Bombay High Court
Shaikh Gulab Shaikh Ahmed vs The State Of Maharashtra on 29 November, 2011
Bench: Naresh H. Patil, M.T. Joshi
WP 10934/10
1
IN THE HIGH COURT AT BOMBAY
APPELLATE SIDE, BENCH AT AURANGABAD
WRIT PETITION NO. 10934 OF 2010
1. Shaikh Gulab Shaikh Ahmed,
Age 40 yrs., Occu. Agriculture,
R/o. Panwadi, Tq. Phulambri,
Dist. Aurangabad.
2. Ambadas s/o. Maruti Kale,
Age 45 yrs., Occu. Agriculture,
R/o. Ganori, Tq. Phulambri,
Dist. Aurangabad.
ig ....Petitioners.
Versus
1. The State of Maharashtra,
Through Department of Co-operation,
Mantralaya, Mumbai.
2. The Commissioner of Sugar,
Pune.
3. The Recovery Officer,
Debt Recovery Tribunal,
Aurangabad.
4. M/s. International Asset Reconstruction
Company Private Limited,
(A Trustee of IARC-CBOB-01/2007 Trust
Body Corporate constituted under the
Companies Act, 1956, and Securitization and
Asset Reconstruction Company pursuant
to Section 3 of Securitization & Reconstruction
of Finance Assets & Enforcement of
Security Interest Act, 2002 And having
its Registered Office at 104, Ashoka Estate,
245 - Barkhamba Road, New Delhi 110 001
and officer at B-302, City Point, Andheri
Kurla Road, Andheri (E), Mumbai 400 059,
acting in its capacity as Trustee of IARC-BOB-
-01/07 Trust through its authorised
representative/ Managing Director and CEO
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WP 10934/10
2
Mr. Birendra Kumar
(Through Bank of Baroda)
5. M/s. Deogiri Sahakari Sakhar Karkhana Ltd.,
Girijanagar, Phulambri, Tq. Phulambri,
Dist. Aurangabad
Through it's Managing Director.
6. Zambad Infrastructures,
Aurangabad.
7. Maharashtra State Cooperative Bank Limited,
9, Maharashtra Chambers,
Commerce Lane, Fort, Mumbai. ....Respondents.
Mr. D.P. Palodkar, Advocate for petitioners.
Mr. D.R. Korde, Assistant Government Pleader for respondent Nos.
1 and 2.
Mr. Alok Sharma, Assistant Solicitor General, for respondent No. 3.
Mr. P.K. Joshi, Advocate for respondent No. 4.
Mr. V.D.Hon Advocate with Shri. K.J. Suryawanshi, Advocate for
respondent No. 6.
Shri. V.S. Kadam, Advocate for respondent No. 7.
Shri. S.B. Talekar, Advocate for interveners.
CORAM : NARESH H. PATIL &
T. V. NALAWADE, JJ.
DATED : 29th November, 2011.
JUDGMENT : [ PER T. V. NALAWADE, J. ]
1. Rule. Rule made returnable forthwith by consent of
both the sides. Heard all the sides including advocates appearing
in intervention proceedings.
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2. The petition is filed under Articles 226 and 227 of
Constitution of India to challenge the orders made by the
Recovery Officer of Debt Recovery Tribunal (hereinafter referred to
as "D.R.T." for short) on Exhs. 117 and 127 in Recovery
Proceeding No. 31/2007. Under the orders, the Recovery Officer
has confirmed the sale made in recovery proceeding (private sale)
and the possession of immovable property is given to the
purchaser. A relief of direction to sell the same property, which
belongs to respondent No. 5 - Deogiri Co-operative Sugar Factory
(hereinafter referred to as the "debtor" for short) by public
auction is also sought in the writ petition. Some civil applications
are filed for intervention by persons having interest as
shareholders in the property as they want to object to the sale
and some civil applications are filed by other persons, who
wanted to purchase the property at higher price. Writ petition No.
3084/2011 is filed by Village Panchayat Phulambri as it is
interested in recovering some tax from the debtor.
3. The debtor factory is registered under the
Maharashtra Co-operative Societies Act, 1960 (hereinafter
referred to as "State Co-operative Societies Act") as a co-
operative society and the petitioners are its shareholders. The
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sugar factory was indebted to Bank of Baroda for an amount of
around Rs. four crore. Respondent No. 4 M/s. International Asset
Reconstruction Company Private Limited (hereinafter referred to
as "certificate holder" for short) is a company, acting for Bank of
Baroda for recovery of this loan amount.
