DEENADAYAL NAGARI SAHAKARI BANK LTD. & ANOTHER versus MUNJAJI AND OTHERS on 16 February 2022

948

SUPREME COURT REPORTS

[2022] 8 S.C.R.

ADEENADAYAL 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 –CAuction – Respondent no.1-borrower borrowed loan from two banksand 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-Dauction purchaser was found to be the highest bidder – Salecertificate was issued in favour of the auction purchaser on17.01.2011 and the sale deed was also executed on 19.01.2011 –No further steps were taken by respondent no.1 immediately – Healso did not come forward to deposit 5% of the amount equal to thepurchase money within 30 days from the date of the sale so as toEseek setting aside of the sale in terms of r.107(13) of the MCS Rules,1961 – No objection was raised before the Recovery Officer aboutany irregularity or fraud as required under r.107(14) of the MCSRules, 1961 – When the officers of the bank went to take possessionof the property, they were attacked – FIR reporting attack lodgedFon 24.02.2011 – Thereafter, respondent no.1 challenged the auctionproceedings before the Divisional Joint Registrar by way of revisionunder s.154 of the MCS Act, 1960, which was dismissed – Order ofDivisional Joint Registrar was challenged before High Court, whichwas allowed and auction was set aside – On appeal, held: Once therevision application before the Divisional Joint Registrar under s.154Gwas held to be not maintainable, High Court ought not to haveconsidered the writ petition on merits – The borrower never appliedto the recovery officer to set aside the sale on the grounds of materialirregularity, mistake or fraud in publishing or conducting it,therefore, once the borrower failed to apply to the Recovery Officerto set aside the auction sale within a period of thirty days from theH

date of sale of immovable property, it was not open for the borrowerto 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 unlessthe Recovery Officer is satisfied that the applicant had sustainedsubstantial injury by reason of such irregularity, mistake or fraud– In the present case, there is no finding recorded by the High Courtthat the borrower had sustained substantial injury – Setting asideof auction sale by the High Court was just contrary to the provisoto r.107(14)(i) of the MCS Rules, 1961 – Maharashtra Co-operativeSocieties Rules, 1961 – r.107(11)(f) .

Allowing the appeals, the Court

Conclusion

Allowing the appeals, the Court

HELD: 1. In the present case, Sale Certificate was issuedin favour of the auction purchaser on 19.01.2011 after a period ofthirty days from holding the auction sale. Even the Sale Certificatewas issued by the Bank/Recovery Officer only after the receiptof the approval of the District Deputy Registrar. While approvingthe sale, the District Deputy Registrar noted in the approval dated29.11.2010 that the valuation of the land was determined at Rs.98,10,000/- according to the letter issued by the Governmentapproved Valuer dated 10.06.2010 which was the upset price andthe amount realised was Rs.1,26,00,000/-, which is higher thanthe upset price. Therefore, as such, even the District DeputyRegistrar also did not doubt the valuation and the amountrealised, i.e., Rs. 1,26,00,000/- against the upset price ofRs.98,10,000/-. Therefore, once the borrower failed to apply tothe Recovery Officer to set aside the auction sale on the groundsof material irregularity, mistake or fraud in publishing orconducting the auction sale within a period of thirty days fromthe date of sale of immovable property, thereafter it was not openfor the borrower to challenge the sale on the ground of materialirregularity. All the grounds on which the High Court has setaside the auction sale/sale were available with the borrower andthe borrower did not apply to set aside the sale on the said groundsof material irregularity, mistake or fraud. [Para 7.1][962-D-G]

2. Even under Rule 107(14)(i) of the MCS Rules, 1961, nosale shall be set aside on the ground of material irregularity,mistake or fraud unless the Recovery Officer is satisfied that the AB

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Aapplicant had sustained substantial injury by reason of suchirregularity, mistake or fraud. In the present case, there is nofinding recorded by the High Court that the borrower hadsustained substantial injury and by reason of such irregularitythe auction sale had to be set aside. Under the abovecircumstances also, setting aside of auction sale/sale by the HighBCourt is just contrary to the proviso to Rule 107(14)(i) of theMCS Rules, 1961. One another ground on which the High Courthas set aside the auction sale is that as the auction was postponedby seven days, fresh proclamation ought to have been issued.Therefore, according to the High Court, not issuing the freshCproclamation and conducting/holding the auction was in breachof Rule 107(11)(f) of the MCS Rules. The High Court has alsoobserved and held that as the auction was held/conducted withina 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 andpublished in the daily newspaper on 9.9.2010. The date fixed forsubmission 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 theEauction proceedings and the Divisional Joint Registrar grantedstay of the auction proceedings on 28.09.2010. The revisionapplication came to be dismissed by the Divisional Joint Registrarvide order dated 23.11.2010. On dismissal of the revisionapplication and vacating the stay against the auction proceedings,Fthe bank/Recovery Officer opened the bids on 29.11.2010 in whichthe auction purchaser was found to be the highest bidder whooffered 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 dateof vacating stay and dismissal of the revision application, theauction was held. Therefore, it cannot be said that the auctionGsale was in breach of Rule 107(11)(f) of the MCS Rules. Theperiod during which the stay was in operation was to be excluded.Even otherwise, proviso to Rule 107(11)(f) is applicable to issuea fresh proclamation in case the sale is adjourned for a longerperiod than seven days by the Recovery Officer or the Sale Officer.H

