Supreme Court of India
SADASHIV PRASAD SINGHversusHARENDAR SINGH & ORS.
- Citation
- 2014 INSC 17
- Decided
- 8 January 2014
- Disposal
- Appeal(s) allowed
- Bench
- A K PATNAIK
Holding
A confirmed auction sale to a bona‑fide purchaser cannot be set aside except on proof of fraud or collusion, and the High Court’s order overturning the sale was erroneous.
Summary
The Supreme Court examined a dispute arising from the public auction of Plot No.722, attached in a debt recovery proceeding against a partnership firm. Sadashiv Prasad Singh, the highest bidder, was confirmed as the purchaser, took possession and obtained mutation of the property. Harendar Singh, brother of the original debtor, challenged the auction on the ground of procedural violations under Income‑Tax Rule 11 and alleged an unregistered sale of the plot to himself. The High Court set aside the auction, invoking equity and alleged non‑compliance with Rule 11, and ordered the appellant to pay additional sums. The Supreme Court held that a bona‑fide auction purchaser’s rights, once the sale is confirmed, cannot be extinguished except on proof of fraud or collusion; no such allegation was made. It also noted the appellant’s delay, abandonment of objections, and lack of any objection in the mutation proceedings, concluding that the High Court erred in interfering. The Court set aside the High Court’s order, confirmed Sadashiv’s ownership, allowed his appeal and dismissed Harendar’s.
Issues considered
- The rights of a bona‑fide auction purchaser after confirmation of sale under a debt recovery proceeding
- Whether procedural non‑compliance with Income‑Tax (Certificate Proceedings) Rule 11(2) can invalidate a confirmed auction sale
- Whether delay, abandonment of objections and lack of objection in mutation proceedings bar the challenge to the auction
- Whether the High Court could set aside the auction on equitable grounds despite the absence of fraud or collusion
Legislation cited
Subjects
auctionbona fide purchaserdebt recoveryrecovery officerRule 11delaylachesequityproperty lawpublic auction
Judgment
[2014] 1 S.C.R. 249
SADASHIV PRASAD SINGH A
v.
HARENDAR SINGH & ORS.
(Civil Appeal No.161 of 2014)
JANUARY 8, 2014
B
[A.K. PATNAIK AND JAGDISH SINGH KHEHAR, JJ.]
Auction:
Auction sale - Rights of auction purchaser in the c
property purchased ..;. Held: Cannot be extinguished except
in cases where the said purchase can be assailed on grounds
of fraud or collusion ..:. In the instant case, there was no
allegation of fraud or collusion as regards auction purchase
by a third party - It was no body's case that at the time of 0
auction purchase, the· value of the property purchased by him
was in excess of his bid .:... Besides, no objection was raised
to attachment proclamations and notices in newspapers for
auction - Auction sale was confirmed and possession of
property was handed over to auction purchaser - Mutation E
proceedings were finalized - Challenge raised by first
respondent ought to have been rejected on the ground <;>f
delay and /aches "'."""" Interference by High Court even on
ground of equity was clearly uncalled for - Impugned order
passed by High Court is set aside - Right of appellant-
auction purchaser in plot in question is confirmed - Delay/ F
/aches - Equity.
A partnership firm comprising three partners,
including the brother of respondent no. 1, obtained a loan
of Rs.12.70 lac from Allahabad Bank after mortgaging G
certain properties. Since the loan amount was not repaid,
the Bank, in 1998, preferred Original Application before
the Debt. Recovery Tribunal for recovery of its dues. The
application was allowed on 21.11.2000 and a direction
~9 H
250 SUPREME COURT REPORTS [2014] 1 S.C.R
A was issued for the recovery of Rs.75,75,564/- from the
firm. During the pendency of the recovery proceedings,
plot No.722 was attached which was in the ownership of
the brother of respondent no. 1, who had died meanwhile.
On 10.6.2004, respondent no. 1 filed an objection before
B the Recovery Officer stating that the attached property did
not belong to the judgment debtors, but had been
purchased by him from his brother under an unregistered
agreement of sale dated 10.1.1991. He, however, chose
to abandon the proceedings. The Recovery Officer
c passed an order dated 5.5.2008, for the sale of the
property by way of public auction. As the appellant turned
to be the highest bidder, the Recovery Officer ordered the
sale of the property in his favour on 28.8.2008. On
27 .11.2009, the appellant filed a writ petition before the
D High Court assailing the order dated 5.5.2008 passed by
the Recovery Officer. The High Court dismissed the writ
petition. However, in the Letters Patent Appeal filed by
respondent no. 1, the Division Bench of the High Court,
besides adjudicating the matter on its merits, finally
concluded that the proceedings before the Recovery
E Officer were in flagrant violation of the provisions of
r.11 (2) of the Income Tax (Certificate Proceedings) Rules,
and set aside the proceedings conducted by the
Recovery Officer, including the sale of the property by
public auction.
