M/s Al-Can Export Pvt. Ltd. vs Prestige H.M. Polycontainers Ltd. & Ors.

30 days’ notice, thus, the sale was conducted in breach of the provisions of s. 194 – Sale certificate was issued on the same day, i.e., on the date of the auction itself, much before the confirmation of sale by the Additional Collector, thus, the sale was conducted in breach of the provisions of s. 212 – Appellant-purchaser was put in possession of the property much before the sale came to be confirmed and that too prior to the cheque being realised, thus, breach of the provisions of ss. 212 and 208 respectively – Undue haste was exhibited by the Tahsildar in completing the sale in favour of the appellant – Tahsildar supressing an important fact before the Additional Collector as regards the objections received by him from IFCI itself indicates that there was some collusion between the Tahsildar and the appellant – Said lapses, cannot be termed as irregularity – Various illegalities were committed even in confirming the sale – If all the illegalities taken note of were to be condoned or overlooked, applying the provisions of Ord. XXI r. 90 CPC, the same would result in nothing but gross travesty of justice – No interference warranted with the impugned judgment of the High Court – Having taken the view that the High Court committed no error, much less any error of law, the appeals could have been dismissed – However, the appellant having running an oxygen cylinder manufacturing plant on the suit property, for almost

15 years after investing a huge amount wherein 200 employees are working, it is fit to give one opportunity to the appellant to save its industrial unit set up on the subject land – Appellant to deposit a sum of Rupees Four Crore Only with the respondent no. 6 towards full and final settlement of all liabilities – In case of the failure to deposit the amount, the competent authorities to take over the possession of the entire unit with the land and put the same once again for sale by way of fresh auction process. [Paras 56-64, 66-67, 75-78]

Code of Civil Procedure, 1908 – Ord. XXI r. 90, ss. 141 and

9 – Constitution of India – Art. 226 – Ordinary civil jurisdiction and extraordinary original jurisdiction – Applicability of the provisions of Ord. XXI r. 90 to writ proceedings u/Art. 226: Held: Provisions of the CPC do not apply to writ petitions u/Art. 226 except some of the principles enshrined therein like res judicata, delay and laches, addition of parties, matters which have not been specifically dealt with by the writ rules framed by the respective High Court – As a court of plenary jurisdiction, the writ court while exercising powers u/Art. 226 is free to adopt its own procedures and follow them – It cannot be compelled to follow the procedures prescribed in the CPC – This is so for the specific provision made in its s. 141 explanation – High Court while exercising jurisdiction u/Art. 226 has jurisdiction to pass appropriate orders – Such power can neither be controlled nor affected by the provisions of Ord. XXI r. 90 – It would not be correct to say that the terms of Ord. XXI r.

90 should be mandatorily complied with while exercising jurisdiction under Article 226 – Proceedings u/Art. 226 stand on a different footing when compared to the proceedings in suits or appeals arising therefrom – High Court exercises its writ jurisdiction u/Art. 226, whereas the Civil Courts exercise their jurisdiction in terms of the provisions of the respective State Civil Courts Acts read with s. 9 CPC – High Court exercises constitutional function, the Civil Court exercises a statutory function – High Court exercises a wide power u/Art. 226 and in a given situation, it can even mould the reliefs in order to do substantial justice between the parties. [Paras 39, 48-50]

Code of Civil Procedure, 1908 – Ord. XXI r. 90 – Auction sale conducted by the State through its authorities – Legality, validity and propriety of – Auction sale challenged on the ground of mala fides, undue favour for extraneous considerations and gross violation of the mandatory provisions of law – Principles enshrined in Ord. XXI r. 90 CPC, if applicable: Held: It would be hazardous to apply the principles enshrined in Ord. XXI r. 90 CPC – Human values and ethics in public functionaries have degraded to a considerable extent – Corruption is on a rampage – Having regard to the same and in order to protect and uphold the rule of law, the courts have a duty to ensure that the State authorities have conducted public auctions in a fair and transparent manner and have not done anything by which public exchequer has suffered – It would be too much to say that although the writ court may find auction sale conducted by a public functionary to be in gross violation of the mandatory provisions of law and the action of such public functionary to be arbitrary, yet the aggrieved party complaining about the same should be told to establish the dual conditions stipulated in Ord.XXI r.90 CPC – First and the foremost aspect that the writ court should look into is fairness and transparency on the part of the State in conducting the auction sale so as to be in conformity with Art.14 – Once the action of the State is found to be unfair and arbitrary, then that is end of the matter for the writ court. [Para 55] Maharashtra Land Revenue Code, 1966 – s. 247 – Appeal and appellate authorities – Matter pertaining to auction proceedings conducted by the Tahsildar of the subject property originally owned by the respondent No. 1 – Respondent no. 1 mortgaged its property in favour of the Bank and obtained loan – Bank assigned the debts due and payable to it in favour of the respondent no. 6 – Respondent no. 1 was in arrears of land revenue and despite issuance of demand notices failed to make the payment and as such the property owned by the respondent no. 1 put to auction under the provisions of the Land Revenue Code and the appellant was declared the successful bidder and sale certificate issued by the Additional Collector in his favour – Appeals filed by the original owner and respondent no. 6 u/s. 247 – Jurisdiction of the Additional Commissioner to decide the appeals – Plea of the appellant that the appeals before the Additional Commissioner u/s. 247 not maintainable as there was remedy available u/s. 210 of the Code: Held: Under s. 210, an application before the Collector to get the Sale set aside has to be made within a period of 30 days and it is after considering the objections the sale is to be confirmed – Remedy u/s. 210 rendered illusory as the sale was finalised by the Tahsildar much before the confirmation by the Collector – In fact, the sale certificate was issued and the possession was also handed over to the appellant – Confirmation was done by the Tahsildar much before the expiry of 30 days – There was nothing left for the Collector to consider and decide u/s. 210 of the Revenue Code – Once the sale certificate is issued, then the remedy falls u/s. 247 instead of s. 210 of the Revenue Code – Furthermore, s.