4. The debtor owns agricultural lands at Sawangi [Tahsil
Aurangabad] which totally admeasure 62.51 Hectors. It owns
19.76 Hectors of agricultural land at village Chokha, Tahsil and
District Aurangabad. Charge in respect of the loan amount was
created in the year 2006 on these lands by certificate holder.
These lands were already mortgaged to Maharashtra State Co-
operative Bank Limited, respondent No. 7, in the year 1998 for
getting loan and entry in respect of this mortgage was made in
revenue record. At the relevant time, the amount of more than Rs.
19.24 Crore was due to respondent No. 7 from the debtor. The
debtor had other creditors also including Maharashtra State
Electricity Board.
5. In aforesaid recovery proceeding, the lands from both
Sawangi and Chokha came to be attached on 13.2.2009.
Respondent No. 7 filed objection petition before Recovery Officer
(Exh. 23) and requested to add it as a party as the amount of
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more than Rs. 19 Crore was due to it. This application came to be
allowed. But the sale order came to be made and the Recovery
Officer directed to pay the amount of certificate holder first and
then hand over excess amount, if any, to respondent No. 7 after
the sale of aforesaid properties. (Order dated 8.1.2010). On
1.2.2010 and 2.2.2010 orders came to be made in the recovery
proceeding for settling proclamation and for publication of
proclamation in newspaper. On 3.3.2010 Recovery Officer made
order that reserve price was to be fixed.
6. By application dated 5.10.2008 the debtor had
applied to Maharashtra State Co-operative Bank
Limited/respondent No. 7 for permission to sell the aforesaid
lands. Subject to some conditions, the respondent No. 7 had
granted permission on 14.1.2009. By letter dated 24.6.2009 the
debtor had applied to the Sugar Commissioner, the authority, for
permission of sale of lands from Sawangi and Chokha. The Sugar
Commissioner had given the permission to the debtor on
1.7.2009, subject to conditions which include condition of sale of
the property in public auction. The State Co-operative Bank had
also put some conditions like previous approval of Sugar
Commissioner for sale and approval of the rate by the Sugar
Commissioner in addition to a condition of sale in public auction.
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7. By the application dated 1.1.2010 the debtor
requested the Recovery Officer to sell the property situated at
Sawangi first (Exh. 25). Submissions were made before the
Recovery Officer for debtor that the certificate holder had given
no objection for sale of the property at Sawangi first and
permission of Sugar Commissioner was also obtained. This
application came to be rejected on 8.1.2010, the date on which
the sale order was made. However, the Recovery Officer observed
that the properties from both the villages can be sold as per the
procedure laid down in this regard and that may be either by
public auction or under Rule 66 of the Rules framed under Income
Tax Act.
8. On 17.3.2010 the debtor applied to the Recovery
Officer vide Exh. 55 for permission to sell the lands from Sawangi,
to intending purchaser, respondent No. 6/ Zambad Infrastructure
Limited, Aurangabad under private sale under Rule 66. The
respondent No. 7/ Maharashtra State Co-operative Bank Limited
gave consent for such sale. Intervention applications were already
made by other creditors of the debtor. Nifad Co-operative Sugar
Factory, a creditor, had filed dispute before the Co-operative Court
for recovery of the amount and had obtained order of attachment
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of these properties on 25.2.2010. This factory gave consent for
private sale. Samarth Sugar Factory was entitled to recover more
than Rs. 3 Crore from debtor and it also filed consent on 3.4.2010
for private sale. The certificate holder collected Rs. 40 lacs from
prospective purchaser, respondent No. 6, and gave consent for
such private sale. It was informed to Recovery Officer by debtor
that the respondent No. 7/ State Co-operative Bank had the first
charge on the properties as the lands were mortgaged with it in
the year 1998. It was informed that the certificate holder had the
second charge and Samarth Co-operative Sugar Factory had third
charge. On 17.3.2010 itself, the date on which the application for
permission of private sale was made by debtor, the respondent
No. 6, the proposed purchaser filed an application to inform that it
was ready to purchase the lands from Sawangi at the rate of Rs.
12.05 lacs per Acre.
9. By the order dated 24.7.2010 the Recovery Officer
directed the debtor to place on record the resolution of the
Managing Committee of the Factory. The Recovery officer gave
direction to make fresh valuation of lands situated at Sawangi.
10. In the recovery proceeding the certificate holder had
already filed its valuation report on 12.12.2007 and it was
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informed that the value of the lands from Sawangi was around
Rs. 1.54 Crore and the price per Acre was around Rs. 2.47 lacs.
After the order dated 27.4.2010 the valuer of D.R.T. gave report
on 10.5.2010 and informed that the fair market value of all the
lands situated at Sawangi was around Rs. 18.70 Crore. This was
exactly the price already offered by respondent No. 6, the
intending purchaser.