F
Allowing the appeal, the Court
HELD: 1.1. The rights of an auction-purchaser in the
property purchased by him cannot be extinguished
G except in cases where the said purchase can be assailed
on grounds of fraud or collusion. [para 12] [264-F]
Ashwin S. Mehta & Anr. vs. Custodian & Ors. 2006
(1) SCR 56 = (2006) 2 SCC 385; Janatha Textiles & Ors. vs.
=
Tax Recovery Officer & Anr. 2008 (8) SCR 1148 (2008) 12
H
SADASHIV PRASAD SINGH v. HARENDAR SINGH & 251
ORS.
SCC 582, Nawab Zain-Ul-Abdin Khan v. Mohd. Asghar Ali A
Khan, (1887-88) 15 IA ·12; Janak Raj vs. Gurdia/ Singh
1~67 SCR 77 = AIR 1967 SC 608; Gurjoginder Singh vs.
Jaswant Kaur, 1994 (1) SCR 794 = (1994) 2 SCC 368;
Padanathil Ruqmini Amma vs. P.K. Abdulla 1996 (1) SCR
651 = (1996) 7 SCC 668; Velji Khimji and Company vs. B
Official Liquidator of Hindustan Nitro Product (Gujarat) Limited
& Ors. 2008 (12) SCR 1 = (2008) 9 SCC 299 - referred to.
1.2. In the instant case, there is no allegation of fraud
or collusion. Therefore, irrespective of the merits of the C
lis between the rival parties, namely, the Allahabad Bank
and the partners of the borrower firm, it is not open for
anyone to assail the purchase of the property made by
the auction purchaser in the public auction held in
furtherance of the order passed by the Recovery Officer
on 28.8.2008. In this view of the matter, this Court is of D
the view that the High Court clearly erred while setting
aside the auction ordered in favour of the auction-
purchaser-appellant. [para 13] [265-D-F]
1.3. The High Court in ignoring the vested right of the E
appellant in the property in question, after his auction bid
was accepted and confirmed, subjected him to grave
injustice by depriving him of the property which he had
genuinely and legitimately purchased at a public auction.
It is nobody's case that at the time of the auction- F
purchase, the value of the property purchased by him
was in excess of his bid. Since it was nobody's case that
the highest bidder at the auction conducted on 28.8.2008,
had purchased the property in question at a price lesser
than the prevailing market price, there was no justification G
whatsoever to set aside the auction-purchase made by
him on account of escalation of prices thereafter. In ~he
considered view of this Court, not only did the Division
Bench of the High Court in the matter ignored the sound,
legal and clear principles laid down by this Court in H
252 SUPREME COURT REPORTS (2014] 1 S.C.R.
A respect of a third party auction purchaser, it also clearly
overlooked the equitable rights vested in the auction-
purchaser during the pendency of a lis. [para 14] [266-C-
E]
1.4. Even otherwise, the objections of respondent no.
8
1 have no substance. The claim of respondent no. 1 in
his objection petition was based on an unregistered
agreement to sell dated 10.1.1991, which would not vest
any legal right in his favour. Further, it is apparent that it
C may not have been difficult for him to have had the said
agreement to sell notarized in connivance with his
brother. Secondly, it is apparent from the factual position
that respondent no. 1 despite his having filed objections
before the Recovery Officer, had abandoned the contest
raised by him and, as such, it was not open to him to have
D re-agitated the same by filing a writ petition before the
High Court. Thirdly, a remedy of appeal was available to
him in respect of the order of the Recovery Officer u/s 30.
Fourthly, respondent no. 1 could not be allowed to raise
a challenge to the public auction held on 28.8.2008
E because he had not raised any objection to the
attachment of the property in question or the
proclamations and notices issued in newspapers in
connection with the auction thereof. All these facts
cumulatively lead to the conclusion that after 26.10.2005,
F respondent no. 1 had lost all interest in the property in
·question and had remained a silent spectator to various
orders which came to be passed from time to time. He
had, therefore, no equitable right in his favour to assail
the auction-purchase made by the appellant on 28.8.2008.
G Finally, the public auction under reference was held on
28.8.2008. Thereafter the same was confirmed on
22.09.2008. Possession of the property was handed over
to the auction-purchaser on 11.3.2009. The auction-
purchaser initiated mutation proceedings in respect of the
H property in question. Respondent no. 1 did not raise any
SADASHIV PRASAD SINGH v. HARENDAR SINGH & 253
ORS.
objections in the said mutation proceedings, which were A
also finalized in favour of the applicant. [para 15) [267-A-
E; 268-A-E]
1.5. The challenges raised by respondent no. 1 ought
to have been rejected on the grounds of delay and 8
latches, especially because third party rights had
emerged in the meantime. More so, because the auction
purchaser was a bona fide purchaser for consideration,
having purchased the property in furtherance of a duly .
publicized public auction, interference by the High Court C
even on ground of equity was clearly uncalled for. The
impugned order passed by the High Court is set aside.
The right of the appellant in plot in question is confirmed.
[para 15) [268-E-H; 269-A-B].
