven days by the Recovery Officer or the Sale Officer.
H
DEENADAYAL NAGARI SAHAKARI BANK LTD. & 951
ANOTHER v. MUNJAJI AND OTHERS
The said proviso is not applicable in a case where at the last A
moment the borrower obtains a stay of the auction which is
vacated after some time, i.e., after a period of seven days. [Para
8.1][964-E-H; 965-A]
4. Now insofar as the finding recorded by the High Court
that the auction was conducted/held within a period of thirty days B
from the date of proclamation and therefore there is a breach of
Rule 107(11)(f) is concerned, it appears that the High Court has
considered 09.09.2010 as the date of proclamation. However, it
is to be noted that 09.09.2010 was the date on which the tender
notice indicating the date of auction/sale was issued. The same C
was published in the daily newspaper on 14.09.2010 fixing the
date of auction/sale on 28.09.2010. It was not a proclamation.
Prior thereto, the proclamation/public notice dated 20.02.2010
was published in the daily newspaper ‘Sakal’ on 22.02.2010,
23.02.2010 and 24.02.2010. Even thereafter also, Public
Advertisement dated 26.05.2010, which also can be said to be a D
proclamation as per Rule 107(11)(f) of the MCS Rules, 1961,
was issued. Therefore, the High Court is factually incorrect in
concluding that the auction sale was in breach of Rule 107(11)(f)
of the MCS Rules, 1961. [Para 9][965-E-G]
Shilpa Shares and Securities and others vs. National E
Cooperative Bank Limited (2007) 12 SCC 165 : [2007]
5 SCR 1128; Balram vs. Ilam Singh (1996) 5 SCC 705
: [1996] 5 Suppl. SCR 104; Ram Kishun vs. State of
Uttar Pradesh (2012) 11 SCC 511 : [2012] 6 SCR 105;
J. Rajiv Subramaniyan vs. Pandiyas (2014) 5 SCC 651 F
: [2014] 3 SCR 1140 – referred to.
Case Law Reference
[2007] 5 SCR 1128 referred to Para 5.6
[1996] 5 Suppl. SCR 104 referred to Para 5.6 G
[2012] 6 SCR 105 referred to Para 5.8
[2014] 3 SCR 1140 referred to Para 5.8
H
952 SUPREME COURT REPORTS [2022] 8 S.C.R.
A CIVIL APPELLATE JURISDICTION: Civil Appeal No. 818 of
2022.
From the Judgment and Order dated 30.07.2021 of the High Court
of Bombay, Bench at Aurangabad in Writ Petition No. 570 of 2012.
With
B
Civil Appeal No. 819 of 2022.
Santosh Paul, Sr. Adv., Sudhanshu S. Choudhari, Mahesh P. Shinde,
Ms. Rucha Pande, Nishant Ramakantrao Katneshwarkar, Shrirang P.
Katneshwarkar, Aaditya A. Pande, Chander Shekhar Ashri, Anand Dilip
C Landge, Rahul Chitnis, Sachin Patil, Geo Joseph, Ms. Shwetal Shepal,
Amol Nirmalkumar Suryawanshi, Advs. for the appearing parties.
The Judgment of the Court was delivered by
M. R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned judgment
D
and order dated 30.07.2021 passed by the High Court of Judicature at
Bombay, Bench at Aurangabad in Writ Petition No. 570 of 2012, by
which the High Court has allowed the said writ petition preferred by
respondent no.1 herein and has set aside the auction sale in respect of
the lands in question and also ordered that the Sale Certificate dated
E 19.01.2011 executed by the appellant-bank in Civil Appeal No. 818/2022
in favour of the auction purchaser stands cancelled, both, the Bank as
well as the auction purchaser have preferred the present appeals.
2. The facts leading to the present appeals in a nutshell are as
under:
F One Vaishnavi Hatcheries Company Limited, of which respondent
no.1 herein is the Director (hereinafter referred to as the ‘borrower’),
borrowed loan from the appellant-bank and one Vaidanath Nagari
Sahakari Bank. As a security to the said loan, four properties, i.e., survey
nos. 102, 440, 437 & 439 were mortgaged. Property survey No. 439
G was mortgaged with Vaidanath Bank, property survey No. 437 was
mortgaged with the appellant-bank and property survey Nos.440 & 102
were jointly mortgaged with the appellant-bank and Vaidanath Bank.
2.1 That the borrower defaulted in payment of the appellant-bank
and Vaidanath Bank in the year 2010. Both the banks initiated separate
H recovery proceedings against respondent no.1 and the borrower. A
DEENADAYAL NAGARI SAHAKARI BANK LTD. & 953
ANOTHER v. MUNJAJI AND OTHERS [M. R. SHAH, J.]