11.
On 14.5.2010 the Recovery Officer passed order to
allow the sale under private treaty under Rule 66 of Rules framed
under the Income Tax Act. The main part of the order is as
follows :-
"2) M/s. Zambad Infrastructure Ltd. is hereby
directed to deposit the sale consideration
amount for the land mortgaged by certificate
debtor no. 1 in favour of Maharashtra State Co-
Operative Bank @ 12,05,000/- (Rupees twelve
Lacs Five Thousand Only) in installment within
the considerable time however for delay period
10% P.A. interest will be charged."
12. Some Ex-Directors of the debtor filed objection at Exh.
79 before Recovery Officer on 11.6.2010 and they requested for
sale of the lands by public auction. They also requested for the
sale of only 14 Acres of land by contending that as per the record
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the amount of only Rs. 3.48 Crore was to be given to certificate
holder. It was contended that the sale of all the lands from
Sawangi was not necessary. It was contended that the properties
situated at Sawangi are adjacent to the Corporation limits of
Aurangabad and they have non-agricultural potential. It was
contended that the market value of the lands per Acre was more
than Rs. 25 lacs. On 18.6.2010 the Recovery Officer made an
order in recovery proceeding that as the amount of Rs. 17.01
Crore and interest on it as per the aforesaid order dated
14.5.2010 was not deposited by the intending purchaser, the
purchaser was to pay the remaining amount and after such
payment the sale was to be treated as confirmed. On 18.6.2010
itself the objection application of Ex-Directors/Members of the
debtor factory came to be rejected. One of the reasons given was
that, these persons had no locus standi. On 24.6.2010 present
petitioners filed their objection to the aforesaid sale. The
petitioners contended that the procedure to sell the property by
public auction was not followed and the land was being sold for
meagre amount, when the market value of the land per Acre was
more than Rs. 50 lacs. This objection application is not yet
decided by the Recovery Officer.
13. By order dated 4.11.2010 the incharge Recovery
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Officer issued order of confirmation of sale by observing that
auction purchaser had deposited the sale consideration. On the
same day by making order at Exh. 127 the incharge Recovery
Officer directed to hand over the possession of the lands from
Sawangi to the respondent No. 6. The respondent No. 6 made a
request to the Recovery Officer to issue the said certificate in
favour of Zambad Mount View Private Limited, a sister concern of
the respondent No. 6 and this request was also allowed.
14. The contentions made in the present petition are
similar to the contentions which are made in objection petition
filed before the Recovery Officer. Allegations are made against the
Recovery Officer, the purchaser, the debtor and also against
respondent No. 7 that they have joined hands to see that the
property of the debtor is sold at such low price to respondent No.
6, when the value per Acre is around Rs. 50 lacs. Allegations are
made that the procedure of sale in public auction is avoided only
to see that the property is sold at such low price to respondent
No. 6.
15. In the present proceeding, respondent No. 6, the
purchaser, has filed an affidavit in reply and it is contended that
appropriate procedure was followed in recovery proceeding for
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sale of property to it. The debtor factory has also made similar
contentions. These two respondents have contended that
alternative remedy is available under the provisions of Recovery
of Debts due to Banks and Financial Institutions Act, 1993
(hereinafter referred to as "R.D.B. Act" for short) and so the writ
petition is not tenable. It is contended by them that similar
objections filed before the Recovery Officer by other persons like
Ex-Directors are decided on merits and appeals are filed against
these orders before Debt Recovery Appellate Tribunal (appellate
authority).
16. The State, respondents No. 1 and 2 have filed affidavit
in reply. The State has contended that no information about the
aforesaid sale was given to it and the sale is not in conformity
with the directions given by the Sugar Commissioner. It is
contended that no publicity was given to the proposed sale. In the
present proceeding, a letter of the authority is produced to show
that it intends to take action under section 83 of the State
Co-operative Societies Act against the Managing Committee and
the concerned persons.
17. Submissions were made by the advocates of both the
sides in relation to aforesaid contentions and some reported cases
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are cited by both the sides. This Court has perused the relevant
record which includes various orders made by the Recovery
Officer. Copy of Rozanama of recovery proceeding is also
produced by the petitioners.
18. Section 29 of R.D.B. Act shows that the provisions of
Income Tax (Certificate Proceedings) Rules, 1962 are applicable
for recovery proceeding started on the basis of certificate issued
under R.D.B. Act. General procedure is given in part I of Schedule
II of Income Tax Act, 1961 and special procedure in respect of
immovable property is given in part II of Schedule II. Before
considering these Rules, it is necessary to keep in mind the
admitted position that the proclamation was not published,
though the notice to draw such proclamation was given to debtor.