Case Law Reference: D
2006 (1) SCR 56 referred to para 12
2008 (8) SCR.1148 referred to para 12
(1887-88) 15 IA 12 referred to para 12
E
1967 SCR 77 referred to para 12
1994 (1) SCR 794 referred to para 12
1996 (1) SCR 651 referred to para 12
F
2008 (12) SCR 1 referred to para 12·
CIVIL APPELLATE JURIS.DICTION : Civil Appeal No.161
of 2014.
From the Judgment & Order dated 17.05.2010 of the High G
Court of Judicature at Patna in LP.A No, 844 of 2010.
WITH
C.A. No, 162 of 2014 ..
S.S. Upadhyay, Ainarendra Sharan, Santosh Mishra, H
254 SUPREME COURT REPORTS [2014) 1 S.C.R.
A Param Mishra, Alok Kumar, Vivek Singh, Somesh Chandra Jha,
Rakesh K. Sharma, Sanjay Mishra, Sangeeta Chauhan, Gopal
Singh, Chandan Kumar for the appearing parties.
The Judgment of the Court was delivered by
B JAGDISH SINGH KHEHAR, J. 1. On 11.9.1989, The
Allahabad Bank (hereinafter referred to as 'the Bank')
sanctioned a loan of Rs.12. 70 lac to Mis. Amar Timber Works,
a partnership firm having three partners, Jagmohan Singh,
Payam Shoghi and Dev Kumar Sinha. The above loan was
C sanctioned to Mis. Amar Timber Works, after its partners had
mortgaged certain properties to secure the loan amount. Since
the loan amount was not repaid in compliance with the
commitment made by Mis. Amar Timber Works, nine years
later, in 1998, the Bank preferred Original Application No.107
D of 1998 before the Debt Recovery Tribunal for the recovery of
the Bank's dues. The above Original Application was allowed
on 21.11.2000. Accordingly, a direction was issued for the
recovery of Rs.75,75,564/- from M/s. Amar Timber Works. For
the execution of the order passed by the Debt Recovery
E Tribunal, the Bank initiated recovery proceedings on
28.11.2000. During the pendency of the recovery proceedings,
Jagmohan Singh, one of the partners of M/s. Amar Timber
Works, died (on 27.1.2004). On 16.4.2004, the Recovery
Officer attached plot No.722, located at Exhibition Road, P.S.
F Gandhi Maidan, Patna (hereinafter referred to as 'the property')
measuring 1298 sq.ft. It would be pertinent to mention that the
aforesaid plot was in the ownership of Jagmohan Singh, one
of the partners in M/s. Amar Timber Works.
2. On 10.6.2004, Harender Singh, brother of Jagmohan
G Singh, filed an objection petition before the Recovery Officer
alleging, that the attached property did not belong to the
judgment debtors, but had been purchased by him from his
brother Jagmohan Singh, by executing an agreement of sale
dated 10.1.1991, which was duly notarized though not
H registered. It would be relevant to mention, that Harender Singh
SADASHIV PRASAD SINGH v. HARENDAR SINGH & 255
ORS. [JAGDISH SINGH KHEHAR, J.]
pursued the objection petition filed by him before the ,Recovery A
Officer till 26.10.2005, but chose to abandon the. proceedings
thereafter. The order passed by the Recovery officer when the
Objector was represented for the last time on 26.10.2005 is
being extracted below:
B
"Ld. Advocate of Bank and objectors appears. Objector
reiterated his points and invited attention towards Section
53 of TP Act. Counsel of the bank submits that he had to
say nothing more than what was said/submitted earlier. He
also submits that D.Drs. was guarantor also in this case C
hence his properties attached. Put up on 28.12.08 for
further hearing.
Sd/- Illegible
l/C R.O." D
3. The recovery proceedings referred to above remained
pending for a further period of more than two years. Finally, the
Recovery Officer passed an order dated 5.5.2008, for the sale
of the property by way of public auction on 4.7.2008. The
Recovery Officer fixed Rs.12.92 lacs as the reserve price, and E
also fixed 28.8.2008 as the date of its auction. At the auction
held on 28.8.2008, Sadashiv Prasad Singh, was the highest
bidder. Accordingly, the Recovery Officer ordered the sale of
the property in his favour on 28.8.2008. On 22.9.2008, the
Recovery Officer, in the absence of any objections, confirmed F
the sale of the property in favour of Sadashiv Prasad Singh.
The Recovery Officer also ordered, the handing over of physical
possession of the property to the auction purchaser. Sadashiv
Prasad Singh, the auction purchaser, took physical possession
of the property on 11.3.2009. G
4. In .furtherance of the proceedings initiated through
Mutation Case No.295/2/09-10, the land in question was
mutated in favour of the auction purchaser. It would be relevant
to mention thafthe application for mutation filed by the auction H
256 SUPREME COURT REPORTS [2014] 1 S.C.R.
A purchaser, Sadashiv Prasad Singh, was supported by letter
dated 14.10.2008 of the Ministry of Finance, Government of
India, Realization Authority, Patna. It would be relevant to
mention, that no objections were filed in the mutation case
preferred by Sadashiv Prasad Singh, by or on behalf of
B Harender Singh, before the Mutation Officer.