Recovery Certificate dated 6.2.2010 was issued in favour of the appellant- A
bank under Section 101 of Maharashtra Co-operative Societies Act, 1960
(hereinafter referred to as the ‘MCS Act, 1960’). According to the
appellant-bank, a proclamation was published in the daily newspaper
‘Sakal’ on 22.02.2010 as well as on 23.02.2020, followed by the
publication in the daily newspaper ‘Sakal’ on 24.02.2010. According to
B
the appellant-bank, a proclamation as per Rule 107(11) of the Maharashtra
Co-operative Societies Rules, 1961 (hereinafter referred to as the ‘MCS
Rules, 1961’) was issued on 26.05.2010 giving 30 days’ time to respondent
no.1 to pay the amount.
2.2 That the Deputy Joint Registrar, Co-operative Societies fixed
the upset price at Rs.98,10,000/- vide communication dated 26.07.2010. C
Vaidanath Bank also initiated the process of auction of the property in
survey no. 439 in terms of the recovery certificate issued in its favour.
The said proceedings so far as the Vaidanath Bank is concerned had
attained finality. Upset price fixed by the Deputy Joint Registrar, Co-
operative Societies was challenged by respondent no.1 by way of Revision D
Petition No. 58/2010 before the Divisional Joint Registrar.
2.3 The appellant-bank issued a tender notice to sell the mortgaged
properties on 9.9.2010, which was published in the daily newspaper on
14.09.2010. On the date fixed for submission of tender, the Divisional
Joint Registrar, Co-operative Societies granted stay of the auction E
proceedings in Revision Application No. 58/2010 filed by respondent
no.1 herein. However, subsequently, the Divisional Joint Registrar
dismissed the said Revision Application vide order dated 23.11.2010. On
dismissal of the revision application and vacating the stay, bids were
opened on 29.11.2010. The appellant in Civil Appeal No. 819/2022 –
Ratnakar Gutte was found to be the highest bidder and he offered the F
bid of Rs.1,26,00,000/-. The auction purchaser deposited 15% of the
said amount on the same day, i.e., on 29.11.2010. Thereafter, an application
was made to the District Deputy Registrar for seeking approval to accept
the balance 85% of the amount from the auction purchaser which
according to the bank was required as per the circular issued by the Co- G
operative Commissioner & Registrar dated 23.07.2004. The approval
was received from the District Deputy Registrar on 29.12.2010.
Immediately on receipt of the approval, the auction purchaser deposited
the remaining 85% of the amount on 12.01.2011, which was within 15
days from the date of approval.
H
954 SUPREME COURT REPORTS [2022] 8 S.C.R.
A 2.4 A Sale Certificate was issued in favour of the auction purchaser
on 17.01.2011 and the sale deed was also executed in favour of the
auction purchaser on 19.01.2011. No further steps were taken by
respondent no.1 immediately. He also did not come forward to deposit
5% of the amount equal to the purchase money within 30 days from the
date of the sale so as to seek setting aside of the sale in terms of Rule
B
107(13) of the MCS Rules, 1961. No objection was raised before the
Recovery Officer about any irregularity or fraud as required under Rule
107(14) of the MCS Rules, 1961. It appears that the officers of the bank
went to take possession of the property, they were attacked and therefore
the officers of the bank lodged an FIR on 24.02.2011 for an attack on
C them while acquiring possession of the property.
2.5 Thereafter, respondent no.1 challenged the auction proceedings
before the Divisional Joint Registrar by way of Revision Application No.
11/2011 under section 154 of the MCS Act, 1960. Respondent no.1 filed
an FIR being FIR No. 138/2011 alleging that the mortgaged deed of the
D property and sale deed with respect to land survey no. 437 (to the extent
of 34R) and land survey no. 440(to the extent of 72R) are illegal. Vide
order dated 13.04.2011, the Divisional Joint Registrar dismissed Revision
Application No. 11/2011 filed by respondent no.1 herein. Respondent
no.1 filed Writ Petition No. 570/2012 before the High Court challenging
E order dated 13.04.2011 in Revision Application No. 11/2011 passed by
the Divisional Joint Registrar upholding the auction proceedings.
Respondent no.1 also challenged Recovery Certificate dated 6.2.2010
before the High Court by filing two writ petitions, i.e., Writ Petition No.
4618/2011 & Writ Petition No. 9282/2011. Both, Writ Petition No. 4618/
2011 & Writ Petition No. 9282/2011 came to be dismissed by the High
F
Court, vide order dated 20.02.2012. By judgment and order dated
23.09.2013, the High Court quashed the criminal proceedings initiated
by respondent no.1 against the officers of the bank and others concerned
vide FIR No. 138/2011.
G 2.6 Feeling aggrieved and dissatisfied with the order passed by
the learned Single Judge in Writ Petition No. 4618/2011, respondent no.1
preferred Letters Patent Appeal No. 130/2012. The same came up for
hearing before the Division Bench on 5.3.2014. Respondent no.1
withdrew the said Letters Patent Appeal and therefore the said LPA
No. 130/2012 came to be dismissed as withdrawn.
H
DEENADAYAL NAGARI SAHAKARI BANK LTD. & 955
ANOTHER v. MUNJAJI AND OTHERS [M. R. SHAH, J.]