It needs to be kept in mind that the debtor is supporting the
orders made by the Recovery Officer and the record of
confirmation of the sale. The State is supporting the petition by
contending that there are material irregularities in the process of
sale. The relevant provisions in this regard from the aforesaid
schedule are as under :-
"Sale and proclamation of sale.
52. (1) The Tax Recovery Officer may direct
that any immovable property which has been
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attached, or such portion thereof as may seem
necessary to satisfy the certificate, shall be
sold.
(2) Where any immovable property is
ordered to be sold, the Tax Recovery Officer
shall cause a proclamation of the intended sale
to be made in the language of the district.
Contents of proclamation.
53.
A proclamation of sale of immovable
property shall be drawn up after notice to the
defaulter, and shall state the time and place of
sale, and shall specify, as fairly and accurately
as possible.-
(a) the property to be sold;
(b) the revenue, if any, assessed upon
the property or any part thereof;
(c) the amount for the recovery of
which the sale is ordered;
(cc) the reserve price, if any, below
which the property may not be sold; and
(d) any other thing which the Tax
Recovery Officer considers it material for a
purchaser to know, in order to judge the nature
and value of the property.
Mode of making proclamation.
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54. (1) Every proclamation for sale of
immovable property shall be made at some
place on or near such property by beat of drum
or other customary mode, and a copy of the
proclamation shall be affixed on a conspicuous
part of the property and also upon a
conspicuous part of the office of the Tax
Recovery Officer.
ig Where the tax Recovery Officer so
directs, such proclamation shall also be
published in the Official Gazettee or in a local
newspaper, or in both; and the cost of such
publication shall be deemed to be costs of the
sale.
(3) Where the property is divided into
lots for the purpose of being sold separately, it
shall not be necessary to make a separate
proclamation for each lot, unless proper notice
of the sale cannot, in the opinion of the Tax
Recovery Officer, otherwise be given.
................
................
Postponement of sale to enable defaulter
to raise amount due under certificate.
66. (1) Where an order for the sale of
immovable property has been made, if the
defaulter can satisfy the Tax Recovery Officer
that there is reason to believe that the amount
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of the certificate may be raised by the
mortgage or lease or private sale of such
property, or some part thereof, or of any other
immovable property of the defaulter, the Tax
Recovery Officer may, on his application,
postpone the sale of the property comprised in
the order for sale, on such terms and for such
period as he thinks proper, to enable him to
raise the amount.
(2) In such case, the Tax Recovery
Officer shall grant a certificate to the defaulter,
authorising him, within a period to be
mentioned therein, and not withstanding
anything contained in this Schedule, to make
the proposed mortgage, lease or sale:
Provided that all moneys payable under
such mortgage, lease or sale shall be paid, not
to the defaulter, but to the Tax Recovery Officer
:
Provided also that no mortgage, lease
or sale under this rule shall become absolute
until it has been confirmed by the Tax Recovery
Officer."
19. The record, submissions made for purchaser and
submissions made by debtor show that the permission of private
sale was obtained under Rule 66 and the transaction needs to be
treated as the transaction of private sale under Rule 66. In the
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order of permission, no time was fixed for sale. Permission was
given to make payment in installments and if there was delay in
making the payment, interest at the rate of 10% p.a. was to be
charged. The aforesaid Rules show that for private sale time is
required to be fixed and the purchaser is required to be directed
to deposit the money payable under the sale before the Recovery
Officer. The time is required to be fixed against the debtor who is
given permission of private sale. As it is not auction sale the
provisions of Rule 57 of aforesaid Schedule II cannot be applied
for such private sale.
20. Rule 6 of Schedule II runs as under :-
"Purchaser's title.
6. (1) Where property is sold in execution
of a certificate, there shall vest in the purchaser
merely the right, title and interest of the
defaulter at the time of the sale, even though
the property itself be specified.
(2) Where immovable property is sold
in execution of a certificate, and such sale has
become absolute, the purchaser's right, title
and interest shall be deemed to have vested in
him from the time when the property is sold,
and not from the time when the sale becomes
absolute."
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The aforesaid Rules [6 and 66] show that unless, there is a private
sale by debtor, there cannot be order of confirmation by the
Recovery Officer. Rule 66 shows that the intention behind this rule
is to give opportunity to the debtor to raise money by selling
either immovable property - attached in recovery proceeding or
by selling other property of the debtor. Though there is no clear
mention in these Rules, from the aforesaid Rules it can be inferred
that the question of confirmation will arise, only when the
property attached in recovery proceeding is allowed to be sold in
private sale under Rule 66. The private sale is to be made by the
debtor directly and as it is not auction sale made by Recovery
Officer, the general conditions of sale of immovable property
become applicable to such private sale.