5. On 27.11.2009, CWJC No.16485 of 2009 was filed by
Harender Singh before the High Court of Judicature at Patna
(hereinafter referred to as the 'High Court'). In the aforesaid writ
petition, Harender Singh assailed the order of the Recovery
C Officer dated 5.5.2008, whereby, the property had been
ordered to be -sold by public auction in discharge of the debt
owed by M/s Amar Timber Works to the Allahabad Bank. Vide
its order dated 23.3.2010, the High Court ordered the auction
purchaser, i.e. Sadashiv Prasad Singh to be impleaded as a
D party-respondent. On 27.11.2010, the High Court dismissed
the above writ petition by accepting the objections raised on
behalf of the Bank, as well as, the auction purchaser by holding
as under:
E "The above facts do weigh with the Court in not interfering
with the sale or the proceeding where it has been reached.
The petitioner has no satisfactory explanation for not
approaching the Court well within time challenging such a
decision or the subsequent proceedings or orders of the
Recovery Officer at an appropriate time. The conduct of
F
the petitioner by itself has precluded and prevented this
Court from passing any order in his favour at this belated
stage.
The writ application has not merit. It is dismissed
G accordingly."
6. Dissatisfied with the order dated 27.4.2010 whereby the
writ petition filed by Harender Singh was dismissed by a Single
Bench of the High Court, he preferred Letters Patent Appeal
H No.844 of 2010. Before the Letters Patent Bench, Harender
SADASHIV PRASAD SINGH v. HARENDAR SINGH & 257
ORS. [JAGDISH SINGH KHEHAR, J.]
Singh, brother of Jagmohan Singh, asserted that his brother A
Jagmohan Singh had availed a loan of Rs.14. 70 lacks. As
against the aforesaid loan amount, the Bank had initiated
proceedings before the Debt Recovery Tribunal for the
. realization of a sum of 75, 75,564/-. The· property under
reference was sold by way of public auctionto Sadashiv Prasad B
Singh for a sum of Rs.13.20 lacs. As against the aforesaid sale
consideration paid by the auction purchaser, Harender Singh,
offered a sum of Rs.39 lacs before the Letters Patent Bench.
In the.order passed by the Letters Patent Bench disposing of
Letters Patent Appeal No,844 of 2010, it stands noticed that c
the Bank had accepted to finally settle the matter on being paid
a sum of Rs.45 lacs, subject to the condition thatthe Harender
Singh pays a sum of Rs.15 lacs immediately, and the balance
amount of Rs.30 lacs within a period of two years in a phased
manner. Even though the learned counsel representing the D
appellant, Harender .Singh was agreeable to proposal of the
Bank, the rival parties could not amicably settle the matter. It
is, therefore, t~.at the letters patent Bench went on to adjudicate
the matter on its merits. The above factualposition has been
noticed for the reason that it has a nexus to thE! final order which
was eventually passed by the Leiters Patent Bench disposing E
of LPA No.844 of 2010. In fact, it would be in the fitness of
matters to extract paragraph 8 from the impugned judgment
rendered in LPA No.844 of 2010 in order to appreciate the
niceties.of the matter. The aforesaid paragraph is, accordingly,
being extracted herein : F
"8. At this juncture, we may state that the brother of the
appellant had availed a loan of Rs.14. 70 lacs. The said
aspect is not disputed by Mr. Ajay Kumar Sinha, learned
counsel for the Bank. The Bank had initiated a proceeding G
. oefore the Tribunal for realization of approximately a sum
ofRs. 75. 75 lacs. The property has been sold for Rs.13.20
lacs. It is submitted by Mr. Ojha that the prices nave gone
up and he is being offered more than39 lacs for the same.
lti.s riot in diSpute that the price, the audion-purchaser has H)
·--.
258 SUPREME COURT REPORTS [2014] 1 S.C.R.
A tendered, is Rs.13.20 lacs. On the earlier occasion, a
suggestion was given whether the Bank would accept
Rs.45 lacs in toto to settle the dispute. Mr. Sinha, learned
counsel for the Bank has obtained instructions that the
Bank has no objection to settle the same, if the appellant
B pays Rs.15 lacs immediately so that the same can be paid
to the auction-purchaser and Rs.30 lacks should be paid
within a period of two years in a phased manner. Mr.
Choubey, learned counsel for the appellant submitted that
the appellant is agreeable to pay the same. Mr. Ojha
c submitted that he has instructions not to accept the
suggestion."