2.7 By the impugned judgment and order dated 30.07.2021, the A
High Court has allowed Writ Petition No. 570/2012 challenging order
dated 13.04.2011 passed by the Divisional Joint Registrar in Revision
Application No. 11/2011 upholding the auction proceedings and
consequently has set aside the auction sale in respect of lands survey
nos. 440, 437 and 102 dated 29.11.2010. By the impugned judgment and
B
order, the High Court has also set aside the Sale Certificate in favour of
the auction purchaser dated 19.01.2011. The High Court has directed
the appellant-bank to refund the sale price to the auction purchaser along
with interest @ 10% per annum from the date of deposit till payment.
From the impugned judgment and order passed by the High Court, it
appears that the High Court has allowed the writ petition and set aside C
the auction sale on the ground that there was a non-compliance of
mandatory provisions of Rule 107(11) (e) (f) and Rule 107(11)(h) of the
MCS Rules, 1961.
2.8 Feeling aggrieved and dissatisfied with the impugned judgment
and order passed by the High Court, the bank as well as the auction D
purchaser both have preferred the present appeals.
3. Shri Sudhanshu S. Choudhari, learned counsel appearing on
behalf of the appellants in Civil Appeal No. 818/2022 has vehemently
submitted that, as such, respondent no.1 has not deposited even a farthing
towards the loan amount since 2010. It is submitted that he even did not E
deposit the amount in terms of the proclamation dated 26.05.2010, nor
did he deposit the 5% amount in terms of Rule 107(13) of the MCS
Rules, 1961 for seeking setting aside the auction/sale.
3.1 It is contended that the High Court has not properly appreciated
the fact that in the earlier two rounds of litigation, respondent no.1 – F
borrower failed, i.e., in his challenge to the recovery proceedings and
challenge to the base price. It is submitted that this is the third attempt to
stall the recovery of public money.
3.2 It is further urged that as such the High Court has not properly
appreciated and/or considered that the properties at Survey Nos. 440 & G
102 were jointly mortgaged to the appellant-bank and the Vaidanath Bank
and were inseparable. It is submitted that out of the auction amount, Rs.
47 lakhs were paid to Vaidanath Bank and despite the above fact,
Vaidanath Bank was not made party before the High Court. It is submitted
that in writ petition No. 570/2012, as such, there was no challenge to the
H
956 SUPREME COURT REPORTS [2022] 8 S.C.R.
A auction sale of properties bearing survey nos. 102 & 440, jointly
mortgaged with the appellant-bank and the Vaidanath Bank.
3.3 It is further contended by learned counsel appearing on behalf
of the appellant-bank that once having held by the High Court that since
respondent no.1 did not exercise the right under Rule 107(13), Revision
B Application No. 11/2011 under Section 154 of the MCS Act, 1960 was
not maintainable, thereafter it was not open for the High Court to pass
the impugned judgment and order in the writ petition in which the order
passed in the revision application was under challenge.
3.4 It is submitted that in the present case, Vaishnavi Hatcheries
C was the borrower and respondent no.1 is the only Director of the
borrower. It is submitted that the borrower – Vaishnavi Hatcheries has
accepted the auction as it has not challenged the same. It is therefore
submitted that challenge to the auction/sale by respondent no.1 as a
director in his individual capacity was not maintainable.
D 3.5 It is further contended that as such respondent no.1 did not
raise any objection before the Recovery Officer in terms of Rule 107(14)
of the MCS Rules, 1961. That in view of the proviso to the said Rule, no
sale could be set aside on the ground of irregularity, mistake or fraud
unless the Recovery Officer is satisfied that the applicant has sustained
substantial injury due to it. It is submitted that in fact the order of the
E High Court would cause substantial injury to respondent no.1 as he will
have to pay interest at the rate of 15% per annum from the date of
default, i.e., from 2010 till date. It is submitted that the amount if calculated
at present would come to Rs. 3,54,58,836/- and after addition of 10% to
be paid to the auction purchaser, the amount would be Rs.6,15,05,589/.
F 3.6 It is further submitted that the High Court has not properly
considered the conduct on the part of respondent no.1. This is because
respondent no.1 has filed several proceedings in several Courts to stall
the recovery of the outstanding debt. It is submitted that at this stage, to
initiate a fresh process would cause substantial injury to the appellant as
G the life of the machinery auctioned was only three years and the appellant
will not be able to recover the amount which is public money. It is
submitted that the High Court has even erroneously asked the appellant-
bank to repay the sale price to the auction purchaser along with interest
at the rate of 10% per annum from the date of deposit till payment,
which is in the nature of a penalty against the bank.
H
DEENADAYAL NAGARI SAHAKARI BANK LTD. & 957
ANOTHER v. MUNJAJI AND OTHERS [M. R. SHAH, J.]