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The said proviso is not applicable in a case where at the lastmoment the borrower obtains a stay of the auction which isvacated after some time, i.e., after a period of seven days. [Para8.1][964-E-H; 965-A]

4. Now insofar as the finding recorded by the High Courtthat the auction was conducted/held within a period of thirty daysfrom the date of proclamation and therefore there is a breach ofRule 107(11)(f) is concerned, it appears that the High Court hasconsidered 09.09.2010 as the date of proclamation. However, itis to be noted that 09.09.2010 was the date on which the tendernotice indicating the date of auction/sale was issued. The samewas published in the daily newspaper on 14.09.2010 fixing thedate of auction/sale on 28.09.2010. It was not a proclamation.Prior thereto, the proclamation/public notice dated 20.02.2010was published in the daily newspaper ‘Sakal’ on 22.02.2010,23.02.2010 and 24.02.2010. Even thereafter also, PublicAdvertisement dated 26.05.2010, which also can be said to be aproclamation as per Rule 107(11)(f) of the MCS Rules, 1961,was issued. Therefore, the High Court is factually incorrect inconcluding that the auction sale was in breach of Rule 107(11)(f)of the MCS Rules, 1961. [Para 9][965-E-G]

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Shilpa Shares and Securities and others vs. NationalCooperative 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 ofUttar Pradesh (2012) 11 SCC 511 : [2012] 6 SCR 105;

J. Rajiv Subramaniyan vs. Pandiyas (2014) 5 SCC 651: [2014] 3 SCR 1140 – referred to.

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Case Law Reference

[2007] 5 SCR 1128 [1996] 5 Suppl. SCR 104[2012] 6 SCR 105 [2014] 3 SCR 1140

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ACIVIL APPELLATE JURISDICTION: Civil Appeal No. 818 of2022.

From the Judgment and Order dated 30.07.2021 of the High Courtof Bombay, Bench at Aurangabad in Writ Petition No. 570 of 2012.

WithB

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 DilipCLandge, 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 judgmentDand order dated 30.07.2021 passed by the High Court of Judicature atBombay, Bench at Aurangabad in Writ Petition No. 570 of 2012, bywhich the High Court has allowed the said writ petition preferred byrespondent no.1 herein and has set aside the auction sale in respect ofthe lands in question and also ordered that the Sale Certificate datedE19.01.2011 executed by the appellant-bank in Civil Appeal No. 818/2022in favour of the auction purchaser stands cancelled, both, the Bank aswell as the auction purchaser have preferred the present appeals.

2. The facts leading to the present appeals in a nutshell are asunder:F

One Vaishnavi Hatcheries Company Limited, of which respondentno.1 herein is the Director (hereinafter referred to as the ‘borrower’),borrowed loan from the appellant-bank and one Vaidanath NagariSahakari Bank. As a security to the said loan, four properties, i.e., surveynos. 102, 440, 437 & 439 were mortgaged. Property survey No. 439Gwas mortgaged with Vaidanath Bank, property survey No. 437 wasmortgaged with the appellant-bank and property survey Nos.440 & 102were jointly mortgaged with the appellant-bank and Vaidanath Bank.

2.1 That the borrower defaulted in payment of the appellant-bankand Vaidanath Bank in the year 2010. Both the banks initiated separateHrecovery proceedings against respondent no.1 and the borrower. A

Recovery Certificate dated 6.2.2010 was issued in favour of the appellant-bank under Section 101 of Maharashtra Co-operative Societies Act, 1960(hereinafter referred to as the ‘MCS Act, 1960’). According to theappellant-bank, a proclamation was published in the daily newspaper‘Sakal’ on 22.02.2010 as well as on 23.02.2020, followed by thepublication in the daily newspaper ‘Sakal’ on 24.02.2010. According tothe appellant-bank, a proclamation as per Rule 107(11) of the MaharashtraCo-operative Societies Rules, 1961 (hereinafter referred to as the ‘MCSRules, 1961’) was issued on 26.05.2010 giving 30 days’ time to respondentno.1 to pay the amount.