7. During the course of appellate proceedings, the High
Court referred to Chapter V of the Recovery of Debts Due to
Banks and Financial Institutions Act, 1993 (hereinafter referred
D to as the Debt Recoveries Act) and particularly to Section 29
which is being extracted hereunder:
"29. Application of certain provisions of Income-tax
Act.-The provisions of the Second and Third Schedules
E to the Income-tax Act, 1961 (43of1961) and the Income-
tax (Certificate Proceedings) Rules, 1962, as in force from
time to time shall, as far as possible, apply with necessary
modifications as if the said provisions and the rules
referred to the amount of debt due under this Act instead
F of to the Income-tax:
Provided that any reference under the said
provisions and the rules to the "assessee" shall be
construed as a reference to the defendant under this Act."
G The High Court while interpreting Section 29 extracted
above, concluded that certain provisions of the Income Tax Act
and Income Tax (Certificate Proceedings) Rules would be
applicable mutatis mutandis in the matter of recovery of debts
under the Debt Recoveries Act. The High Court then referred
H to Rule 11 of the Income Tax (Certificate Proceedings) Rules
SADASHIV PRASAD SINGH v. HARENDAR SINGH & 259
ORS. [JAGDISH SINGH KHEHAR, J.]
and arrived at the conclusion that sub~rule (2) of Rule 11, had A
not been complied with by the Recovery Officer, inasmuch as,
the objection raised by Harender Singh had not been
adjudicated upon. As such, the High Court finally concluded that
the proceedings before the Recovery Officer were in flagrant
violation of the provisions of Rule 11 (2) of the Income Tax B
(Certificate Proceedings) Rules. Having so concluded, the High
Court set aside the proceedings conducted by the Recovery
Officer, including the sale of the property by public auction. In
order to appreciate the basis of the order passed by the High
Court, Rule 11 of the Second Schedule of the Income Tax Act, c
1961, is being extracted herein:
"Investigation by Tax Recovery Officer.
11. (1) Where any claim is preferred to, or any objection
is made to the attachment or sale of, any property in D
execution of a certificate, on the ground that such property
is not liable to such attachment or sale, the Tax Recovery
Officer shall proceed to investigate the claim or objection:
Provided that no such investigation shall be made where E
the Tax Recovery Officer considers that the claim or
objection was designedly or unnecessarily delayed.
(2) Where the property to which the claim or objection
applies has been advertised for sale, the Tax Recovery
Officer ordering the sale may postpone it pending the F
investigation of the claim or objection, upon such terms as
to security or otherwise as the Tax Recovery Officer shall
deem fit.
(3) The claimant or objector must adduce evidence to G
show that-
(a) (in the case of immov.able property) at the date
of the service of the notice issued under this
Schedule to pay the arrears, or
H
260 SUPREME COURT REPORTS (2014] 1 S.C.R.
A (b) (in the case of movable property) at the date of
the attachment,
he had some interest in, or was possessed of, the
property in question.
B (4) Where, upon the said investigation, the Tax Recovery
Officer is satisfied that, for the reason stated in the claim
or objection, such property was not, at the said date, in the
possession of the defaulter or of some person in truest for
him or in the occupancy of a tenant or other person paying
c rent to him, or that, being in the possession of the defaulter
at the said date, it was so in his possession, not on his
own account or as his own property, but on account of or
in trust for some other person, or partly on his own account
and partly on account of some other person, the Tax
D Recovery Officer shall make an order releasing the
property, wholly or to such extent as he thinks fit, from
attachment or sale.
(5) Where the Tax Recovery Officer is satis.fied that the
property was, at the said date, in the possession of the
E
defaulter as his own property and not on account of any
other person, or was in the possession of some other
person in trust for him, or in the occupancy of a tenant or
other person paying rent to him, the Tax Recovery Officer
shall disallow the claim.
F
(6) Where a claim or an objection is preferred, the party
against whom an order is made may institute a suit in a
civil court to establish the right which he claims to the
property in dispute; but, subject to the result of such suit
G (if any), the order of the Tax Recovery Officer shall be
conclusive."
8. Having dealt with the controversy in the manner
expressed in the foregoing paragraphs, the Division Bench of
H the High Court was of the view that the matter in hand ought to
SADASHIV PRASAD SINGH v. HARENDAR SINGH & 261
ORS. [JAGDISH SINGH KHEHAR, J.]
be settled by working out the equities between the parties. A
Accordingly, the High Court disposed of the matter in the
following manner:
"12. Though we have held the same could not have been
sold in auction, yet equities are to be worked out. Regard
B
being had to the fact that the respondent-purchaser has
deposited Rs.13.20 lac between 28.8.2008 to 22.9.2009
and thus the amount is with the Bank for almost more than
one year and 1O months and thereafter there had been
challenge to the order in the writ petition and after
dismissal of the writ petition the present LP.A. has been C
filed in quite promptitude and that the amount of the
respondent-purchaser was blocked, it will be obligatory on
the part of the appellant to compensate the respondent-
purchaser at least by way of payment of interest at the Bank
rate. We are disposed to think that if a sum of Rs.17 lacs D
is paid to the auction-purchaser, it would sub-serve the
cause of justice and house of the appellant shall be saved
and, accordingly, it is directed that the appellant shall
deposit a sum of Rs.17 lacks within a period of four weeks
from today in the Bank. After such deposit, the Bank shall E
hand it over to the purchaser by way of a bank draft. The
same shall be sent by registered post with
acknowledgment due. Thereafter the appellant shall
deposit a further sum of Rs.32 lacs within a period of two.
years; sum ofRs.16 lacs by 25th March, 2011 and further F
sum ofRs.16 lacs by 25th March, 2012. Needless to say
pro-rate interest shall accrue in favour of the Bank for the
said period.
