Bombay High Court
Idbi Trusteeship Services Ltd. ... vs District Collector , Pune And Ors on 25 June, 2021
Bench: S.J. Kathawalla, V. G. Joshi
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 3417 OF 2019
IDBI Trusteeship Services Limited, )
a company incorporated under the provisions )
of the Companies Act, 1956 and having its )
registered ofce at Asian Building, Ground Floor, 17, )
R. Kamani Marg, Ballard Estate, Mumbai - 400 001; )
though its Director / Authorized Representative )
Mr. Viragh Shah. ) ... Petitioner
Versus
1.District Collector, Pune, )
New Collector Ofce Building, opposite Sassoon )
Hospital, Station Road, Pune - 411 011. )
2. Additional Tehsildar, )
Pimpri Chinchwad, Taluka Haveli, Pune. )
3.Gyaneshwar Vishwanath Kaddu, )
Sector No. 16, Plot No. 33, Flat No.2 Morya Park, )
Raja Shivaji Nagar, Chinchwad, Pune - 411 019. )
3A. Nitin Chagganlal Jain, )
an adult Indian Inhabitant Sector No. 16, Plot No. 33, )
Flat No. 2, Morya Park, Raja Shivaji Nagar, )
Chinchwad, Pune - 411 019. )
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(Amendment carried out as per order )
dated 27th March, 2019) )
4. Darode Jog Homes Pvt Ltd., )
a Company duly incorporated under the provisions )
of the Company Act, 1956, having its registered ofce )
at 1212, Darode-Jog House, Apte Road, Deccan )
Gymkhana, Pune - 411 004. )
5. Sudhir Darode, )
adult, occupation business, Indian inhabitant, resident )
at Chandraprabha, Plot No. 9, Mangalwadi )
Co-operative Housing Society, Senapati Bapat Road, )
Pune - 411 016.
6.Anand Jog, )
adult, occupation business, Indian inhabitant residing )
at Rajas, Plot No. 42, S. No. 37/1, Karve Nagar, )
Kothrud, Pune - 411 052. )
7.M/s. Darode Jog & Associates, )
a partnership frm registered under the provisions )
of the Indian Partnership Act, 1932, acting through its )
partners Anand Jog and Sudhir Darode, having its )
principal place of business at 1212, Darode Jog House, )
Apte Road, Decan, Gymkhana, Pune - 411 004. )
8.Darode Jog Builders Pvt Ltd., )
a company incorporated under the provisions of the )
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Companies Act, 1956, having its registered ofce )
at 1212, Darode-Jog House, Apte Road, Deccan )
Gymkhana, Pune - 411 004.
9. Maharashtra Real Estate Regulatory Authority, )
an authority incorporated under the provisions of the )
Real Estate (Regulation and Development) Act, 2016, )
having its ofce at 3rd Floor, A-Wing, SRA, )
Administrative Building, Anant Kanekar Marg, )
Bandra East, Mumbai, Maharashtra 400051. )
10.Kavit Chandan Rasal, )
adult, Indian inhabitant residing at Flat No. 22, )
Hira Ratan Niwas behind Janai Heights, Bhosari, )
Near PMT Bus Stop, Haveli, Pune - 411039. )
11. Mangesh P. Deshpande, )
adult, Indian inhabitant residing at Flat No. 8, )
A8 Kunal Estate, Bhoir Chowk, Keshav Nagar, )
Morya Gasavi Stadium, Mulshi, Chinchwad, )
Pune - 411 033. )
12.Dwarkadas M. Mule, )
adult, Indian inhabitant residing at Flat No. 22, )
Hira Ratan Niwas behind Janai Heights, Bhosari, )
Near PMT Bus Stop, Haveli, Pune - 411039. )
13. Puja Suyog Deshmukh, )
adult, Indian inhabitant, residing at A28, Bluebell )
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Society, Chowdhery Park, Wakad, near Ganpati )
Mandir, Mulshi, Pune - 411 057. )
14.Rekha S. Girme, )
adult, Indian inhabitant residing at 279, Postal Colony, )
Wakad, Ganpati Mandir, Mulshi, Pune - 411 057. )
15.Vinod Chaudhary, )
adult, Indian inhabitant, residing at B-1, Ketan )
Paradise, Sector 6, Sant Nagar, Haveli, Aalandi, )
Pune - 412 105. ) ... Respondents
Mr. Karl Tamboly a/w Mr. Hrushi Narvekar and Mr. Ryan D'souza i/b DSK Legal,
for the Petitioner.