21. Section 54 of Transfer of Property Act, runs as under :-
"54. "Sale" defined .-"Sale" is a transfer of
ownership in exchange for a price paid or
promised or part-paid and part-promised.
Sale how made.- Such transfer, in the
case of tangible immoveable property of the
value of one hundred rupees and upwards, or in
the case of a reversion or other intangible
thing, can be made only by a registered
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instrument.
In the case of tangible immoveable
property of a value less than one hundred
rupees, such transfer may be made either by a
registered instrument or by delivery of the
property.
Delivery of tangible immoveable property
takes place when the seller places the buyer, or
such person as he directs, in possession of the
property.
Contract for sale .- A contract for the
sale of immovable property is a contract that a
sale of such property shall take place on terms
settled between the parties.
It does not, of itself, create any interest in
or charge on such property. "
22. In the present case, a query was made to the
advocate of respondent No. 7, as to whether there was any sale
by debtor in favour of respondent No. 6. It was submitted for the
respondent No. 7 that there was no sale transaction, as
contemplated under section 54 of the Transfer of Property Act.
The documents on record, which are copies of applications filed
by the debtor and the purchaser before the Recovery Officer in
respect of negotiations which they had made, show that the value
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of the property to be sold was shown as more than Rs. 18 Crore.
In view of the aforesaid provisions of Transfer of Property Act
regarding the sale transaction and the rival contentions, there is
no other alternative than to hold that there was no conveyance,
sale of the lands from Sawangi by respondent No. 5 in favour of
respondent No. 6. In view of this circumstance, further orders
made on Exhs. 117 and 127 of confirmation of sale and of giving
of possession, have no meaning in law. As there was no effective
conveyance, the fact of delivery of possession in this case has
also no relevance. This single circumstance is sufficient for setting
aside the orders made on Exhs. 117 and 127.
23. It was submitted for petitioners that the property
involved belongs to Co-operative Sugar Factory, thousands of its
shareholders and so the mode of sale in public auction ought to
have been adopted. On this point some reported cases were cited.
In the case reported as 1995 (4) SCC 595 [Chairman and
Managing Director, Sipcot, Madras Vs. Contromix Pvt. Ltd.
by its Director (Finance) Seetharaman, Madras], the Apex
Court has held that :-
"In the matter of sale of public property,
the dominant consideration is to secure the
best price to property to be sold. This can be
achieved only when there is maximum
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participation, in the process of sale and
everybody has an opportunity of making an
offer. Public auction after adequate publicity
ensures participation of every person, who is
interested in purchasing the property and
generally secures the best price."
24. In the case reported as (1986) 3 SCC 391 [Chenchu
Rami Reddy and Another Vs. Government of Andhra
Pradesh and others] the Apex Court was considering the sale of
property belonging to religious and charitable endowments by
private negotiations. The Apex Court observed that normally the
mode of sale of such properties should be by public auction. It is
observed that the authorities exercising powers must remain alert
and show awareness towards ugly realities of the life. It is
observed that the authorities must be aware that in such matters
the trustees or persons authorizes to sell by private negotiations,
can, in a given case, enter into a secret or invisible underhand
deal or understanding with the purchasers at the cost of the
concerned institution. In this case there was question of
interpretation and the use of section 74 (1) (c), proviso of Andhra
Pradesh Charitable and Hindu Religious Institutions and
Endowments Act, 1966. As per this provision, for giving the
permission of private negotiations - sale, it was necessary for the
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Government to reach to satisfaction that such private negotiation
- sale would be in the interest of the institution. Similar
observations are made in the case reported as 1993 (2) SCC 279
[Mahesh Chandra Vs. Regional Manager, U.P. Financial
Corporation and others] while discussing the powers of State
Finance Corporation. In this case the property of one industry was
sold. No institution like Co-operative factory or religious
endowment was involved. But, in that case also the Apex Court
has observed that it is always desirable to have sale in public
auction by the authority.
25. In 2008 (1) D.R.T.C. 493 Madras High Court
[Hannu Reddy Realty India Pvt. Ltd. & Ors. Vs. Jignesh &
Ors.], the High Court has discussed Income Tax Act Rules 1961
which are used in the present case also. It is observed by the High
Court that in ordinary course the Recovery Officer must see that
the property is sold for market price in a free auction made with
wide publicity. As there were material irregularities in that regard
in the procedure, the sale was set aside.