13. After the amount is paid to the purchaser, it would be G
the duty of the Recovery Officer to hand over the
possession to the appellant."
9. Sadashiv Prasad Singh, the auction purchaser, has
assailed the impugned order passed by the Division Bench of ·
the High Court in LPA No.844 of 2010 praying for the setting H
262 SUPREME COURT REPORTS [2014] 1 S.C.R.
A aside of the order by which he has been deprived of the
property purchased by him in the public auction held on
28.8.2008, which was subsequently confirmed by the Recovery
Officer of the Debt Recovery Tribunal on 23.9.2008. This
challenge has been made by Sadashiv Prasad Singh by filing
8 Special Leave Petition (C) No.23000 of 2010. The impugned
order passed by the High Court on 17.5.2010, has also been
assailed by Harender Singh by preferring Special Leave
Petition (C) No.26550 of 2010. The prayer made by Harender
Singh is, that order passed by the Division Bench places him
C in the shoes of the auction purchaser, and as such, he could
have only been asked to pay a sum of Rs.17 lacs. Requiring
him to pay a further sum of Rs.32 lacs is unsustainable in law,
and accordingly, deserved to be set aside.
10. Leave granted in both the Special Leave Petitions.
D
11. For the narration of facts, we have relied upon the
pleadings and the documents appended to Special Leave
Petition (C) No.23000 of 2010.
12. Learned counsel for the auction purchaser Sadashiv
E Prasad Singh, in the first instance vehemently contended, that
in terms of the law declared by this Court, property purchased
by a third party auction purchaser, in compliance of a court
order, cannot be interfered with on the basis of the success or
failure of parties to a proceeding, if auction purchaser had
F bonafidely purchased the property. In order to substantiate his
aforesaid contention, learned counsel representing Sadashiv
Prasad Singh placed emphatic reliance, firstly, on a judgment
rendered by this Court in Ashwin S. Mehta & Anr. vs.
Custodian & Ors., (2006) 2 SCC 385). Our attention was
G drawn to the following observations recorded therein :
"In that view of the matter, evidently, creation of any third-
party interest is no longer in dispute nor the same is
subject to any order of this Court. In any event, ordinarily,
H a bona fide purchaser for value in an auction-sale is
SADASHIV PRASAD SINGH v. HARENDAR SINGH & 263
ORS. [JAGDISH SINGH KHEHAR, J.]
treated differently than a decree-holder purchasing such A
properties. In the former event. even if such a decree is
set aside. the interest of the bona fide purchaser in an
auction-sale is saved. (See Nawab Zain-ul-Abdin Khan
. v. Mohd. Asghar Ali Khan (1887) 15 IA 12) The said
decision has been affirmed by this Court in Gurjoginder B
Singh v. Jaswant Kaur (1994) 2 SCC 368)."
(emphasis is ours)
On the same subject, and to the same end, learned
counsel placed reliance on another judgment rendered by this C
Court in Janatha Textiles & Ors. vs. Tax Recovery Officer &
Anr., (2008) 12 SCC 582, wherein the conclusions drawn in
Ashwin S. Mehta's case (supra) came to be reiterated. In the
above judgment, this Court relied upon the decisions of the
Privy Council and of this Court in Nawab Zain-Ul-Abdin Khan o
v;. Mohd. Asghar Ali Khan, (1887-88) 15 IA 12; Janak Raj vs.
Gurdial Singh, AIR 19'67 SC 608; ,Gurjoginder Singh vs.
Jaswant Kaur, (1994) 2 SCC 368; Padanathil Ruqmini Amma
vs. P.K. Abdulla, (1996) 7 sec 668, as also, on Ashwin s.
Mehta (supra) in order to conclude, that it is an established E
principle of law, that a third party auction purchaser's interest,
in the auctioned property continues to be protected,
notwithstanding that the underlying decree is subsequently set
aside or otherwise. It is, therefore, that this Court in its ultimate
analysis observed as under:
F
"20. Law makes a clear distinction between a stranger
who is a bona fide purchaser of the property at an auction-
sale and a decree-holder purchaser at a court auction. The
strangers to the decree are afforded protection by the
court because they are not connected with the decree. G
Unless the protection is extended to them the court sales
would not fetch market value or fair price of the property."