2.2 That the Deputy Joint Registrar, Co-operative Societies fixedthe upset price at Rs.98,10,000/- vide communication dated 26.07.2010.Vaidanath Bank also initiated the process of auction of the property insurvey no. 439 in terms of the recovery certificate issued in its favour.The said proceedings so far as the Vaidanath Bank is concerned hadattained finality. Upset price fixed by the Deputy Joint Registrar, Co-operative Societies was challenged by respondent no.1 by way of RevisionPetition No. 58/2010 before the Divisional Joint Registrar.

2.3 The appellant-bank issued a tender notice to sell the mortgagedproperties on 9.9.2010, which was published in the daily newspaper on14.09.2010. On the date fixed for submission of tender, the DivisionalJoint Registrar, Co-operative Societies granted stay of the auctionproceedings in Revision Application No. 58/2010 filed by respondentno.1 herein. However, subsequently, the Divisional Joint Registrardismissed the said Revision Application vide order dated 23.11.2010. Ondismissal of the revision application and vacating the stay, bids wereopened on 29.11.2010. The appellant in Civil Appeal No. 819/2022 –Ratnakar Gutte was found to be the highest bidder and he offered thebid of Rs.1,26,00,000/-. The auction purchaser deposited 15% of thesaid amount on the same day, i.e., on 29.11.2010. Thereafter, an applicationwas made to the District Deputy Registrar for seeking approval to acceptthe balance 85% of the amount from the auction purchaser whichaccording to the bank was required as per the circular issued by the Co-operative Commissioner & Registrar dated 23.07.2004. The approvalwas received from the District Deputy Registrar on 29.12.2010.Immediately on receipt of the approval, the auction purchaser depositedthe remaining 85% of the amount on 12.01.2011, which was within 15days from the date of approval.

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A2.4 A Sale Certificate was issued in favour of the auction purchaseron 17.01.2011 and the sale deed was also executed in favour of theauction purchaser on 19.01.2011. No further steps were taken byrespondent no.1 immediately. He also did not come forward to deposit5% of the amount equal to the purchase money within 30 days from thedate of the sale so as to seek setting aside of the sale in terms of RuleB107(13) of the MCS Rules, 1961. No objection was raised before theRecovery Officer about any irregularity or fraud as required under Rule107(14) of the MCS Rules, 1961. It appears that the officers of the bankwent to take possession of the property, they were attacked and thereforethe officers of the bank lodged an FIR on 24.02.2011 for an attack onCthem while acquiring possession of the property.

2.5 Thereafter, respondent no.1 challenged the auction proceedingsbefore the Divisional Joint Registrar by way of Revision Application No.11/2011 under section 154 of the MCS Act, 1960. Respondent no.1 filedan FIR being FIR No. 138/2011 alleging that the mortgaged deed of theDproperty and sale deed with respect to land survey no. 437 (to the extentof 34R) and land survey no. 440(to the extent of 72R) are illegal. Videorder dated 13.04.2011, the Divisional Joint Registrar dismissed RevisionApplication No. 11/2011 filed by respondent no.1 herein. Respondentno.1 filed Writ Petition No. 570/2012 before the High Court challengingEorder dated 13.04.2011 in Revision Application No. 11/2011 passed bythe Divisional Joint Registrar upholding the auction proceedings.Respondent no.1 also challenged Recovery Certificate dated 6.2.2010before 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 HighFCourt, vide order dated 20.02.2012. By judgment and order dated23.09.2013, the High Court quashed the criminal proceedings initiatedby respondent no.1 against the officers of the bank and others concernedvide FIR No. 138/2011.

G2.6 Feeling aggrieved and dissatisfied with the order passed bythe learned Single Judge in Writ Petition No. 4618/2011, respondent no.1preferred Letters Patent Appeal No. 130/2012. The same came up forhearing before the Division Bench on 5.3.2014. Respondent no.1withdrew the said Letters Patent Appeal and therefore the said LPANo. 130/2012 came to be dismissed as withdrawn.H

2.7 By the impugned judgment and order dated 30.07.2021, theHigh Court has allowed Writ Petition No. 570/2012 challenging orderdated 13.04.2011 passed by the Divisional Joint Registrar in RevisionApplication No. 11/2011 upholding the auction proceedings andconsequently has set aside the auction sale in respect of lands surveynos. 440, 437 and 102 dated 29.11.2010. By the impugned judgment andorder, the High Court has also set aside the Sale Certificate in favour ofthe auction purchaser dated 19.01.2011. The High Court has directedthe appellant-bank to refund the sale price to the auction purchaser alongwith interest @ 10% per annum from the date of deposit till payment.From the impugned judgment and order passed by the High Court, itappears that the High Court has allowed the writ petition and set asidethe auction sale on the ground that there was a non-compliance ofmandatory provisions of Rule 107(11) (e) (f) and Rule 107(11)(h) of theMCS Rules, 1961.

