Holding

The High Court erred in confirming the auction sale without compliance with Sections 202 and 203 of the Maharashtra Land Revenue Code; the sale must be examined afresh by the competent authority.

Summary

The partners of Somras Distillers (respondents 5‑7) were in arrears of sales‑tax and their properties were attached. A writ petition sought that the tax dues be recovered from the other partners (appellants) and not from them. The High Court ordered the properties to be auctioned; the auction was held but the High Court failed to examine whether the purchaser had complied with Sections 202 and 203 of the Maharashtra Land Revenue Code, 1966, which prescribe payment of purchase money and consequences of default. The High Court nonetheless confirmed the sale and directed possession to be handed over, dismissing the petitioners’ objections. On appeal, the Supreme Court held that the High Court erred by not considering compliance with the statutory provisions, by expanding its jurisdiction and by giving an unwarranted direction. The Supreme Court set aside the High Court order and directed the Assistant Commissioner of Sales Tax, the competent authority, to reconsider the objections afresh in accordance with the law. The appeal was allowed.

Issues considered

Whether the High Court could confirm an auction sale without compliance with Sections 202 and 203 of the Maharashtra Land Revenue Code, 1966.
Whether the High Court had jurisdiction to issue a direction for further steps without specifying the procedure.
Whether the procedures prescribed under the Code of Civil Procedure, 1908 (Order XLIII Rule 1) must be followed in confirming an auction sale.
Whether non‑compliance with mandatory statutory provisions renders the sale invalid.

Legislation cited

Code of Civil Procedure, 1908s. Order XLIII Rule 1
Maharashtra Land Revenue Code, 1966s. 202, s. 203

Subjects

auctionland revenue codesale of propertystatutory compliancecivil proceduresales taxattachmentrecovery of duesjurisdictionHigh CourtSupreme Court

Judgment

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LAXMIKANT CHHOTELAL GUPTA AND ORS. A
v.
STATE OF MAHARASHTRA AND ORS.

MAY 9, 2007

[S.B. SINHA AND MARKANDEY KATJU, JJ.] B

,
... Maharashtra Land Revenue Code, 1966-ss. 202 and 203-Auction
sale-Dues of the revenue-Recovery of-Properties of the defaulters put to
auction-Objections to the validity of sale at instance of one party-Non-
compliance of the procedures laid down-High Court not addressing itself
c
to the vital aspect of the matter despite attention having been drawn thereto--
Directions passed by it was wholly unwarranted-Thus, order of High Court
set aside and matter directed to be considered afresh by the Competent
Authority-Code of Civil Procedure, 1908-0 XL!!/, r l(u).
D
Respondent nos. 5 to 7, partners of a firm, ran into arrears in payment
of sales tax. The properties of the partners were attached. Respondent nos. 5
... to 7 filed writ petition praying for direction to the Authorities to recover the
y
dues in respect of the said firm from the appellants alone and not from them.
High Court directed to put the properties for auction and the auction was held.
The question arose whether the auction purchaser had deposited the amounts E
in terms of the said provision. Respondent opposed the handing over of the
possession. Single Judge of High Court directed that despite the order that
the auction was to be held strictly in accordance with law, the auction has
been confirmed by order dated 09.12.2003, and dismissed the petition.
Application was filed for recalling the said order which was also dismissed
F
and respondent nos. 5 to 7 were directed to hand over possession of the
property to the Department. In appeal before this Court, High Court was
directed to consider the effect of non-compliance of the provisions of s. 202
and 203 of the Maharashtra Land Revenue Code before confirming the sale.
The High Court again failed to examine the effect of the provisions of ss. 202
and 203 of the Code and disposed of all objections including the one for G
recalling its order dated 9.12.2003 filed by the appellants directing that some
of the properties which are already put to auction and purchased by auction
purchasers could not be handed over to them for various objections raised by
respondent nos. 5 to 7 and directed respondent nos. I to 4 to take further