(emphasis is ours)
H
264 SUPREME COURT REPORTS [2014] 1 S.C.R.
A On the issue as has been dealt with in the foregoing paragraph,
this Court has carved out one exception. The aforesaid
exception came to be recorded in Velji Khimji and Company
vs. Official Liquidator of Hindustan Nitro Product (Gujarat)
Limited & Ors., (2008) 9 SCC 299, wherein it was held as
8 under:
"30. In the first case mentioned above i.e. where the
auction is not subject to confirmation by any authority, the
auction is complete on the fall of the hammer. and certain
rights accrue in favour of the auction-purchaser. However,
c where the auction is subject to subsequent confirmation by
some authority (under a statute or terms of the auction) the
auction is not complete and no rights accrue until the sale
is confirmed by the said authority. Once. however. the sale
is confirmed by that authority, certain rights accrue in
D favour of the auction-purchaser. and these rights cannot be
extinguished except in exceptional cases such as fraud.
31. In the present case. the auction having been confirmed
on 30.7.2003 by the Court it cannot be set aside unless
some fraud or collusion has been proved. We are satisfied
E
that no fraud or collusion has been established by anyone
in this case."
(emphasis is ours)
F It is, therefore, apparent that the rights of an auction-
purchaser in the property purchased by him cannot be
extinguished except in cases where the said purchase can be
assailed on grounds of fraud or collusion.
G 13. It is imperative for us, to adjudicate upon the veracity
of the sale of the property by way of public auction, made in
favour of Sadashiv Prasad Singh on 28.8.2008. It is not a matter
of dispute, that the lis in the present controversy was between
the Allahabad Bank on the one hand and the partners of M/s.
Amar Timber Works, namely, Jagmohan Singh, Payam Shoghi
H
SADASHIV PRASAD SINGH v. HARENDAR SINGH & 265
ORS. [JAGDISH SINGH KHEHAR, J.]
and Dev Kumar Sinha on the other. Sadashiv Prasad Sinha A
was not a party to the proceedings before the Debt Recovery
Tribunal or before the Recovery Officer. By an order dated
5.5.2008, the Recovery Officer ordered the sale of the property
by way of public auction. On 4.7.2008, the Recovery Officer
fixed Rs.12.92 lacs as the reserve price. and also fixed B
28.8.2008 as the date of auction. At the public auction held on
28.8.2008, Sadashiv Prasad Sinha was the highest bidder, and
accordingly, the Recovery officer ordered the sale of the
property in his favour on 28.8.2008. In the absence of any
objections, the Recovery Officer confirmed the sale of the c
property in favour of Sadashiv Prasad Sinha on 22.9.2008.
Thereafter possession of the property was also handed over
to the auction-purchaser on 11.3.2009. Applying the law
declared by this Court in the judgments referred in the foregoing
paragraphs irrespective of the merits of the lis between the rival D
parties, namely, the Allahabad Bank and the partners of Mis.
Amar Timber Works, it is not open for anyone to assail the
purchase of the property made by Sadashiv Prasad Sinha in
the public auction held in furtherance of the order passed by
the Recovery Officer on 28.8.200.8. In the above view of the
matter, especially in the absence of any allegation of fraud or E
collusion, we are of the view that the High Court clearly erred
while setting aside the auction ordered in favour of the auction-
purchaser, Sadashiv Prasad Sinha in the impugned order
dated 17.5.2010.
F
14. A perusal of the impugned order especially paragraphs
8, 12 and 13 extracted hereinabcve reveal that the impugned
order came to be passed in order to work out the equities
between the parties. The entire deliberation at the hands of the
High Court were based on offers and counter offers, inter se G
between the Allahabad Bank on the one hand and the objector
Harender Singh on the other, whereas the rights of Sadashiv
Prasad Sinha - the auction-purchaser, were not at all taken into~
consideration. As a matter of fact, it is Sadashiv Prasad Sinha
who was to be deprived of the property which came to be H
266 SUPREME COURT REPORTS [2014] 1 S.C.R.
A vested in him as far back as on 28.8.2008. It is nobody's case,
that at the time of the auction-purchase. the value of the property
purchased by Sadashiv Prasad Sinha was in excess of his bid.
In fact, the factual position depicted under paragraph 8 of the
impugned judgment reveals, that the escalation of prices had
B taken place thereafter, and the value of the property purchased
by Sadashiv Prasad Sinha was presently much higher than the
bid amount. Since it was nobody's case that Sadashiv Prasad
Sinha, the highest bidder at the auction conducted on
28.8.2008, had purchased the property in question at a price
c lesser than the then prevailing market price, there was no
justification whatsoever to set aside the auction-purchase made
by him on account of escalation of prices thereafter. The High
Court in ignoring the vested right of the appellant in the property
in question. after his auction bid was accepted and confirmed,
subjected him to grave injustice by depriving him to property
0
which he had genuinely and legitimately purchased at a public
auction. In our considered view, not only did the Division Bench
of the High Court in the matter by ignoring the sound, legal and
clear principles laid down by this Court in respect of a third party
auction purchaser, the High Court also clearly overlooked the
E equitable rights vested in the auction-purchaser during the
pendency of a lis. The High Court also clearly overlooked the
equitable rights vested in the auction purchaser while disposing
of the matter.