3.7 It is further urged that even otherwise, on facts also, the High A
Court has erred in observing and holding that there was a breach of
Rules 107(11)(e), (f) & (h) of the MCS Rules, 1961. That the High
Court has committed a grave error in observing and holding that in terms
of Rule 107(11)(e) and (f), there was no gap of thirty days between the
proclamation and the sale. It is stated that the date of proclamation was
B
20.02.2010 and 26.05.2010 and the date of auction was 28.09.2020.
Therefore, there was a clear gap of thirty days between the two. It is
submitted that the High Court has erroneously taken the date of publication
of notice as the date of proclamation.
3.8 It is further submitted that the High Court has also committed
an error in holding that there was a breach of Rule 107(11)(f) by not C
issuing a fresh proclamation. That the High Court has erred in holding
that in terms of Rule 107(11)(f), a fresh proclamation was required to be
issued since the auction was adjourned for more than seven days. It is
urged that the High Court has not considered that in terms of proviso to
Rule 107(11)(f), only where the Recovery Officer or the Sale Officer in D
his discretion adjourns the sale for a period longer than seven days, a
fresh proclamation was required to be issued. That in the instant case,
there was no such discretion exercised either by the Recovery Officer
or the Sale Officer. It is submitted that the sale was required to be
adjourned as there was a stay of the auction granted on the very date
fixed for it by the Divisional Joint Registrar vide order dated 28.09.2010 E
at the instance of respondent no.1, which came to be vacated on
23.11.2010 and thereafter within a period of seven days the auction was
held.
3.9 Making the above submissions, it is prayed to allow the present
appeal and to quash and set aside the impugned judgment and order F
passed by the High Court.
4. Shri Nishant Katneshwarkar, learned counsel appearing on
behalf of the auction purchaser, while adopting the submissions made on
behalf of the appellant-bank, has further submitted that the High Court
has erred in holding that the auction purchaser did not deposit the balance G
85% amount within the stipulated time. It is submitted that as per circular
dated 23.07.2004 issued by the Cooperative Commissioner & Registrar,
Cooperative Societies, all the proposals for sale confirmation were
required to be submitted to the Assistant Registrar/District Deputy
Registrar. It is submitted that in the present case the bids were opened H
958 SUPREME COURT REPORTS [2022] 8 S.C.R.
A and tender was allotted to the auction purchaser as he was the highest
bidder and he deposited 15% of the amount on 29.11.2010. That an
application was made to the District Deputy Registrar for seeking his
approval and to accept the balance 85% of the amount. That the same
was required as per circular dated 23.07.2004. That the approval was
received from the District Deputy Registrar on 29.12.2010 and
B
immediately thereafter within a period of 15 days, i.e., on 12.01.2011,
the auction purchaser had deposited the remaining 85% of the amount
and thereafter the sale certificate came to be issued in favour of the
auction purchaser on 17.01.2011. It is submitted that therefore the High
Court has erred in observing that the auction purchaser did not deposit
C the 85% of the balance amount of sale consideration within the stipulated
time provided under the Rules. It is urged that therefore the High Court
has committed a grave error in setting aside the entire sale which was
held in 2010/2011.
5. The present appeals are vehemently opposed by Shri Santosh
D Paul, learned Senior Advocate appearing on behalf of respondent no.1.
It is submitted that in the present case, the High Court has rightly held
that the auction sale was in contravention of Rules 107(11)(e), 107(11)(f),
107(11)(g) & 107(11)(h) of the MCS Rules, 1961.
5.1 It is submitted that according to Rule 107(11)(e) of the MCS
E Rules, 1961, the proclamation was to be published thirty days before the
date for sale. But in the instant case, no such proclamation was made
for the auction sale held on 29.11.2010. It is submitted that the proclamation
was issued on 09.09.2010 and was published on 14.09.2010 for opening
of tender on 28.09.2010, which was within the period of thirty days from
the date of proclamation. It is submitted, therefore the High Court has
F rightly held that the auction was in breach of Rule 107(11)(e) of the
MCS Rules, 1961.
5.2 It is further submitted that as per second proviso to Rule 107
(11)(f) of the MCS rules, if, for any reason, the sale has been postponed
beyond seven days, a fresh proclamation is required to be issued. It is
G contended that in the present case, the Divisional Registrar stayed the
auction and the proclamation of auction by order dated 28.09.2010 and
the revision was dismissed on 23.11.2010. The auction was scheduled to
be held on 28.09.2010 but the auction was actually held after 61 days,
i.e., on 29.11.2010 without a fresh proclamation as mandated by second
H proviso to Rule 107(11)(f) of the Rules. It is submitted that second proviso
DEENADAYAL NAGARI SAHAKARI BANK LTD. & 959
ANOTHER v. MUNJAJI AND OTHERS [M. R. SHAH, J.]
to Rule 107(11)(f) clearly stipulates the mandate of issuing a fresh A
proclamation. It does not state that the fresh proclamation is not necessary
if there is a stay by higher authorities/Courts. It is contended that in the
absence of the fresh proclamation, auction held on 29.11.2010 is a nullity.