2.8 Feeling aggrieved and dissatisfied with the impugned judgmentand order passed by the High Court, the bank as well as the auctionpurchaser both have preferred the present appeals.

3. Shri Sudhanshu S. Choudhari, learned counsel appearing onbehalf of the appellants in Civil Appeal No. 818/2022 has vehementlysubmitted that, as such, respondent no.1 has not deposited even a farthingtowards the loan amount since 2010. It is submitted that he even did notdeposit the amount in terms of the proclamation dated 26.05.2010, nordid he deposit the 5% amount in terms of Rule 107(13) of the MCSRules, 1961 for seeking setting aside the auction/sale.

3.1 It is contended that the High Court has not properly appreciatedthe fact that in the earlier two rounds of litigation, respondent no.1 –borrower failed, i.e., in his challenge to the recovery proceedings andchallenge to the base price. It is submitted that this is the third attempt tostall the recovery of public money.

3.2 It is further urged that as such the High Court has not properlyappreciated and/or considered that the properties at Survey Nos. 440 &102 were jointly mortgaged to the appellant-bank and the Vaidanath Bankand 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 submittedthat in writ petition No. 570/2012, as such, there was no challenge to the AB

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Aauction sale of properties bearing survey nos. 102 & 440, jointlymortgaged with the appellant-bank and the Vaidanath Bank.

3.3 It is further contended by learned counsel appearing on behalfof the appellant-bank that once having held by the High Court that sincerespondent no.1 did not exercise the right under Rule 107(13), RevisionBApplication No. 11/2011 under Section 154 of the MCS Act, 1960 wasnot maintainable, thereafter it was not open for the High Court to passthe impugned judgment and order in the writ petition in which the orderpassed in the revision application was under challenge.

3.4 It is submitted that in the present case, Vaishnavi HatcheriesCwas the borrower and respondent no.1 is the only Director of theborrower. It is submitted that the borrower – Vaishnavi Hatcheries hasaccepted the auction as it has not challenged the same. It is thereforesubmitted that challenge to the auction/sale by respondent no.1 as adirector in his individual capacity was not maintainable.

D3.5 It is further contended that as such respondent no.1 did notraise 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, nosale could be set aside on the ground of irregularity, mistake or fraudunless the Recovery Officer is satisfied that the applicant has sustainedsubstantial injury due to it. It is submitted that in fact the order of theEHigh Court would cause substantial injury to respondent no.1 as he willhave to pay interest at the rate of 15% per annum from the date ofdefault, i.e., from 2010 till date. It is submitted that the amount if calculatedat present would come to Rs. 3,54,58,836/- and after addition of 10% tobe 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 properlyconsidered the conduct on the part of respondent no.1. This is becauserespondent no.1 has filed several proceedings in several Courts to stallthe recovery of the outstanding debt. It is submitted that at this stage, toinitiate a fresh process would cause substantial injury to the appellant asGthe life of the machinery auctioned was only three years and the appellantwill not be able to recover the amount which is public money. It issubmitted that the High Court has even erroneously asked the appellant-bank to repay the sale price to the auction purchaser along with interestat 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

3.7 It is further urged that even otherwise, on facts also, the HighCourt has erred in observing and holding that there was a breach ofRules 107(11)(e), (f) & (h) of the MCS Rules, 1961. That the HighCourt has committed a grave error in observing and holding that in termsof Rule 107(11)(e) and (f), there was no gap of thirty days between theproclamation and the sale. It is stated that the date of proclamation was20.02.2010 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 issubmitted that the High Court has erroneously taken the date of publicationof notice as the date of proclamation.

3.8 It is further submitted that the High Court has also committedan error in holding that there was a breach of Rule 107(11)(f) by notissuing a fresh proclamation. That the High Court has erred in holdingthat in terms of Rule 107(11)(f), a fresh proclamation was required to beissued since the auction was adjourned for more than seven days. It isurged that the High Court has not considered that in terms of proviso toRule 107(11)(f), only where the Recovery Officer or the Sale Officer inhis discretion adjourns the sale for a period longer than seven days, afresh proclamation was required to be issued. That in the instant case,there was no such discretion exercised either by the Recovery Officeror the Sale Officer. It is submitted that the sale was required to beadjourned as there was a stay of the auction granted on the very datefixed for it by the Divisional Joint Registrar vide order dated 28.09.2010at the instance of respondent no.1, which came to be vacated on23.11.2010 and thereafter within a period of seven days the auction washeld.

3.9 Making the above submissions, it is prayed to allow the presentappeal and to quash and set aside the impugned judgment and orderpassed by the High Court.