211 H
212 SUPREME COURT REPORTS [2007] 6 S.C.R.

A steps in accordance with law. Hence the present appeal. ~

Allowing the appeal, the Court

HELD: 1.1. It is unfortunate that the High Court did not address itself
to a vital aspect of the matter despite its attention having been drawn thereto.
B It purported to have disposed of all the pending applications directing only
the respondent nos. 1 to 4 to take further steps in the matter in accordance
with law, but what those other or further steps in the matter would be, have
not been spelt out. Such a direction was wholly unwarranted. [Para 13) -<
1·

c should1.2.be There cannot be any doubt or dispute that the dues of the revenue
recovered wherefor properties of the defaulters inter alia can be
put to auction, but there cannot also be any doubt or dispute that procedures
laid down therefor must be complied with. This Court has noticed in its Order
in the Civil Appeal that the High Court resorted to a wrong procedure. The
issues involved in the writ petition filed by respondent Nos. S to 7 was limited.
D The High Court unjustly expanded its jurisdiction. [Para 14) (216-F, G)

1.3. Even when an auction takes place under orders of the competent
~
civil court, the procedures laid down in the Code of Civil Procedure are '"(
required to be complied with. Objections to the validity of sale at the instance
of one party or the other are required to be considered and determined. Even
E
an appeal lies against such an Order in terms of Order XLIII Rule l(u) of
the Code of Civil Procedure. (Para 15) (217-AJ

1.4. Provisions of a statute whether direct<>ry or mandatory
necessitating strict or substantial compliance are questions which must be
F determined by the courts. This Court thought that the High Court would do
so. Presumably the effect and purport of this Court's Order having not been
brought to its notice, therefore, the matter should be directed to be considered
afresh by the competent authority. Respondent No. 4 being Assistant
Commissioner of Sales Tax is the competent authority therefor. Therefore,
G while setting aside the Order of the High Court, Authority is directed to
consider the contentions raised by the appellants on their own merits.
(Para 16] (217-B, CJ

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2406 of2007.
r
H From the Final Judgment and Order dated 20.12.2005 of the High Court
LAXMIKANT CHHOTELALGUPTA v. STATE OF MAHARASHTRA [S.B. SINHA, J.] 213
)-

of Bombay, Nagpur Bench, Nagpur in W.P. (C) No. 2530 of2001. A
Uday Umesh Lalit, Pragati N. Singh, S. Singh, Dangre and Dhannendra
Kumar Sinha for the Appellant.

P.S. Mishra, Satyajit A. Desai, Anagha S. Desai, Vikram Saluja,
Venkateswara Rao Anumolu, Anupam K. Sanghi, Anitha Shenoy, Aniruddha B
P. Mayee, Tathagat H. Vardhan, Dhruv Kumar Jha, Upendra Mishra, Ravi C.
,. Prakash and Manu Shanker Mishra for the Respondents.

' The Judgment of the Court was delivered by

S.B. SINHA, J. I. Leave granted. c
2. Respondent Nos. 5 to 7 herein were partners of a finn known as Ml
s. Somras Distillers. It ran into arrears inter alia in payment of sales tax.

3. The properties of the partners were attached. A Writ Petition came
to be filed by the respondent nos. 5 to 7 inter alia praying for a direction to D
the sales tax authorities to recover the dues in respect of the said finn from
.... the appellants alone and not from them .
.,.
4. As Respondent Nos. I to 4 intended to put the properties of the
partnership finn on auction, the High Court in tenns of an Order dated
28.4.2003 directed:- E
"In so far as item No. 4, namely Plant Machinery of the finn is
concerned, we are infonned that the upset price fixed is rupees twenty-
five lacs and no bidders are coming forward. It will be appropriate if
advertisement of auction in relation to this item is given in the national
dailies which are widely circulated. The cost of auction as also F
l_ advertisement shall be payable out of the auction sale proceeds. The
auction be conducted within a period of 45 days from today and
report of auction in respect of the above mentioned properties be filed
before the Court, S.O. to eight weeks."

5. Pursuant to the said direction, an auction was held on 6.6.2003 of the
G
factory premises of the finn; the highest bid being Rs. 65 lakhs.
- -,.,_ 6. Public auction in such matters are governed by the provisions of
Maharashtra Land Revenue Code, 1966, the relevant provisions of which read
as under:- H
214 SUPREME COURT REPORTS [2007] 6 S.C.R.

A "Purchase money when to be paid.