F 15. At the time of hearing, we were thinking of remanding
the matter to the Recovery Officer to investigate into the
objection of Harender Singh under Rule 11 of the Second
Schedule to the Income Tax Act, 1961. But considering the
delay such a remand may cause, we have ourselves examined
G the objections of Harender Singh and reject the objections for
a variety of reasons. Firstly, the contention raised at the hands
of the respondents before the High Court, that the facts narrated
by Harender Singh (the appellant in Special Leave Petition (C)
No.26550 of 2010) were a total sham, as he was actually the
H brother of one of the judgment-debtors, namely. Jagmohan
SADASHIV PRASAD SINGH v. HARENDAR SINGH & 267
ORS. [JAGDISH SINGH KHEHAR, J.]
Singh. And that Harender Singh had created an unbelievable A
story with the connivance and help of his brother, so as to save
the property in question. The claim of Harender Singh in his
objection petition, was based on an unregistered agreement
to sell dated 10.1.1991. Not only that such an agreement to sell
would not vest any legal right in his favour; it is apparent that it B
may not have been difficult for him to have had the aforesaid
agreement to sell notarized in connivance with his brother, for
the purpose sought to be achieved. Secondly, it is apparent
from the factual position depicted in the foregoing paragraphs
that Harender Singh, despite his having filed objections before C
the Recovery Officer, had abandoned the contest raised by him
by not appearing (and by not being represented) before the
Recovery Officer after 26.10.2005, whereas, the Recovery
Officer had passed the order of sale of the property by way of
public auction more than two years thereafter, only on 5.5.2008. D
Having abandoned his claim before the Recovery Officer, it was
not open to him to have reagitated the same by filing a writ
petition before the High Court. Thirdly, a remedy of appeal was
available to Harender Singh in respect of the order of the
Recovery Officer assailed by him before the High Court under
Section 30, which is being extracted herein to assail the order E
dated 5.5.2008:
"30. Appeal against the order of Recovery Officer.-
(1) Notwithstanding anything contained in section 29, any
person aggrieved by an order of the Recovery Officer F
made under this Act may, within thirty days from the date
on which a copy of the order is issued to him, prefer an
appeal to the Tribunal.
(2) On receipt of an appeal under sub-section (1 ), the
Tribunal may, after giving an opportunity to the appellant G
to be heard, and after making such inquiry as it deems fit,
confirm, modify or set aside the order made by the
Recovery Officer in exercise of his powers under section
25 to 28 (both inclusive)."
H
268 SUPREME COURT REPORTS [2014] 1 S.C.R.
A The High Court ought not to have interfered with in the
matter agitated by Harender Singh in exercise of its writ
jurisdiction. In fact, the learned Single Judge rightfully dismissed
the writ petition filed by Harender Singh. Fourthly, Harender
Singh could not be allowed to raise a challenge to the public
8 auction held on 28.8.2008 because he had not raised any
objection to the attachment of the property in question or the
proclamations and notices issued in newspapers in connection
with the auction thereof. All these facts cumulatively lead to the
conclusion that after 26.10.2005, Harender Singh had lost all
C interest in the property in question and had therefore, remained
a silent spectator to various orders which came to be passed
from time to time. He had, therefore, no equitable right in his
favour to assail the auction-purchase made by Sadashiv
Prasad Sinha on 28.8.2008. Finally, the public auction under
reference was held on 28.8.2008. Thereafter the same was·
D confirmed on 22.09.2008. Possession of the property was
handed over to the auction-purchaser Sadashiv Prasad Sinha
on 11.3.2009. The auction-purchaser initiated mutation
proceedings in respect of the property in question. Harender
Singh did not raise any objections in the said mutation
E proceedings. The said mutation proceedings were also
finalized in favour of Sadashiv Prasad Sinha. Harender Singh
approached the High Court through CWJC No.16485 of 209
only on 27.11.2009. We are of the view that the challenged
raised by Harender Singh ought to have been rejected on the
F grounds of delay and latches, especially because third party
rights had emerged in the meantime. More so, because the
auction purchaser was a bona fide purchaser for consideration,
having purchased the property in furtherance of a duly
publicized public auction, interference by the High Court even
G on ground of equity was clearly uncalled for.
For the reasons recorded hereinabove, we are of the view
that the impugned order dated 17.5.2010 passed by the High
Court allowing Letters Patent Appeal No.844 of 2010 deserves
H to be set aside. The same is accordingly set aside. The right
SADASHIV PRASAD SINGH v. HARENDAR SINGH & 269
ORS. [JAGDISH SINGH KHEHAR; J.]
of the appellant Sadashiv Prasad Sinha in Plot No.2722, A
Exhibition Road, P.S. Gandhi Maidan, Patna, measuring 1289
sq.ft. is hereby confirmed. In the above view of the matter, while
the appeal preferred by Sadashiv Prasad Sinha stands
allowed, the one filed by Harender Singh is hereby dismissed.
B
R.P. Appeal allowed. ·
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