4. Shri Nishant Katneshwarkar, learned counsel appearing onbehalf of the auction purchaser, while adopting the submissions made onbehalf of the appellant-bank, has further submitted that the High Courthas erred in holding that the auction purchaser did not deposit the balance85% amount within the stipulated time. It is submitted that as per circulardated 23.07.2004 issued by the Cooperative Commissioner & Registrar,Cooperative Societies, all the proposals for sale confirmation wererequired to be submitted to the Assistant Registrar/District DeputyRegistrar. It is submitted that in the present case the bids were opened AB

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Aand tender was allotted to the auction purchaser as he was the highestbidder and he deposited 15% of the amount on 29.11.2010. That anapplication was made to the District Deputy Registrar for seeking hisapproval and to accept the balance 85% of the amount. That the samewas required as per circular dated 23.07.2004. That the approval wasreceived from the District Deputy Registrar on 29.12.2010 andBimmediately thereafter within a period of 15 days, i.e., on 12.01.2011,the auction purchaser had deposited the remaining 85% of the amountand thereafter the sale certificate came to be issued in favour of theauction purchaser on 17.01.2011. It is submitted that therefore the HighCourt has erred in observing that the auction purchaser did not depositCthe 85% of the balance amount of sale consideration within the stipulatedtime provided under the Rules. It is urged that therefore the High Courthas committed a grave error in setting aside the entire sale which washeld in 2010/2011.

5. The present appeals are vehemently opposed by Shri SantoshDPaul, learned Senior Advocate appearing on behalf of respondent no.1.It is submitted that in the present case, the High Court has rightly heldthat 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 MCSERules, 1961, the proclamation was to be published thirty days before thedate for sale. But in the instant case, no such proclamation was madefor the auction sale held on 29.11.2010. It is submitted that the proclamationwas issued on 09.09.2010 and was published on 14.09.2010 for openingof tender on 28.09.2010, which was within the period of thirty days fromthe date of proclamation. It is submitted, therefore the High Court hasFrightly held that the auction was in breach of Rule 107(11)(e) of theMCS 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 postponedbeyond seven days, a fresh proclamation is required to be issued. It isGcontended that in the present case, the Divisional Registrar stayed theauction and the proclamation of auction by order dated 28.09.2010 andthe revision was dismissed on 23.11.2010. The auction was scheduled tobe 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 secondHproviso to Rule 107(11)(f) of the Rules. It is submitted that second proviso to Rule 107(11)(f) clearly stipulates the mandate of issuing a freshproclamation. It does not state that the fresh proclamation is not necessaryif there is a stay by higher authorities/Courts. It is contended that in theabsence 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 freshproclamation before an auction is to obtain the best financial return forthe property and to oversee a free and fair competition amongst buyers.It is submitted that the High Court is right in setting aside the auctionsale 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 inquestion was sold for an amount of Rs.1,26,00,000/- and the verypurchaser 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 threerelated parties participated in the auction and therefore the property inquestion was sold at a very low price.

5.5 It is further submitted that as per Rules 107(11) (g) & (h), it ismandatory that the auction purchaser deposits 15% of the priceimmediately and that he also deposits the remainder 85% within a periodof fifteen days from the date of sale. It is submitted that in the presentcase, the auction purchaser deposited 15% of the sale price on 29.11.2010and the remaining amount was paid after 44 days on 12.01.2011. This isa clear breach of Rules 107(11) (g) & (h). It is submitted that the HighCourt 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 Securitiesand others vs. National Cooperative Bank Limited, reported in (2007)12 SCC 165 wherein the very same Rules 107(11) (g) &(h) were underconsideration and admittedly like in the present case the amount ofremaining 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 failureto pay 85% of the purchase money within stipulated time renders theauction sale a nullity and that there was no valid auction sale. It issubmitted that in the aforesaid decision it is held that failure to depositthe amount within the stipulated time vitiates the auction process.

5.7 Now insofar as the reliance placed upon Section 154 of theMCS Act, 1960 by the bank is concerned, it is submitted that the saidprovision cannot be pressed into service when the auction has been held A

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Ain a completely illegal manner and in blatant violation of the rules whichare mandatory in nature. It is contended that in the present case as therewas no fresh proclamation issued and the auction was hastily conductedafter the stay was vacated, therefore the High Court has rightlyentertained the writ petition and has rightly set aside the auction sale.

B5.8 Relying upon the decisions of this Court in the cases of RamKishun vs. State of Uttar Pradesh, reported in (2012) 11 SCC 511and J. Rajiv Subramaniyan vs. Pandiyas, reported in (2014) 5 SCC651, it is vehemently submitted by the learned Senior Advocate appearingon behalf of the respondent – borrower that as observed by this Court inthe aforesaid two decisions the bank has to act fairly and all effortsCshould be made to get the best price for the mortgaged property. It issubmitted that in the aforesaid decisions, it is held that the conditionprecedent for taking away someone’s property or disposing of the securedassets is that the authority must ensure compliance with the statutoryprovisions. It is submitted that in the present case, while conducting theDauction sale and selling the property, the statutory provisions have notbeen followed and in fact the property in question was sold at a lowerprice and therefore the High Court has rightly quashed and set aside theauction as well as the sale in favour of the auction purchaser.