210 may be applicable in case of owner of the property but not to a lender who has valid subsisting mortgage – Respondent No. 6 does not fall within the category as provided u/s. 210(1) nor has the respondent No. 6 claimed to be the owner of the property or has an interest in the property by virtue of the “title acquired” – Assuming that the Additional Commissioner had no jurisdiction to adjudicate and decide the two appeals filed by the respondent No. 1 and respondent No. 6 respectively, yet the common order passed by the Additional Commissioner allowing the appeals and remanding the matter back to the authority concerned could not have been disturbed and the High Court rightly did not disturb the same – Had the High Court taken the view that the Additional Commissioner had no jurisdiction and the order passed by it was a nullity, the result would have been the revival of the illegal order passed by the Additional Collector confirming the sale – Moreso, the writ court should not quash the order if it revives a wrong or illegal order. [Paras 69-74]

Auction – Auction sale – Conduct of, by the court in the execution proceedings initiated by the decree holder under the provisions of the CPC, and by the State through its revenue authorities like Tahsildar, etc. under the provisions of different enactments like Land Revenue Code etc. – Difference between: Held: There is a fine distinction between the two – Whole object behind Ord. XXI r. 90 CPC appears to be to discourage the judgment debtors from filing frivolous application complaining about the irregularity or fraud in the conduct of the auction sale – Lot of sanctity is attached to the auction sale conducted by the executing court under the provisions of the CPC compared to the auction sale conducted by the State through its authorities – Execution is the enforcement by the process of the court of its orders and decrees – This is in furtherance of the inherent power of the court to carry out its orders or decrees – Order XXI CPC deals with the elaborate procedure pertaining to the execution of orders and decrees – Sale is one of the methods employed for execution – r. 89 of Ord. XXI CPC is the only means by which a judgment-debtor can escape from a sale that has been validly carried out – Object of the rule is to provide a last opportunity to put an end to the dispute at the instance of the judgment debtor before the sale is confirmed by the court and also to save his property from dispossession. [Para 38]

Code of Civil Procedure, 1908 – Ord. XXI r. 90 – Nature and scope of:

Held: R. 90 of Ord. XXI deals with cases of setting aside auctionsale on the ground of material irregularity or fraud in publishing or conducting such sale and the applicant proves substantial injury by reason of such irregularity or fraud – Explanation to r. 90 clarifies that mere absence of or defect in, attachment of property sold would be no ground for setting aside sale – Ord. XXI is exhaustive and in the nature of a complete code as to how the execution proceedings should take place – This is the second stage after the success of the party in the civil proceedings – Another legal battle, more prolonged, starts in execution proceedings defeating the right of the party which has succeeded in establishing its claim in civil proceedings – This is the reason why Ord. XXI r. 90 provides that both the conditions enumerated therein should be fulfilled. [Paras 36, 37]

Public functionaries – Role of – Conduct of auction sale – Requirement of fairness and non-arbitrariness by the State: Held: State action must be informed by reason and the action uninformed by reason is per se arbitrary – Basic requirement of Art. 14 is fairness in action by the State and non-arbitrariness in essence and substance is the heartbeat of fair play – These actions are amenable to the judicial review not only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose – Public authorities are governed by the “rule of law” – Such authorities are constitutionally obliged in law to maintain absolute fairness and transparency during the conduct of the auction sale right from the initiation of the same till its completion – Judicial audit and scrutiny play a key role in ensuring that the public authorities do not act in an unreasonable manner. [Para 55]

Public functionaries – Public efficiency – Maintenance of balance between accountability and autonomy of action – Test of justness, fairness, reasonableness:

Held: Accountability is an impediment to efficient discharge of the duty – There is a distinction between prying into details of dayto-day administration and of the legitimate actions or resultant consequences thereof – To enthuse efficiency into administration, a balance between accountability and autonomy of action should be carefully maintained – Over-emphasis on either would impinge upon public efficiency – But undermining the accountability would give immunity or carte blanche power to deal with the public property or of the debtor at whim or vagary – Whether the public authority acted bona fide would be gauged from the impugned action and attending circumstances – Authority should justify the action assailed on the touchstone of justness, fairness, reasonableness and as a reasonable prudent owner – Test of reasonableness is stricter – Public functionaries should be duty conscious rather than power charged – Its actions and decisions which touch the common man have to be tested on the touchstone of fairness and justice – That which is not fair and just is unreasonable – And what is unreasonable is arbitrary – An arbitrary action is ultra vires – It does not become bona fide and in good faith merely because no personal gain or benefit to the person exercising discretion has been established – An action is mala fide if it is contrary to the purpose for which it was authorised to be exercised – Dishonesty in discharge of duty vitiates the action without anything more – An action is bad even without proof of motive of dishonesty, if the authority is found to have acted contrary to reason. [Para 67] Words and phrases – Illegality and irregularity – Distinction between :

Held: Once it is evident that the mandatory provisions as stipulated under the rules and regulations are not followed or abridged, any action pursuant to the same could be termed as gross illegality – There is a fine distinction between illegality and irregularity – Whereas the former goes to the root of the matter and renders the action null and void, of no effect whatsoever, the latter does not ipso facto invalidate the action, unless prejudice is caused to the person making a complaint. [Para 64]