Mr. A. I. Patel, Addl. Govt. Pleader a/w Ms. K.N. Solunke for Respondent Nos. 1
and 2.
Mr. Drupad Patil i/b Mr. Pavan S. Patil, for Respondent Nos.3 and 3A.
Mr. Akshay Patil i/b K. K. Kandpile, for Respondent Nos. 4 to 8.
Mr. Manoj Badgujar i/b Mr. Akshay P. Shinde, for Respondent No.9
Mr. Sarnath Sariputta, for Respondent Nos.10 to 15.
CORAM : S. J. KATHAWALLA &
VINAY JOSHI JJ.
RESERVED FOR JUDGMENT : 12th MARCH, 2021
DATE OF PRONOUNCEMENT : 25th JUNE, 2021
JUDGMENT (PER S. J. KATHAWALLA & VINAY JOSHI, JJ.) :
1. Rule. Rule made returnable forthwith. Heard fnally by consent of
parties.
2. By this Writ Petition fled under Article 226 of the Constitution of India,
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the Petitioner has challenged the auction sale of immovable property being a parcel of
land bearing Survey No. 95 Hissa No. 3, situated at Chovisawadi, Taluka Haveli,
District Pune, admeasuring 0 Hectares 49.66 Ares ("the said Property"), of which
the Petitioner is a Mortgagee, by Respondent No. 1 (District Collector, Pune) and
Respondent No. 2 (Additional Tehsildar, Pimpri Chinchwad, Pune), in favour of
Respondent Nos. 3 and 3A, in order to recover amounts payable by Respondent No. 4
to the Respondent Nos. 10 to 15, under Orders passed by Respondent No. 9
(Maharashtra Real Estate Authority) under the provisions of the Real Estate
(Regulation and Development) Act, 2016.
3. The Petitioner is a Trusteeship Company in whose favour the said
Property has been mortgaged. Respondent Nos. 1 and 2 are the revenue authorities
who have conducted the auction sale of the said Property. Respondent Nos. 3 and 3A
are the Auction Purchasers of the said Property. Respondent No. 4 is the Original
Owner of the said Property and has created the mortgage in respect thereof in favour
of the Petitioner. Respondent Nos. 5, 6 and 8 are the Promoters of Respondent No. 4.
Respondent No. 7 is a Partnership Firm forming part of the same group as
Respondent Nos. 4 to 6 and 8. Respondent No. 9 is the Maharashtra Real Estate
Authority. Respondent Nos. 10 to 15 are Flat Purchasers who had fled RERA
Complaints against Respondent No. 4 before Respondent No. 9. Respondent No. 9
had passed Orders directing Respondent No. 4 to refund the monies paid to it by
Respondent Nos. 10 to 15 along with interest. It was for recovery of these amounts
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that Respondent Nos. 1 and 2 conducted the auction sale of the said Property.
4.1. The case of the Petitioner in the present Petition, is as follows:
4.2. The Petitioner is a leading Indian Trusteeship Company providing
services as a debenture trustee, security trustee, share pledge trustee, securitisation
trustee etc.
4.3. By and under a Debenture Trust Deed dated 16 th February 2016,
executed by and between Respondent Nos. 4 to 8 and the Petitioner ("Debenture
Trust Deed"), Respondent No. 4 agreed to issue secured, redeemable optionally
convertible debentures for an aggregate sum of Rupees One Hundred and Twenty
Crores to the subscribers thereof, in order to raise funds for developing certain
immovable properties. The Petitioner is the Debenture Trustee under the Debenture
Trust Deed. The Debenture Trust Deed has been registered with the Sub-Registrar of
Assurances at Haveli-16 under Registration No. Havl-16/1511/211/2015. Various
immovable properties, including the said Property, were mortgaged in favour of the
Petitioner to secure the obligations of Respondent No. 4 under the Debenture Trust
Deed.
4.4. Respondent No. 4 purchased further immovable property under a Sale
Deed dated 8th June 2015. The same was mortgaged in favour of the Petitioner under a
Supplementary Deed of Mortgage dated 12 th February 2016, to secure the
performance of the obligations of Respondent No. 4 under the Debenture Trust Deed.
4.5. Based on the aforesaid documents, the Petitioner became the frst charge
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holder in respect of the properties mentioned therein, including the said Property.