5.9 Making the above submissions and relying upon the aforesaidEdecisions, it is prayed to dismiss the present appeals.

6. We have heard the learned counsel for the respective partiesat length.

By the impugned judgment and order, the High Court has set asidethe auction sale conducted on 29.11.2010 and has cancelled the SaleFCertificate dated 19.01.2011 in favour of the auction purchaser on theground 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 orderpassed by the Divisional Joint Registrar passed in Revision ApplicationGNo. 11/2011 under Section 154 of the MCS Act, 1960. However, it isrequired to be noted that even the High Court in the impugned judgmentand order has specifically observed in paragraph 31 that as the borrowerdid not exercise the right under Rule 107(13) of the MCS Rules, it wasnot competent for the borrower to prefer revision before the DivisionalJoint Registrar under Section 154 of the MCS Act, 1960. Therefore,H

once the revision application before the Divisional Joint Registrar underSection 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 petitionon merits.

7. Even otherwise on merits also, the High Court has erred inentertaining the writ petition filed by the borrower and quashing andsetting aside the auction sale/sale by not bearing in mind the followingaspects:

firstly, that after conducting the auction sale and sale of the propertyin favour of the auction purchaser, the borrower never applied to theRecovery Officer to set aside the sale on the grounds of materialirregularity, mistake or fraud in publishing or conducting it; secondly, as per proviso to Rule 107(14)(i) of the MCS Rules, nosale shall be set aside on the ground of irregularity or fraud unless theRecovery Officer is satisfied that the applicant has sustained substantialinjury by reason of such irregularity, mistake or fraud; and thirdly, as per Rule 107(14)(iii), on the expiration of thirty daysfrom the date of sale, if no application to have the sale set aside is madeor if such application has been made and rejected, the Recovery Officershall make an order confirming the sale. Rule 107(14) reads as under:

“(14)(i) At any time within thirty days from the date of the sale ofimmovable property, the applicant or any person entitled to sharein a rateable distribution of the assets or whose interests areaffected by the sale, may apply to the [District Deputy Registrar] toset aside the sale on the ground of a material irregularity or mistakeor fraud in publishing or conducing it:

Provided that no sale shall be set aside on the ground of irregularityor fraud unless the [District Deputy Registrar] is satisfied thatthe applicant has sustained substantial injury by reason of suchirregularity, mistake or fraud.

(ii) If the application be allowed, the Recovery shall set aside thesale and may direct a fresh one

(iii) On the expiration of thirty days from the date of sale, if noapplication to have the sale set aside is made or if such applicationhas been made and rejected, the [District Deputy Registrar] shallmake an order confirming the sale; A

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AProvided that if he shall have reason to believe that the sale oughtto be set aside notwithstanding that no such application has beenmade or on grounds other than those alleged in any applicationwhich has been made and rejected, he may, after recording hisreasons in writing, set aside the sale.

B(iv) Whenever the sale of any immovable property is not soconfirmed or is set aside, the deposit or the purchase money, asthe case may be, shall be returned to the purchaser.

(v) After the confirmation of any such sale, the [District DeputyRegistrar] shall grant a certificate of sale bearing his seal andCsignature to the purchaser, and such certificate shall state theproperty sold and the name of the purchaser.”

7.1 In the present case, Sale Certificate was issued in favour ofthe auction purchaser on 19.01.2011 after a period of thirty days fromholding the auction sale. At this stage, it is required to be noted that evenDthe Sale Certificate was issued by the Bank/Recovery Officer only afterthe receipt of the approval of the District Deputy Registrar. Whileapproving the sale, the District Deputy Registrar noted in the approvaldated 29.11.2010 that the valuation of the land was determined at Rs.98,10,000/- according to the letter issued by the Government approvedValuer dated 10.06.2010 which was the upset price and the amountErealised was Rs.1,26,00,000/-, which is higher than the upset price.Therefore, as such, even the District Deputy Registrar also did not doubtthe valuation and the amount realised, i.e., Rs. 1,26,00,000/- against theupset price of Rs.98,10,000/-. Therefore, once the borrower failed toapply to the Recovery Officer to set aside the auction sale on the groundsFof material irregularity, mistake or fraud in publishing or conducting theauction sale within a period of thirty days from the date of sale ofimmovable property, thereafter it was not open for the borrower tochallenge the sale on the ground of material irregularity. All the groundson which the High Court has set aside the auction sale/sale were availablewith the borrower and the borrower did not apply to set aside the sale onGthe said grounds of material irregularity, mistake or fraud. Therefore,once the borrower failed to apply to the Recovery Officer to set asidethe sale on the ground of material irregularity within a period of thirtydays from the date of sale of the immovable property and thereafter theSale Certificate has been issued, normally the borrower cannot beHpermitted to challenge the same subsequently, having not raised any objection at the appropriate time and stage as per the statute, otherwisethe 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 ofmaterial irregularity, mistake or fraud unless the Recovery Officer issatisfied that the applicant had sustained substantial injury by reason ofsuch irregularity, mistake or fraud. In the present case, there is no findingrecorded by the High Court that the borrower had sustained substantialinjury and by reason of such irregularity the auction sale had to be setaside. 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.

