Ajay Shyamkant Chaudhary, ... vs The Janata Sahakari Bank Ltd., A ...
2003 Latest Caselaw 747 Bom

JUDGMENT

C.K. Thakker, C.J.

1. Writ Petition No. 3375 of 2003 is filed by the petitioners for an appropriate writ, direction or order under Article 226 of the Constitution restraining the State of Maharashtra, respondent No. 3, and M/s. Loyal Engineering Private Limited, respondent No. 4, from disposing of, alienating, encumbering, creating third party right or in any manner dealing with the land situate at Theregaon, Mulshi, Pune, bearing Survey No. 30, Hissa Nos. 26-D, 28-A, 28-B, 29-A, 29-B, 31-A, 31-B, 32, 33 and 20-B or any part thereof. A prayer is also made restraining Janata Shahakari Bank Limited, respondent No. 1, and Special Recovery Officer, respondent No. 2, from handing over possession of the above land to respondent Nos. 3 and 4.

2. The case of the petitioners is that in 1998, they applied for loan to respondent No. 1-Bank. The first respondent sanctioned loan of Rs. 53 lakhs under various heads against security of two residential flates belonging to petitioner Nos. 1 and 2. The petitioners by way of security created mortgage of the above flates. No other property, however, was offered as security nor a mortgage was created. The petitioners were not able to repay the loan. A suit, therefore, came to be instituted by the first respondent, which was subsequently transferred to the Debts Recovery Tribunal constituted under the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as "the Act"). On April 10, 2003, the Special Recovery Officer of respondent No. 1 auctioned property belonging to petitioner Nos. 1 and 2 which was not mortgaged with the first respondent-bank. On May 9, 2003, petitioners filed an application for setting aside illegal sale. A notice was issued to the Bank, pursuant to which the Bank appeared and the matter was adjourned to 26th May, 2003. Before that, however, on 12th May, 2003, the second respondent issued a certificate of sale by making a false statement that no application for setting aside of sale was made. The sale was confirmed by respondent No. 2 in collusion with other respondents. In the circumstances, the petitioners are constrained to approach this Court for appropriate reliefs.

3. The petition was filed on May 15, 2003. It was placed for admission hearing on May 19, 2003, before the learned Vacation Judge. A statement was made on that day by the learned counsel for respondent Nos. 4 and 5 that they had purchased the land in question by depositing with the respondent-Bank a sum of Rupees One crore and odd and have also taken over possession. A further statement was made that those respondents will not create third party's right in the land. Hence, the matter was ordered to be placed on Board on 9th June, 2003.

4. On 10th June, 2003, we had heard the learned counsel for the parties. Meanwhile, another petition being Writ Petition No. 3479 of 2003 was also filed challenging the order passed by the Minister of State for Co-operation on May 20, 2003. The said order is challenged by respondent Nos. 4 and 5 herein.

5. We heard the learned counsel for the parties. Since in that petition, no appearance was shown on behalf of respondent Nos. 3, 4 and 5 i.e. petitioner Nos. 5, 4 and 3 respectively and the learned counsel for the petitioners of that petition stated that the notices had been sent through courier but there was no further response, he was not in a position to make positive statement as to whether those respondents were served. WE, therefore, granted time to the contesting respondents to file an affidavit, if they wanted to file on or before June 23, 2003. We also observed in our order that the arguments be treated as over and the judgment would be pronounced on 4th July, 2003.

6. In Writ Petition No. 3375 of 2003, mainly it was contended by the learned counsel for the petitioners that the Co-operative Court had no jurisdiction to hear the dispute and to take proceedings under the Act. The action of the Special Recovery Officer, respondent No. 2, of attaching the property, holding of auction and confirming sale were without jurisdiction, null and void. The land was neither sold nor mortgaged nor charged in favour of respondent-Bank and respondent-Bank could not have dealt with the said property at all. It was also contended that the respondent-Bank did not take any step to enforce its security against property which was mortgaged in its favour. Certificate, of confirmation of sale did not mention the price for which the land was sold in favour of third and fourth respondents. There was total non-application of mind on the part of the second respondent to the adequacy of price before an action of confirmation of sale was taken. On all these grounds, it was submitted, the petition deserves to be allowed, the orders passed by the respondents are liable to be quashed and set aside and the order of confirmation of sale is liable to be quashed.