5.3 It is submitted that the underlying purpose of issuing a fresh
proclamation before an auction is to obtain the best financial return for B
the property and to oversee a free and fair competition amongst buyers.
It is submitted that the High Court is right in setting aside the auction
sale which was in breach of Rule 107(11)(f) of the Rules.
5.4 It is further submitted that in the present case the property in
question was sold for an amount of Rs.1,26,00,000/- and the very C
purchaser valued the same property in four months at Rs.4,91,00,000/-.
It is submitted that in the absence of a fresh proclamation only three
related parties participated in the auction and therefore the property in
question was sold at a very low price.
5.5 It is further submitted that as per Rules 107(11) (g) & (h), it is D
mandatory that the auction purchaser deposits 15% of the price
immediately and that he also deposits the remainder 85% within a period
of fifteen days from the date of sale. It is submitted that in the present
case, the auction purchaser deposited 15% of the sale price on 29.11.2010
and the remaining amount was paid after 44 days on 12.01.2011. This is
a clear breach of Rules 107(11) (g) & (h). It is submitted that the High E
Court is right in setting aside the sale in favour of the auction purchaser.
5.6 It is submitted that in the case of Shilpa Shares and Securities
and others vs. National Cooperative Bank Limited, reported in (2007)
12 SCC 165 wherein the very same Rules 107(11) (g) &(h) were under
consideration and admittedly like in the present case the amount of F
remaining 85% was not paid within fifteen days from the date of sale,
following the earlier decision of this Court in the case of Balram vs.
Ilam Singh, reported in (1996) 5 SCC 705, it has been held that failure
to pay 85% of the purchase money within stipulated time renders the
auction sale a nullity and that there was no valid auction sale. It is G
submitted that in the aforesaid decision it is held that failure to deposit
the amount within the stipulated time vitiates the auction process.
5.7 Now insofar as the reliance placed upon Section 154 of the
MCS Act, 1960 by the bank is concerned, it is submitted that the said
provision cannot be pressed into service when the auction has been held
H
960 SUPREME COURT REPORTS [2022] 8 S.C.R.
A in a completely illegal manner and in blatant violation of the rules which
are mandatory in nature. It is contended that in the present case as there
was no fresh proclamation issued and the auction was hastily conducted
after the stay was vacated, therefore the High Court has rightly
entertained the writ petition and has rightly set aside the auction sale.
B 5.8 Relying upon the decisions of this Court in the cases of Ram
Kishun vs. State of Uttar Pradesh, reported in (2012) 11 SCC 511
and J. Rajiv Subramaniyan vs. Pandiyas, reported in (2014) 5 SCC
651, it is vehemently submitted by the learned Senior Advocate appearing
on behalf of the respondent – borrower that as observed by this Court in
the aforesaid two decisions the bank has to act fairly and all efforts
C should be made to get the best price for the mortgaged property. It is
submitted that in the aforesaid decisions, it is held that the condition
precedent for taking away someone’s property or disposing of the secured
assets is that the authority must ensure compliance with the statutory
provisions. It is submitted that in the present case, while conducting the
D auction sale and selling the property, the statutory provisions have not
been followed and in fact the property in question was sold at a lower
price and therefore the High Court has rightly quashed and set aside the
auction as well as the sale in favour of the auction purchaser.
5.9 Making the above submissions and relying upon the aforesaid
E decisions, it is prayed to dismiss the present appeals.
6. We have heard the learned counsel for the respective parties
at length.
By the impugned judgment and order, the High Court has set aside
the auction sale conducted on 29.11.2010 and has cancelled the Sale
F Certificate dated 19.01.2011 in favour of the auction purchaser on the
ground that the auction sale/sale was in breach of Rules 107(11) (e), (f),
(g) & (h) of the MCS Rules, 1961.
6.1 What was challenged before the High Court was the order
passed by the Divisional Joint Registrar passed in Revision Application
G No. 11/2011 under Section 154 of the MCS Act, 1960. However, it is
required to be noted that even the High Court in the impugned judgment
and order has specifically observed in paragraph 31 that as the borrower
did not exercise the right under Rule 107(13) of the MCS Rules, it was
not competent for the borrower to prefer revision before the Divisional
Joint Registrar under Section 154 of the MCS Act, 1960. Therefore,
H
DEENADAYAL NAGARI SAHAKARI BANK LTD. & 961
ANOTHER v. MUNJAJI AND OTHERS [M. R. SHAH, J.]
once the revision application before the Divisional Joint Registrar under A
Section 154 of the MCS Act, 1960 was held to be not maintainable and/
or competent at the instance of the borrower – respondent no.1 herein,
thereafter the High Court ought not to have considered the writ petition
on merits.