26. The Recovery Officer in the present case being
statutory authority and as the property of one Co-operative
Institution was to be sold, he ought to have followed the
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procedure of sale in public auction. This Court has no hesitation to
hold that in such cases, the property must be sold in public
auction which can make the things transparent. Admittedly, in
correspondence of the factory made with the Sugar Commissioner
two years prior to the date of sale order. Management of the
Factory had informed to the authority that the property would
fetch more than Rs. 28 Crore at the rate of Rs. 50 lacs per Hector.
It is the case of the objection petitioners that the price in auction
sale would have been more than Rs. 50 lacs per Acre. It appears
that one intending purchaser had offered to give atleast Rs. 80
lacs more before the Recovery Officer before the confirmation.
These circumstances are sufficient to create probability that
factory could have received more amount in public auction.
27. The record shows that reserve price as required by
the aforesaid Rules was never fixed by the Recovery Officer. The
opinions, Reports on the market price of these lands collected
within span of two years show that there is considerable
difference in the figures given in the two opinions. In the second
report obtained from valuer of D.R.T., the value shown is eight
times more than the value which was shown in the first report.
The value mentioned in the second report is almost the same
which was already offered by respondent No. 6, the purchaser.
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When the certificate holder was ready to accept Rs. 3.75 Crore by
way of settlement, it was not necessary to sell all the lands from
Sawangi. But all the lands were put for sale to be sold by the
Recovery Officer. The Recovery Officer virtually considered all the
claims made before him by other creditors. When the Rules show
that the amount needs to be deposited before the Recovery
Officer, huge amount was directly paid to certificate holder and
the direction was given to deposit remaining amount with State
Co-operative Bank. These circumstances show that the Recovery
Officer did not follow the procedure and did not even apply mind
while passing various orders. These irregularities are certainly
material in nature.
28. Submission was made in this proceeding for
petitioners that it was necessary to follow the provisions of State
Co-operative Societies Act, as the factory is registered under this
Act and the provisions of this Act including the directions given by
the Sugar Commissioner, the supervisory authority, were binding
on the sugar factory. The Recovery Officer refused to consider the
conditions imposed by the Sugar Commissioner before allowing
the private sale when he used the permission given for sale. On
this point, for purchaser reliance was placed on the provisions of
Section 34 of R.D.B. Act. Section 34 (1) of this Act runs as
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follows :-
"34. Act to have overriding effect.-
(1) Save as provided under sub-section (2), the
provisions of this Act shall have effect
notwithstanding anything inconsistent
therewith contained in any other law for the
time being in force or in any instrument having
effect by virtue of any law other than this Act."
29.
In reply to submissions made for purchaser, the
submission was made for the petitioners that the provisions of
State Co-operative Societies Act are not superseded by R.D.B. Act.
Reliance was placed by the advocate of one intervenor on the
case reported as (2007) 6 SCC 236 [Greater Bombay Co-op.
Bank Ltd. Vs. United Yarn Tex (P) Ltd. and others]. This
Court has carefully gone through the facts of this case and
observations made by the Apex Court. The Apex Court has
discussed the definition given in R.D.B. Act, 1993 [Section 2 (c)],
Section 2(1) and Section 56(1) of Banking Regulation Act, 1949.
The Apex Court has also discussed the legislative competence of
the State Legislature and Parliament in relation to Schedule VII,
List I, Entries No. 43 to 45 and List II, Entry No. 32 of Constitution
of India. The relevant paras are as follows :-
"97. For the reasons stated above and
adopting pervasive and meaningful
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interpretation of the provisions of the relevant
statues and Entries 43, 44 and 45 of List I and
Entry 32 of List II of the Seventh Schedule of
the Constitution, we answer the reference as
under :
"Cooperative banks" established under
the Maharashtra Cooperative Societies Act,
1960 (the MCS Act, 1960), the Andhra Pradesh
Cooperative Societies Act, 1964 (the APCS Act,
1964), and the Multi-State Cooperative
Societies Act, 2002 (the MSCS Act, 2002)
transacting the business of banking, do not fall
within the meaning of "banking company" as
defined in Section 5(c) of the Banking
Regulation Act, 1949 (the BR Act). Therefore,
the provisions of the Recovery of Debts Due to
Banks and Financial Institutions Act, 1993 (the
RDB Act) by invoking the doctrine of
incorporation are not applicable to the recovery
of dues by the cooperative from their members.
98. The field of cooperative societies cannot
be said to have been covered by the Central
Legislation by reference to Entry 45, List I of the
Seventh Schedule of the Constitution.