202. The full amount of purchase-money shall be paid by the purchaser
before the expiration of two months from the date on which sale of
the immovable property took place or before the expiration of fifteen
days from the date on which the intimation of confirmation of the sale
B is received by the purchaser, whichever is earlier;

Provided that, if the last date on which the purchase-money is to be
paid happens to be a Sunday or other authorised holiday, then the
payment shall be made before the sunset of the first office day after
such date."
c
"Effect of default.

203. In default of payment within the prescribed period of the full
amount of purchase-money whether of movable or immovable property,
the deposit after defraying thereout the expenses of the sale, shall be
D forfeited to the State Government, and the property shall be resold,
and the defaulting purchaser shall forfeit all claims to the property or
to any part of the sum for which it may be subsequently sold."

7. A question arose as to whether the auction purchaser had deposited
E the amounts in terms of the said provision. By an order dated 29.4.2004,
despite the High Court's notice having been drawn thereto, a leamep Single
Judge directed:-

"I am unable to find any substance in this argument. It may be noted
that despite the order of the Court that the auction shall be held
F strictly in accordance with law, it has confirmed the auction by order
dated 09.12.2003 and now the petitioners cannot take recourse to _!:.
contempt proceedings. They should have brought this fact to the
notice of the Court in Writ Petition No. 2530.'2001. In this view of the
matter the petition is dismissed. Needless to say that the petitioners
G are at liberty to move the Court in Writ Petition No. 2530/2001."

8. A similar application for recalling the said order was dismissed directing;

"In view of the above referred observations, it is evident that auction
sale was confirmed subject to result of this petition. Therefore,
H grievance of any party to the proceedings would be considered at the
LAXMIKANT CHHOTELAL GUPTA v. STA TE OF MAHARASHTRA [S.B. SINHA, J.] 215

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time of final hearing. The earlier orders have been passed by us in A
the petition from time to time keeping in view the necessary recovery
to be effected by the Department towards sales tax dues."

9. It was further directed:

"In view of the above referred facts and circumstances, we see no B
justification whatsoever for respondent Nos. 5 to 7 to oppose handing
over of possession particularly when auction of sale is already
confirmed by this Court and huge amount has already been observed
,.,
...... in the earlier order dated 9.12.2003 that auction sale is subject to
result of the petition. In the circumstances, we direct respondent
Nos. 5 to 7 to hand over possession of the property in question to c
the Department without any obstacle within fifteen days from today."

10. The matter was brought before this Court thereagainst by the
appellants herein which was marked as Civil Appeal No. 6631 of2005. Upon
hearing the counsel for the parties, this Court opined:-
D
... In that view of the matter, it was obligatory on the part of the High
Court to consider the effect of non-compliance of the provisions of
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Section 202 & 203 of the Maharashtra Land Revenue Code itself.
y
Before confirming the sale, the High Court otherwise also could have
directed the parties to take recourse to the said Code. Had such an
E
order been passed by the High Court, it would have been open to
the appellants herein to file appropriate application before respondent
no. 3, who was the appropriate authority to hold such auction.

Having regard to the peculiar facts and circumstances of this
case we are of the opinion that it was a fit case wherein the High
F
Court should have exercised its jurisdiction in entertaining the appeal
filed by the appellants herein, so as to enable the parties to know as
l
to where they stand. Mr. Lalit, is right in his submission that if the
possession of factory premise is handed over to the auction purchaser
of the land and building where the factory is situated, the appellants
herein may be put to irreparable and irretrievable injury. What would G
be the fate of the machineries installed in the factory premises is also
not known. We are informed at the Bar that another auction may take
place in respect of the plant and machineries but in relation thereto
there may be another auction purchaser and so long as such auction
sale in relation thereto is not confirmed and the plant and machinery
H
216 SUPREME COURT REPORTS (2007) 6 S.C.R.
...
~

A are not handed over to the said auction purchaser, the same would ....
remain in possession of the auction purchaser.

11. When, however, the matter was placed before the High Court
pursuant thereto, it again failed to examine the effect of the provisions of
Sections 202 and 203 of the Maharashtra Land Revenue Code, and disposed
B of all objections including the one for recalling its Order dated 9.12.2003 filed
by the appellants being Civil Application No. 3730 of 2004 directing;

"The present state is that some of the properties which are already
put to auction and purchased by auction purchasers could not be ,.-'
handed over to them for various objections raised by respondent nos.
c 5 to 7 who are the main contestants. This includes the factory and
plant of Mis. Somras Distillers.