7. Even otherwise on merits also, the High Court has erred in B
entertaining the writ petition filed by the borrower and quashing and
setting aside the auction sale/sale by not bearing in mind the following
aspects:
firstly, that after conducting the auction sale and sale of the property
in favour of the auction purchaser, the borrower never applied to the C
Recovery Officer to set aside the sale on the grounds of material
irregularity, mistake or fraud in publishing or conducting it;
secondly, as per proviso to Rule 107(14)(i) of the MCS Rules, no
sale shall be set aside on the ground of irregularity or fraud unless the
Recovery Officer is satisfied that the applicant has sustained substantial
D
injury by reason of such irregularity, mistake or fraud; and
thirdly, as per Rule 107(14)(iii), on the expiration of thirty days
from the date of sale, if no application to have the sale set aside is made
or if such application has been made and rejected, the Recovery Officer
shall make an order confirming the sale. Rule 107(14) reads as under:
E
“(14)(i) At any time within thirty days from the date of the sale of
immovable property, the applicant or any person entitled to share
in a rateable distribution of the assets or whose interests are
affected by the sale, may apply to the [District Deputy Registrar] to
set aside the sale on the ground of a material irregularity or mistake
or fraud in publishing or conducing it: F
Provided that no sale shall be set aside on the ground of irregularity
or fraud unless the [District Deputy Registrar] is satisfied that
the applicant has sustained substantial injury by reason of such
irregularity, mistake or fraud.
(ii) If the application be allowed, the Recovery shall set aside the G
sale and may direct a fresh one
(iii) On the expiration of thirty days from the date of sale, if no
application to have the sale set aside is made or if such application
has been made and rejected, the [District Deputy Registrar] shall
make an order confirming the sale; H
962 SUPREME COURT REPORTS [2022] 8 S.C.R.
A Provided that if he shall have reason to believe that the sale ought
to be set aside notwithstanding that no such application has been
made or on grounds other than those alleged in any application
which has been made and rejected, he may, after recording his
reasons in writing, set aside the sale.
B (iv) Whenever the sale of any immovable property is not so
confirmed or is set aside, the deposit or the purchase money, as
the case may be, shall be returned to the purchaser.
(v) After the confirmation of any such sale, the [District Deputy
Registrar] shall grant a certificate of sale bearing his seal and
C signature to the purchaser, and such certificate shall state the
property sold and the name of the purchaser.”
7.1 In the present case, Sale Certificate was issued in favour of
the auction purchaser on 19.01.2011 after a period of thirty days from
holding the auction sale. At this stage, it is required to be noted that even
D the Sale Certificate was issued by the Bank/Recovery Officer only after
the receipt of the approval of the District Deputy Registrar. While
approving the sale, the District Deputy Registrar noted in the approval
dated 29.11.2010 that the valuation of the land was determined at Rs.
98,10,000/- according to the letter issued by the Government approved
Valuer dated 10.06.2010 which was the upset price and the amount
E realised was Rs.1,26,00,000/-, which is higher than the upset price.
Therefore, as such, even the District Deputy Registrar also did not doubt
the valuation and the amount realised, i.e., Rs. 1,26,00,000/- against the
upset price of Rs.98,10,000/-. Therefore, once the borrower failed to
apply to the Recovery Officer to set aside the auction sale on the grounds
F of material irregularity, mistake or fraud in publishing or conducting the
auction sale within a period of thirty days from the date of sale of
immovable property, thereafter it was not open for the borrower to
challenge the sale on the ground of material irregularity. All the grounds
on which the High Court has set aside the auction sale/sale were available
with the borrower and the borrower did not apply to set aside the sale on
G the said grounds of material irregularity, mistake or fraud. Therefore,
once the borrower failed to apply to the Recovery Officer to set aside
the sale on the ground of material irregularity within a period of thirty
days from the date of sale of the immovable property and thereafter the
Sale Certificate has been issued, normally the borrower cannot be
H permitted to challenge the same subsequently, having not raised any
DEENADAYAL NAGARI SAHAKARI BANK LTD. & 963
ANOTHER v. MUNJAJI AND OTHERS [M. R. SHAH, J.]
objection at the appropriate time and stage as per the statute, otherwise A
the statutory provisions would become nugatory and unworkable.