8. One another ground on which the High Court has set aside theauction sale is that as the auction was postponed by seven days, freshproclamation ought to have been issued. Therefore, according to theHigh Court, not issuing the fresh proclamation and conducting/holdingthe auction was in breach of Rule 107(11)(f) of the MCS Rules. TheHigh Court has also observed and held that as the auction was held/conducted within a period of thirty days from the date of issuance ofproclamation, the same is in violation of Rule 107(11)(f) of the MCSRules. Rule 107(11)(f) of the MCS Rules reads as under:

“(f) When any immovable property is sold under these rules, thesale shall be subject to the prior encumbrances on the property, ifany. The applicant shall, when the amount for the realisation ofwhich the sale is held exceeds Rs. 100, furnish to the Sale Officerwithin such time as may be fixed by him or by the RecoveryOfficer, an encumbrance certificate from the RegistrationDepartment for the period of not less than twelve years prior tothe date of attachment of the property sought to be sold, or incases falling under the proviso to sub-rule (10), prior to the dateof the application for execution. The time for production of theencumbrance certificate may be extended at the discretion of theSale Officer or the Recovery Officer, as the case may be. Thesale shall be by public auction to the highest bidder:

Provided that it shall be open to the Sale Officer to decline toaccept the highest bid where the price offered appears to be undulylow or for other adequate reasons:

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AProvided further that the Recovery Officer or the Sale Officermay, in his discretion, adjourn the sale to a specified day and hour,recording his reason for such adjournment. Where a sale is soadjourned for a longer period than seven days, a fresh proclamationunder clause (e) shall be made, unless the defaulter consents towaive it.

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The sale shall be held after the expiry of not less than thirty dayscalculated from the date on which notice of the proclamation wasaffixed in the office of the Recovery Officer. The time and placeof sale shall be fixed by the Recovery Officer and the place ofsale shall be the village where the property to be sold is situatedCor such adjoining prominent place of public resort as may be fixedby the Recovery Officer:

Provided that in cases where an encumbrance certificate is notobtainable owing to the destruction of the connected records, anaffidavit from the village Talathi or corresponding officer in regardDto the encumbrances known to him supported by a certificatefrom the Registration Department that the encumbrance certificatecannot be granted owing to the destruction of the connectedrecords shall be accepted in place of an encumbrance certificate.”

8.1 In the present case, the tender notice was issued and publishedEin the daily newspaper on 9.9.2010. The date fixed for submission of thetender was 28.09.2010. At the last moment, i.e., on 28.09.2010, theborrower filed revision application no. 58/2010 before the Divisional JointRegistrar challenging the auction proceedings and the Divisional JointRegistrar granted stay of the auction proceedings on 28.09.2010. TheFrevision application came to be dismissed by the Divisional Joint Registrarvide order dated 23.11.2010. On dismissal of the revision application andvacating the stay against the auction proceedings, the bank/RecoveryOfficer opened the bids on 29.11.2010 in which the auction purchaserwas found to be the highest bidder who offered Rs.1,26,00,000/- againstthe upset price of Rs. 98,10,000/-. Therefore, as such, within a period ofGseven days from the date of vacating stay and dismissal of the revisionapplication, the auction was held. Therefore, it cannot be said that theauction sale was in breach of Rule 107(11)(f) of the MCS Rules. Theperiod during which the stay was in operation was to be excluded. Evenotherwise, proviso to Rule 107(11)(f) is applicable to issue a freshHproclamation in case the sale is adjourned for a longer period than seven days by the Recovery Officer or the Sale Officer. The said proviso isnot applicable in a case where at the last moment the borrower obtainsa stay of the auction which is vacated after some time, i.e., after aperiod of seven days. Once the sale was required to be adjourned becauseof the stay order obtained by the borrower and the stay continued formore than seven days which came to be vacated subsequently, howsuch a person/borrower can be permitted to take the benefit of his actionof obtaining the stay and thereafter to contend that even if the sale wasadjourned for more than seven days due to the stay order obtained byhim, there shall be a fresh proclamation. This can be said to be giving apremium to such a borrower. If the contention/submission on behalf ofthe borrower is accepted that second proviso to Rule 107(11)(f) doesnot state that the fresh proclamation is not necessary if there is a stay ofauction by higher authorities/Courts, in that case, every dishonestborrower who wants to scuttle or delay the auction/sale will approachthe Court/appropriate authority at the eleventh hour and obtain stay ofthe auction which may continue for more than seven days and he wouldthen contend that as more than seven days have passed, freshproclamation has to be issued. The aforesaid position cannot be accepted.