We, therefore, propose to dispose of this petition by directing
respondent nos. I to 4 to take further steps in the matter in accordance
with law and after giving fair opportunity to all concerned, including
D the petitioners and respondent nos. 5 to 7 and the auction purchasers
so as to enable them to lodge their objections to the procedure
adopted by the sales-tax department in conducting auction sale of the ).
property and after hearing all concerned pass appropriate orders in "(
accordance with law."
E 12. Appellants are, thus, before us.

13. It is unfortunate that the High Court did not address itself to a vital
aspect of the matter despite its attention having been drawn thereto. It
purported to have disposed of all the pending applications directing only the
F respondent Nos. 1 to 4 to t?ke further steps in the matter in accordance with
law, but what those other or further steps in the matter would be, have not
been spelt out. Such a direction was wholly unwarranted. .>
~

14. There cannot be any doubt or dispute that the dues of the revenue
should be recovered wherefor properties of the defaulters inter alia can be put
G to auction, but there cannot also be any doubt or dispute that procedures laid
down therefor must be complied with. This Court has noticed in its Order
dated 28.10.2005 passed in Civil Appeal No. 6631 of2005 that the High Court
resorted to a wrong procedure. The issues involved in the writ petition filed
by the respondent Nos. 5 to 7 was limited. The High Court unjustly expanded r
its jurisdiction.
H
LAXMIKANTCHHOTELALGUPTA "·STATE OF MAHARASHTRA [S.B. Sl~ciA, J] 217
15. Even when an auction takes place under orders of the competent A
civil court, the procedures laid down in the Code of Civil Procedure are
required to be complied with. Objections to the validity of sale at the instance
of one party or the other are required to be considered and determined. Even
an appeal lies against such an Order in terms of Order XLllI Rule l(u) of the
Code of Civil Procedure.
B
16. Provisions of a statute whether directory or mandatory necessitating
strict or substantial compliance are questions which must be determined by
'\. the courts. This Court thought that the High Court would do so. Presumably
the effect and purport of this Court's Order having not been brought to its
notice, we, therefore, are of the opinion that the matter should be directed to C
be considered afresh by the competent authority. We are informed at the bar
that Respondent No. 4 being Assistant Commissioner of Sales Tax is the
competent authority therefor. We, therefore, while setting aside the Order of
the High Court would direct the said authority to consider the contentions
raised by the appellants herein on their own merits.
D
17. Before parting with this case, we may however, notice the submissions
of Mr. P.S. Mishra, the learned senior counsel appearing on behalf of the
auction purchaser, that the requirement of Sections 202 and 203 of the Code
had been complied with. Learned counsel appearing on behalf of the writ
petitioners/ respondents submit that the intention of the appellants herein is
to delay the disposal of the matter. We need not go into the correctness or E
otherwise of the said contentions, as Respondent No. 4 indisputably would
have to take into consideration facts and aspect of the matter also.

18. Mr. Satyajit A. Desai, learned counsel appearing on behalf of
respondent Nos. I to 4 submitted that it may be possible for Respondent No. F
4 to dispose of the objections within a period of two weeks from the date of
l filing of the documents by the parties.

19. Original records in respect of the auctions held must be with the
respondent No. 4. Even otherwise, the same should be produced before him.
Appellant herein would file their written objections as also a copy of Civil G
Application No. 3730 of2004 before respondent No. 4 within two weeks from
date. Writ Petitioners/respondents as also the auction purchaser having regard
to the fact that they are aware of the contentions raised by appellants herein
may file replies thereto within the said period. Respondent No. 4 thereupon
may proceed to determine the matter in accordance with law within a period
H
218 SUPREME COURT REPORTS [2007] 6 S.C.R.

A of four weeks' thereafter, upon giving an opportunity of oral hearing to the
parties after fixing a date of hearing.

20. We make it clear that all contentions of the parties shall remain open.
The impugned judgment is set aside. This Appeal is allowed with the
aforementioned directions. Jn the facts and circumstances of this case, however,
B there shall be no order as to costs.

N.J. Appeal allowed.