7.2 It is also required to be noted that even under Rule 107(14)(i)
of the MCS Rules, 1961, no sale shall be set aside on the ground of
material irregularity, mistake or fraud unless the Recovery Officer is
satisfied that the applicant had sustained substantial injury by reason of B
such irregularity, mistake or fraud. In the present case, there is no finding
recorded by the High Court that the borrower had sustained substantial
injury and by reason of such irregularity the auction sale had to be set
aside. Under the above circumstances also, setting aside of auction sale/
sale by the High Court is just contrary to the proviso to Rule 107(14)(i)
of the MCS Rules, 1961. C
8. One another ground on which the High Court has set aside the
auction sale is that as the auction was postponed by seven days, fresh
proclamation ought to have been issued. Therefore, according to the
High Court, not issuing the fresh proclamation and conducting/holding
the auction was in breach of Rule 107(11)(f) of the MCS Rules. The D
High Court has also observed and held that as the auction was held/
conducted within a period of thirty days from the date of issuance of
proclamation, the same is in violation of Rule 107(11)(f) of the MCS
Rules. Rule 107(11)(f) of the MCS Rules reads as under:
“(f) When any immovable property is sold under these rules, the E
sale shall be subject to the prior encumbrances on the property, if
any. The applicant shall, when the amount for the realisation of
which the sale is held exceeds Rs. 100, furnish to the Sale Officer
within such time as may be fixed by him or by the Recovery
Officer, an encumbrance certificate from the Registration F
Department for the period of not less than twelve years prior to
the date of attachment of the property sought to be sold, or in
cases falling under the proviso to sub-rule (10), prior to the date
of the application for execution. The time for production of the
encumbrance certificate may be extended at the discretion of the
Sale Officer or the Recovery Officer, as the case may be. The G
sale shall be by public auction to the highest bidder:
Provided that it shall be open to the Sale Officer to decline to
accept the highest bid where the price offered appears to be unduly
low or for other adequate reasons:
H
964 SUPREME COURT REPORTS [2022] 8 S.C.R.
A Provided further that the Recovery Officer or the Sale Officer
may, in his discretion, adjourn the sale to a specified day and hour,
recording his reason for such adjournment. Where a sale is so
adjourned for a longer period than seven days, a fresh proclamation
under clause (e) shall be made, unless the defaulter consents to
waive it.
B
The sale shall be held after the expiry of not less than thirty days
calculated from the date on which notice of the proclamation was
affixed in the office of the Recovery Officer. The time and place
of sale shall be fixed by the Recovery Officer and the place of
sale shall be the village where the property to be sold is situated
C or such adjoining prominent place of public resort as may be fixed
by the Recovery Officer:
Provided that in cases where an encumbrance certificate is not
obtainable owing to the destruction of the connected records, an
affidavit from the village Talathi or corresponding officer in regard
D to the encumbrances known to him supported by a certificate
from the Registration Department that the encumbrance certificate
cannot be granted owing to the destruction of the connected
records shall be accepted in place of an encumbrance certificate.”
8.1 In the present case, the tender notice was issued and published
E in the daily newspaper on 9.9.2010. The date fixed for submission of the
tender was 28.09.2010. At the last moment, i.e., on 28.09.2010, the
borrower filed revision application no. 58/2010 before the Divisional Joint
Registrar challenging the auction proceedings and the Divisional Joint
Registrar granted stay of the auction proceedings on 28.09.2010. The
F revision application came to be dismissed by the Divisional Joint Registrar
vide order dated 23.11.2010. On dismissal of the revision application and
vacating the stay against the auction proceedings, the bank/Recovery
Officer opened the bids on 29.11.2010 in which the auction purchaser
was found to be the highest bidder who offered Rs.1,26,00,000/- against
the upset price of Rs. 98,10,000/-. Therefore, as such, within a period of
G seven days from the date of vacating stay and dismissal of the revision
application, the auction was held. Therefore, it cannot be said that the
auction sale was in breach of Rule 107(11)(f) of the MCS Rules. The
period during which the stay was in operation was to be excluded. Even
otherwise, proviso to Rule 107(11)(f) is applicable to issue a fresh
H proclamation in case the sale is adjourned for a longer period than seven
DEENADAYAL NAGARI SAHAKARI BANK LTD. & 965
ANOTHER v. MUNJAJI AND OTHERS [M. R. SHAH, J.]
days by the Recovery Officer or the Sale Officer. The said proviso is A
not applicable in a case where at the last moment the borrower obtains
a stay of the auction which is vacated after some time, i.e., after a
period of seven days. Once the sale was required to be adjourned because
of the stay order obtained by the borrower and the stay continued for
more than seven days which came to be vacated subsequently, how
B
such a person/borrower can be permitted to take the benefit of his action
of obtaining the stay and thereafter to contend that even if the sale was
adjourned for more than seven days due to the stay order obtained by
him, there shall be a fresh proclamation. This can be said to be giving a
premium to such a borrower. If the contention/submission on behalf of
the borrower is accepted that second proviso to Rule 107(11)(f) does C
not state that the fresh proclamation is not necessary if there is a stay of
auction by higher authorities/Courts, in that case, every dishonest
borrower who wants to scuttle or delay the auction/sale will approach
the Court/appropriate authority at the eleventh hour and obtain stay of
the auction which may continue for more than seven days and he would D
then contend that as more than seven days have passed, fresh
proclamation has to be issued. The aforesaid position cannot be accepted.