Cooperative banks constituted under the
Cooperative Societies Acts enacted by the
respective States would be covered by
cooperative societies under Entry 32 of List II of
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the Seventh Schedule of the Constitution of
India."
30. The aforesaid observations show that the provisions of
R.D.B. Act have no overriding effect over the provisions of State
Co-operative Societies Act. It is made clear by the Apex Court that
authorities, Courts created under the State Co-operative Societies
Act will continue to work even after the establishment of Tribunals
under R.D.B. Act. Thus there is no force in the aforesaid defence.
31. In the present case, some directions were already
given by Sugar Commissioner, authority created under the State
Co-operative Societies Act, to the factory while granting
permission of sale. One Committee was also constituted to
supervise the same. The letters of Maharashtra State Co-
operative Bank and the permission granted by Sugar
Commissioner show that it was necessary to make the sale in
public auction and to get the approval of Sugar Commissioner in
respect of the rate. As soon as the Recovery Officer allowed
private sale to the factory, the factory was expected to act under
the provisions of State Co-operative Societies Act and it was
necessary for the factory to follow the directions given by Sugar
Commissioner. It is already observed that in such a case the
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proper course is only the sale by public auction. Surprisingly, the
orders of Recovery Officer also show that he was expecting the
factory to do wide publicity of proposed sale. Though no specific
mode was given, there was no public notice issued in respect of
the proposed sale and no record is produced by the factory to
show that wide publicity in any other way was given to the
proposed sale. It appears that the factory attempted to collect
some offers. But, in view of the aforesaid circumstances, this
Court has no hesitation to hold that an attempt was made to give
go-by to the directions given by Sugar Commissioner and the
provisions of State Co-operative Societies Act. In view of these
circumstances, this Court holds that there were material
irregularities in the procedure followed by the Recovery Officer
and the procedure followed by the sugar factory.
32. To oppose the petition, it was submitted that there is
alternative remedy and the orders made by the Recovery Officer
under R.D.B. Act can be challenged first before D.R.T. and then
before D.R.A.T. under section 30 and 20, respectively of the R.D.B.
Act. It was submitted that writ petition is not tenable in view of
these circumstances. Reliance was placed on the case reported as
(2001) 6 SCC 569 [ Punjab National Bank Vs. O.C. Krishnan
WP 10934/10
and others]. The facts of this reported case show that order of
sale made by D.R.T. in respect of property mortgaged with the
bank was challenged under Article 227 of Constitution of India on
the ground that D.R.T., Calcutta had no territorial jurisdiction over
the property which was situated in Chennai. The High Court set
aside the order made by the Recovery Officer. The Apex Court
made following observations with regard to the provisions of
R.D.B. Act, 1993 and the provisions of Articles 226 and 227 of
Constitution at para No. 6 :-
"6. The Act has been enacted with a view to
provide a special procedure for recovery of
debts due to the banks and the financial
institutions. There is a hierarchy of appeal
provided in the Act, namely, filing of an appeal
under section 20 and this fast-track procedure
cannot be allowed to be derailed either by
taking recourse to proceedings under Articles
226 and 227 of the Constitution or by filing a
civil suit, which is expressly barred. Even
though a provision under an Act cannot
expressly oust the jurisdiction of the court
under Articles 226 and 227 of the Constitution,
nevertheless, when there is an alternative
remedy available, judicial prudence demands
that the Court refrains from exercising its
jurisdiction under the said constitution
provisions. This was a case where the High
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Court should not have entertained the petition
under Article 227 of the Constitution and should
have directed the respondent to take recourse
to the appeal mechanism provided by the Act."
33. Reliance was placed for purchaser on other case
reported as (2008) 13 SCC 323 [Shivanand Gaurishankar
Baswanti Vs. Laxmi Vishnu Textile Mills & Anr]. A worker of
the mill had filed writ petition second time when the previous writ
petition was dismissed and he was advised to approach the
appropriate authority. The worker challenged a sale made by the
Recovery Officer. There was compromise between the Union and
the employer and larger interest was to be protected. The High
Court dismissed the petition by holding that there was alternative
remedy. Supreme Court also held that there was alternative
remedy. Further, the worker had no case at all on merits and the
interference could have affected interest of all the remaining
workers, who had compromised with the employer. In another
case reported as (2010) 8 SCC 110 [United Bank of India Vs.
Satyawati Tondon and Ors.], Supreme Court held in view of the
facts of that case that interference by High Court in the exercise
of powers of creditor bank was not proper by using writ
jurisdiction. The creditor bank had issued notice and it was using
the provisions of section 13 (2) (4) and section 14 of SARFAESI
WP 10934/10
Act. It was observed that such interference would defeat very
object of the Act. Further, action of bank was stayed immediately
after issuance of notice under section 13 (2) of the Act. The Apex
Court held that there was remedy under section 17 and 18 of the
same Act and so, the interference under Article 226 of
Constitution of India was not advisable.
