Maharashtra Co-operative Societies Act, 1960: s.154 – 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 – Appellantbank published proclamation in the daily newspaper and thereafter, tendered a notice to sell the mortgaged properties – Appellantauction 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 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 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 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 to set aside the auction sale within a period of thirty days from the date of sale of immovable property, it was not open for the borrower 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 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
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 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 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 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 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 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 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 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]
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 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, 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 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. The said proviso is 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. [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 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 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 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 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 : [2014] 3 SCR 1140 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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