9. Now insofar as the finding recorded by the High Court that the
auction was conducted/held within a period of thirty days from the date
of proclamation and therefore there is a breach of Rule 107(11)(f) is
E
concerned, it appears that the High Court has considered 09.09.2010 as
the date of proclamation. However, it is to be noted that 09.09.2010 was
the date on which the tender notice indicating the date of auction/sale
was issued. The same was published in the daily newspaper on
14.09.2010 fixing the date of auction/sale on 28.09.2010. It was not a
proclamation. Prior thereto, the proclamation/public notice dated F
20.02.2010 was published in the daily newspaper ‘Sakal’ on 22.02.2010,
23.02.2010 and 24.02.2010. Even thereafter also, Public Advertisement
dated 26.05.2010, which also can be said to be a proclamation as per
Rule 107(11)(f) of the MCS Rules, 1961, was issued. Therefore, the
High Court is factually incorrect in concluding that the auction sale was G
in breach of Rule 107(11)(f) of the MCS Rules, 1961.
10. Now insofar as the finding recorded by the High Court and
reliance placed upon the decisions of this Court in the cases of Shilpa
Shares and Securities (supra) and Balram (supra) that there was a
breach of Rule 107(11)(g) & (h) of the MCS Rules by not depositing the
H
966 SUPREME COURT REPORTS [2022] 8 S.C.R.
A balance 85% sale consideration within a period of 15 days is concerned,
the same is also factually incorrect. The bids were opened on 29.11.2010
and the auction purchaser was found to be the highest bidder who offered
Rs. 1,26,00,000/-. On the very day, he deposited 15% of the sale
consideration. On 01.12.2010, an application was made to the District
Deputy Registrar, which was required as per circular dated 23.07.2004
B
issued by the Co-operative Commissioner & Registrar, Cooperative
Societies. The District Deputy Registrar approved the said proposal which
was received on 29.12.2010 and within a period of fifteen days from the
date of such approval, the auction purchaser deposited the remaining
85% of the amount. Therefore, it cannot be said that there was any
C breach of Rule 107(11)(g) &(h) of the MCS Rules, 1961 as observed
and held by the High Court.
11. Even the conduct on the part of the borrower is also required
to be noted and considered at this stage. A huge sum of Rs. 3,54,58,836/
- was due and payable. He has not paid/deposited even a farthing towards
D the loan amount since 2010. However instead, he lodged an FIR against
the Bank Officers alleging that the mortgaged deeds of the property and
sale deed of the land Ghat No. 437 (to the extent of 34R) and Ghat No.
440 (to the extent of 72R) are illegal. The said criminal proceedings
came to be quashed by the High Court vide order dated 23.09.2013.
Number of proceedings were initiated by the borrower and all efforts
E were made by him to delay the auction/sale of the mortgaged properties
without paying a single rupee. Pursuant to the proclamation issued on
26.05.2010 under Rule 107(11) of the MCS Rules, 1961, thirty days’
time was given to the concerned borrower to repay the debt, but no
steps were taken by him. The borrower was fully aware of this
F publication. Thereafter, public notice was issued on 09.09.2010, which
was published on 14.09.2010 fixing the date of sale/auction on 28.09.2010.
On that day, stay order was obtained by the borrower. Before the High
Court, it was the third round of litigation initiated by the borrower. In the
first round of litigation, he challenged the upset price fixed by the
Divisional Joint Registrar which was filed on 28.09.2010 being the last
G date of submission of the tender. The said revision application No. 58/
2010 came to be dismissed by the Divisional Joint Registrar on 23.11.2010.
Thereafter, the auction was held and the sale certificate was issued in
favour of the auction purchaser on 17.01.2011 and the sale deed was
executed in favour of the auction purchaser on 19.01.2011. Even at that
H stage also, he could have applied for setting aside the sale by depositing
DEENADAYAL NAGARI SAHAKARI BANK LTD. & 967
ANOTHER v. MUNJAJI AND OTHERS [M. R. SHAH, J.]
5% of the amount equal to the purchase money in terms of Rule 107(13) A
but the borrower failed to avail the said opportunity. He even did not
raise any objection before the Recovery Officer about the alleged material
irregularity as required under Rule 107(14). Instead, he challenged the
auction proceedings before the Divisional Joint Registrar by way of
revision application No. 11/2011 under Section 154 of the MCS Act,
B
1960, which even as observed by the High Court was not competent at
the instance of the borrower. From the aforesaid, it is clear that at every
stage without paying a single rupee due and payable, the borrower tried
to stall the auction/sale proceedings.
12. Now insofar as the reliance placed upon the decisions of this
Court in the cases of Shilpa Shares and Securities (supra) and Balram C
(supra) by the learned counsel appearing on behalf of the borrower is
concerned, the same shall not be applicable to the facts of the case on
hand, in view of our findings recorded hereinabove.
13. In view of the above discussion and for the reasons stated
above, the present appeals succeed. The impugned judgment and order D
dated 30.07.2021 passed by the High Court of Bombay, Bench at
Aurangabad in Writ Petition No. 570/2012 is hereby quashed and set
aside and consequently Writ Petition No. 570/2012 filed by the borrower-
respondent no.1 herein stands dismissed.
The present appeals are accordingly allowed. However, there shall E
be no order as to costs.
Devika Gujral Appeals allowed.
(Assisted by : Shevali Monga, LCRA)
F
G
H
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