34. For petitioners and interveners reliance was placed on
some reported cases on the point of tenability of the writ petition.
In the case reported as 1971 (1) SCC 309 [State of West
Bengal Vs. North Adjal Coal Co. Ltd.] the Apex Court has
observed that :-
"Normally before a petition under Article
226 is entertained, there should be recourse to
statutory authorities which have power to give
relief. But that is a rule of practice and not of
jurisdiction. Therefore, a High Court is
competent to entertain a petition even where
the aggrieved party has not exhausted the
remedies available under the statue"
In this reported case, the question of exemption from sales tax on
account of being a sale in the course of export was involved. In
view of the facts of the case, it was held by Supreme Court that in
appropriate case High Court may entertain the petition under
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Article 226 and in view of the facts of the case, High Court had
not committed any error.
35. The aforesaid observations made by the Apex Court in
various cases show that whether the High Court should use the
extraordinary jurisdiction, would always depend upon the facts of
the case. In the present case, it is necessary to consider the
provisions of not only R.D.B. Act, but also the provisions of State
Co-operative Societies Act, Transfer of Property Act, Registration
Act and Indian Stamp Act. The dispute cannot be decided only by
using the provisions of R.D.B. Act. The discussion already made
shows that even when there was an opportunity, go-by was given
to the directions issued by Sugar Commissioner and the
provisions of State Co-operative Societies Act, 1960. Even the
Recovery Officer had given directions of wide publicity while
making order on Exh. 55, but those directions were not followed
with ulterior motive. There are material irregularities in the
procedure adopted by the Recovery Officer. In fact and in law
there was no sale, but the orders were passed on Exhs. 117 and
127 by Recovery Officer. When it is necessary to sell the property
of such institution by way of public auction, private sale mode was
adopted and loss is caused to the institution. In the interest of the
factory, its members and also in the interest of creditors, it has
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become necessary to set aside the orders made by the Recovery
Officer and also to give a direction of sale by public auction in this
proceeding. There is clear possibility that in a sale by public
auction after wide publicity, the factory will get huge amount. In
view of these circumstances, this Court holds that the use of
provisions of Articles 226 and 227 of Constitution of India has
become necessary in this case.
36.
In view of poor financial condition of debtor, the fact
that lands from Sawangi are not necessary for running factory,
the Sugar Commissioner has given permission to sell the lands
and the sale may help factory to come out of the financial
problems, the sale of these lands cannot be prevented.
37. Some submissions were made by interveners and
other creditors regarding the amount due to them. This Court is
not expected to give any finding on such claims. Submissions
were made for Phulambri Village Panchayat in respect of dues to it
from the sugar factory. But, for the same reasons, these
submissions cannot be considered in the present proceedings.
However, Phulambri Village Panchayt had also prayed similar
relief in respect of the procedure adopted by the Recovery Officer.
As this Court is allowing the writ petition No. 10934/10, all other
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proceedings including writ petition No. 3084/2011 can be
disposed of. So the following order.
ORDER
1) The writ petition is allowed. The order dated
4-11-2010 passed below Exhibit 117 in R.P. No.31 of 2007 about
confirmation of sale and the order dated 4-11-2010 passed below
Exhibit 127 in R.P. No.31 of 2007 by the Debt Recovery Tribunal
Aurangabad about handing over possession of the subject land in
favour of respondent No.4 are set aside.
2) We direct that the land Gut Nos.37, 41, 43, 44, 45/1,
45/2, 46, 53, 54 and 102 total admeasuring 62.51 hectares of
village Savangi, Taluka and District Aurangabad shall be sold by
holding public auction by giving wide publicity in the State /
National level news papers. The public auction shall be conducted
sunder the supervision of Commissioner Sugar Pune. In case
possession is handed over to respondent No.6 we direct the
authorities to take back possession of the subject land forthwith.
Rule is made absolute in the above terms with no order as to
costs.
3) At this stage learned counsel for the respondent-Bank
prays for stay of the operation of the order for a period of 8
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weeks. Learned counsel appearing for the petitioners and the
respondents except the respondent bank have strongly opposed
the prayer. This order shall not be operative for a period of six
weeks from today.
4) In view of final disposal of the petition, all the pending
civil applications are disposed of.
[ T. V. NALAWADE, J.] [ NARESH H. PATIL, J.]
ssc/