9. Now insofar as the finding recorded by the High Court that theauction was conducted/held within a period of thirty days from the dateof proclamation and therefore there is a breach of Rule 107(11)(f) isconcerned, it appears that the High Court has considered 09.09.2010 asthe date of proclamation. However, it is to be noted that 09.09.2010 wasthe date on which the tender notice indicating the date of auction/salewas issued. The same was published in the daily newspaper on14.09.2010 fixing the date of auction/sale on 28.09.2010. It was not aproclamation. Prior thereto, the proclamation/public notice dated20.02.2010 was published in the daily newspaper ‘Sakal’ on 22.02.2010,23.02.2010 and 24.02.2010. Even thereafter also, Public Advertisementdated 26.05.2010, which also can be said to be a proclamation as perRule 107(11)(f) of the MCS Rules, 1961, was issued. Therefore, theHigh Court is factually incorrect in concluding that the auction sale wasin breach of Rule 107(11)(f) of the MCS Rules, 1961.

10. Now insofar as the finding recorded by the High Court andreliance placed upon the decisions of this Court in the cases of ShilpaShares and Securities (supra) and Balram (supra) that there was abreach of Rule 107(11)(g) & (h) of the MCS Rules by not depositing the AB

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Abalance 85% sale consideration within a period of 15 days is concerned,the same is also factually incorrect. The bids were opened on 29.11.2010and the auction purchaser was found to be the highest bidder who offeredRs. 1,26,00,000/-. On the very day, he deposited 15% of the saleconsideration. On 01.12.2010, an application was made to the DistrictDeputy Registrar, which was required as per circular dated 23.07.2004Bissued by the Co-operative Commissioner & Registrar, CooperativeSocieties. The District Deputy Registrar approved the said proposal whichwas received on 29.12.2010 and within a period of fifteen days from thedate of such approval, the auction purchaser deposited the remaining85% of the amount. Therefore, it cannot be said that there was anyCbreach of Rule 107(11)(g) &(h) of the MCS Rules, 1961 as observedand held by the High Court.

11. Even the conduct on the part of the borrower is also requiredto 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 towardsDthe loan amount since 2010. However instead, he lodged an FIR againstthe Bank Officers alleging that the mortgaged deeds of the property andsale 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 proceedingscame to be quashed by the High Court vide order dated 23.09.2013.Number of proceedings were initiated by the borrower and all effortsEwere made by him to delay the auction/sale of the mortgaged propertieswithout paying a single rupee. Pursuant to the proclamation issued on26.05.2010 under Rule 107(11) of the MCS Rules, 1961, thirty days’time was given to the concerned borrower to repay the debt, but nosteps were taken by him. The borrower was fully aware of thisFpublication. Thereafter, public notice was issued on 09.09.2010, whichwas 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 HighCourt, it was the third round of litigation initiated by the borrower. In thefirst round of litigation, he challenged the upset price fixed by theDivisional Joint Registrar which was filed on 28.09.2010 being the lastGdate 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 infavour of the auction purchaser on 17.01.2011 and the sale deed wasexecuted in favour of the auction purchaser on 19.01.2011. Even at thatHstage also, he could have applied for setting aside the sale by depositing 5% of the amount equal to the purchase money in terms of Rule 107(13)but the borrower failed to avail the said opportunity. He even did notraise any objection before the Recovery Officer about the alleged materialirregularity as required under Rule 107(14). Instead, he challenged theauction proceedings before the Divisional Joint Registrar by way ofrevision application No. 11/2011 under Section 154 of the MCS Act,1960, which even as observed by the High Court was not competent atthe instance of the borrower. From the aforesaid, it is clear that at everystage without paying a single rupee due and payable, the borrower triedto stall the auction/sale proceedings.

12. Now insofar as the reliance placed upon the decisions of thisCourt in the cases of Shilpa Shares and Securities (supra) and Balram(supra) by the learned counsel appearing on behalf of the borrower isconcerned, the same shall not be applicable to the facts of the case onhand, in view of our findings recorded hereinabove.

13. In view of the above discussion and for the reasons statedabove, the present appeals succeed. The impugned judgment and orderdated 30.07.2021 passed by the High Court of Bombay, Bench atAurangabad in Writ Petition No. 570/2012 is hereby quashed and setaside 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 shallbe no order as to costs.

Devika Gujral

Appeals allowed.

(Assisted by : Shevali Monga, LCRA)

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