7. An affidavit in reply is filed by respondent No. 2, Special Recovery Officer, as also on behalf of Respondent No. 1 by a Senior Officer of respondent No. 1 Bank. Respondent No. 1-Bank has contended that no prima facie case was made out by the petitioners and the petition was liable to be dismissed. It was stated that petitioners No. 3 availed of financial facility from respondent No. 1 and mortgaged certain properties. As it failed and neglected to pay the amount due and payable, three recovery suits being Suit Nos. 1766 of 2000, 1767 of 2000 and 77 of 2000 were instituted. In dispute No. 77 of 2000, respondent-Bank had also obtained interim order of attachment before judgment under Section 95(4) of the Maharashtra Co-operative Societies Act, 1960 read with Order 38, Rule 5 of the Civil Procedure Code, 1908. On 22nd February, 2002, petitioner No. 3, through petitioner No. 1, applied for one time settlement. Such settlement was arrived at between the parties and the petitioners agreed to pay an amount of Rs. 85,00,000/-. The payment was to be made in three instalments. Rs. 35,00,000/- (Rupees Thirty five lakhs only) was to be paid on 22nd February, 2002. The said payment was made by a pay order drawn on Union Bank of India, Pune, in favour of respondent No. 1 as part payment. Out of remaining amount of Rs. 50,00,000/-, Rs. 25,00,000/- were to be paid on or before 15th June, 2002 and remaining Rs. 25,00,000/- on or before 30th June, 2002. It was also agreed between the parties that if the petitioners fail to pay the amount mentioned in the settlement, respondent-Bank could execute the orders against the petitioners as per the recovery certificate issued in the above proceedings. The terms and conditions were duly accepted and admitted by the petitioners. It was then stated that two post dated cheques drawn on Union Bank of India, Pune, of Rs. 25,00,000/- each returned unpaid on presentation on 18th June and 2nd July, 2002 with remarks "Not arranged for" and "insufficient fund" respectively. The Bank, therefore, proceeded against the petitioners under Section 138 of the Negotiable Instruments Act by filing complaints. As per the terms of settlement, it proceeded to recover the amount by enforcing recovery certificate. Accordingly, the action of sale of property was undertaken. The land was sold to the contesting respondents and possession was also handed over to them. On 19th May, 2003, at about 2.26 p.m. panchnama to that effect was also prepared.

8. It was also stated in the affidavit that the present petition as placed for hearing before the learned Vacation Judge on 19th May, 2003 and an order was passed, which we have already referred to earlier. Then on 21st May, 2003 around 12.00 Noon, the petitioners served a certified copy of an order dated 20th May, 2003 issued by the Minister of State for Co-operation staying the order dated 12th May, 2003 passed by Special Recovery Officer, respondent No. 2, till the final decision in Revision Application No. 305 of 2003. It was alleged by the deponent that the said order seemed to have been obtained without due notice and opportunity to respondents. Respondent Nos. 4 and 5, therefore, filed a substantive petition being Writ Petition No. 3479 of 2003 for setting aside the said order. That Writ Petition came up for admission hearing before the learned Vacation Judge on 26th May, 2003 and the learned Vacation Judge directed the parties to maintain status quo as of that day till 10th June, 2003, and the matter was ordered to be posted before regular Court on 9th June, 2003.

9. It was also alleged by the deponent that on or about May 30, 2003, the petitioners filed Civil Suit No. 670 of 2003 in the Court of the Civil Judge, Junior Division, Pune, for declaration that the petitioners were in possession of the suit properties and an order was passed on 5th June, 2003, upholding the preliminary objection raised by defendant No. 1.

10. On merits, it was submitted that the action was taken strictly in consonance with law when the petitioners did not comply with the terms and conditions of the settlement to which they had agreed. In the circumstances, the petitioners are not entitled to any relief.

11. Respondent No. 2, Special Recovery Officer of respondent No. 1, has also field an affidavit that his action was legal and valid and in consonance with law. According to him, after following due process of law as required by Section 156 of the Act and Rule 107 of the Maharashtra State Co-operative Societies rule, 1961, properties were auctioned and no grievance can be made by the petitioners against such action. It was also his say that on the basis of the adjudication, two recovery certificates, were issued by him. Aggrieved by those certificates, petitioners filed two revision applications being Nos. 212 and 213 of 2001 but the Divisional Joint Registrar, Pune, dismissed both the revision applications for default. Two demand notices were thereafter issued to the Petitioners calling upon them to pay the amount. Both the notices were served upon the respondents but no payment was made. The properties were, therefore, attached and auction proceedings were undertaken. On 10th April, 2003, the properties were auctioned. Upset price was fixed at Rs. 1,05,45,000/-. Sale was concluded at a price of Rs. 1,07,50,000/- i.e. more that the upset price which was offered by respondent No. 4. Initially 15% amount was deposited and thereafter the balance of 85 per cent was paid. Sale was confirmed on 12th May, 2003 and possession was also handed over to respondent No. 4. A deed of conveyance was executed in his favour. The Special Recovery Officer referred to the order passed by the learned Vacation Judge on 19th May, 2003 and made a grievance that by suppressing the fact of the order dated 19th May, 2003, the petitioners had obtained an order fro the Minister on 20th May, 2003. He, therefore, submitted that the petitioners have not made out prima facie case and the petition is liable to be dismissed.

12. The learned counsel for the purchasers who have filed substantive petition being Writ Petition No. 3479 of 2003 has supported the stand taken by the first Respondent and Special Recovery Officer, respondent No. 2. They have also stated that there was suppression of material facts by the petitioners and the petition is liable to be dismissed. In view of the order passed by the Minister of State for Co-operation on May 20, 2003, they were constrained to file substantive petition and a prayer is made to quash and set aside the said order also.

13. In further affidavit, petitioner No. 1 of Writ Petition No. 3375 of 2003 submitted that all actions taken by the respondents were illegal and unlawful and the petition deserves to be allowed.

14. In our considered opinion, there is no substance in the grievance made by the petitioners. It is an admitted fact that loan was advanced by respondent No. 1 Bank to the petitioners. The said fact has been admitted even by the petitioners themselves. It is also not in dispute that the amount has not been repaid. The respondent No. 1-Bank, therefore, had to approach this Court by instituting a suit which was subsequently transferred to the Debts Recovery Tribunal and an order was passed in favour of the Bank directing the petitioners to pay the amount to the first respondent. In spite of the order, the amount was not paid by the petitioners to the Bank and thus the petitioners were defaulters. Obviously, therefore, the proceedings were initiated against them for the recovery of the amount and accordingly a certificate was issued by respondent No. 2, Special Recovery Officer, in accordance with the provisions of the Maharashtra Co-operative Societies Act and the Rules made thereunder. It is, therefore, not open to the petitioners to contend that no proceedings could have been initiated by respondent Nos. 1 and 2 and those actions were illegal, ultra vires or without jurisdiction. Since there was an agreement or settlement between the parties and as per such settlement, payment was not made, consequential actions could be taken and no objection can be raised against them.

15. As already stated hereinabove, an offer was made by the petitioners for one time settlement. The officers of the first respondent-Bank considered the said proposal and offer and it was agreed by and between the parties and one time settlement had been arrived at under which the petitioners were to pay total amount of Rs. 85,00,000/-. it is the case of the petitioners themselves that they had agreed to such settlement. Moreover, the settlement arrived at had been acted upon in part and the first respondent had paid an amount of Rs. 35,00,000/- by a pay order. The remaining amount of Rs. 50,00,000/- was to be paid in two instalments of Rs. 25,00,000/- each. Two post dated cheques, of Rs. 25,00,000/- each, were drawn on Union Bank of India in favour of respondent No. 1 by the petitioners. Unfortunately, however, they were not honoured and the amount could not be realised. If, in the light of the above facts, action had been taken, by no stretch of imagination it can be said that there is any illegality in taking appropriate proceedings against the petitioners. We, therefore, see no substance in the argument of the learned counsel for the petitioners that the proceedings could not have been taken against the petitioners and the property could not have been sold. In the facts and circumstances of the case, in our opinion, the action of the respondents can neither be held to be illegal, unlawful or without jurisdiction.

16. It is also clear that the petitioners have suppressed material facts and have obtained certain orders. Against issuance of recovery certificates, they had approached revisional authority and the authority has dismissed both the revision petitions. When they approached this Court and moved the learned Vacation Judge, it was brought to the notice of the Court that the sale had been effected by respondent No. 2 in favour of respondent Nos. 4 and 5. It was confirmed. Sale certificate was issued and possession was handed over to them. Keeping in mind the above fact, this Court did not interfere with the action and ordered the matter to be kept for further hearing on 9th June, 2003. The learned Vacation Judge, however, recorded a statement made on behalf of respondent Nos. 4 and 5 that they "will not create any third party's right" in the said land. In spite of the above fact, the petitioners approached the Minister and without inviting the attention of the Minister of the order dated 19th May, 2003 passed by the learned Vacation Judge in Writ Petition No. 3375 of 2003, obtained an order staying the operation of the order dated 12th May, 2003 passed by the Special Recovery Officer confirming the sale of property. In our opinion, therefore, the said order 20th May, 2003 is also liable to be quashed and set aside. Had the attention of the Hon'ble Minister been invited to the order passed by this Court, in all probability, the Hon'ble Minister would not have entertained the revision petition at all. In any case, in view of the order passed by this Court and on our upholding the action of respondent Nos. 1 and 2 that the action was in conformity with law and pursuant to the breach of settlement arrived at by the parties, the petition filed by them (Writ Petition No. 3375 of 2003) is liable to be dismissed and is accordingly dismissed and the petition filed by the purchasers (Writ Petition No. 3479 of 2003) deserves to be allowed by quashing and setting aside the order dated 20th May, 2003 passed by the Minister of State for Co-operation in Revision Petition NO. 305 of 2003, and is accordingly set aside.

17. In view of the order passed in the above two matters, no order requires to be passed on Civil Application No. 1027 of 2003 and is accordingly disposed of.

Parties be given copies of this order duly authenticated by the Sheristedar/Private Secretary.