Respondent No. 4 failed to redeem the debentures on their due dates, which
constituted an event of default under the Debenture Trust Deed. In view of the same,
the Petitioner became entitled to enforce its mortgage in respect of the various
properties mortgaged to it, including the said Property.
4.6. One of the properties mortgaged to the Petitioner is land situated at
Dudulgaon, Taluka Haveli, District Pune. Respondent No. 4 was developing a real
estate project on this property, which was registered with Respondent No. 9 under the
name of "Padmanabh Phase - 1". Respondent Nos. 10 to 15 had purchased fats from
Respondent No. 4 in this project. Respondent Nos. 10 to 15 fled Complaints before
Respondent No. 9 stating that Respondent No. 4 had not completed the project within
the time stipulated under their respective agreements for sale, and accordingly sought
refund of the monies paid by them to Respondent No. 4. Respondent No. 9 disposed
of the Complaints fled by Respondent Nos. 10 to 15 by its Orders dated 14 th and 27th
February 2018, directing Respondent No. 4 to refund the monies paid by Respondent
Nos. 10 to 15 along with interest. It is the Petitioner's case that Respondent No. 4 did
not inform the Petitioner about these Orders, and that the Petitioner only became
aware of the same shortly prior to fling of the present Petition.
4.7. Since Respondent No. 4 did not pay the amounts due to Respondent
Nos. 10 to 15 under the aforesaid Orders passed by Respondent No. 9, execution
proceedings were initiated against Respondent No. 4 under Section 40 of the Real
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Estate (Regulation and Development) Act, 2016 ("RERA"). Under Section 40(1) of
the RERA, if a promoter fails to pay compensation, interest or penalty imposed upon
him by the RERA authorities, the same is recoverable from the promoter as arrears of
land revenue. Under Rule 3 of the Maharashtra Real Estate (Regulation and
Development) (Recovery of Interest, Penalty, Compensation, Fine Payable, Forms of
Complaints and Appeal etc.) Rules, 2017, any interest, penalty or compensation
imposed on a promoter and recoverable under Section 40 of RERA, shall be recovered
as arrears of land revenue in the manner provided in the Maharashtra Land Revenue
Code, 1966 ("MLRC"). In pursuance of the same, Respondent No. 9 issued a
Recovery Warrant under Section 40(1) of RERA, and directed Respondent No. 1 to
recover the amounts payable by Respondent No. 4 to Respondent Nos. 10 to 15 as
arrears of land revenue.
4.8. Pursuant to the above, various notices were issued and correspondence
was exchanged between May 2018 and February 2019 inter se between the authorities
under the MLRC regarding recovery of the amounts due to Respondent Nos. 10 to 15
as arrears of land revenue. According to the Petitioner, the correspondence exchanged
between the MLRC authorities shows that they were aware of the encumbrance
created over the said Property in favour of the Petitioner.
4.9. On 20th February 2019, Respondent No. 4 shared a Public Notice with
the Petitioner which was issued by Respondent No. 2 in a local newspaper, inviting
bids for sale of the said Property by public auction to be held on 21 st February 2019.
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Immediately upon learning of the same, the Petitioner by its Advocate's Notice dated
21st February 2019 informed Respondent No. 2 of the fact that the Petitioner is the
Mortgagee in respect of the said Property under the Debenture Trust Deed. The
Public Notice for auction sale of the said Property has been issued without disclosing
the Petitioner's mortgage over the same. The Petitioner asserted that it was a secured
creditor having paramount rights over the said Property and called upon Respondent
No. 2 to cancel the auction.
4.10. Despite the above, Respondent No. 2 proceeded with the auction as
scheduled and passed an Order dated 21st February 2019 (the impugned Order)
confrming the sale of the said Property in favour of Respondent Nos. 3 and 3A for a
consideration of Rs. 1,66,40,000/-, without considering or disclosing the Petitioner's
objections. Respondent No. 2 accepted twenty fve percent of the sale consideration
from Respondent Nos. 3 and 3A and called upon them to pay the balance
consideration within eight days from 21st February 2019.
4.11. The Petitioner thereafter made enquiries and discovered the
information pertaining to the sale of the said Property as set out in the Petition. The
Petitioner through its Advocates addressed a Letter dated 28 th February 2019 to
Respondent Nos. 1 to 3A, once again stating its objections to the sale of the said
Property and calling upon them not to act in furtherance of the same.
4.12. According to the Petitioner, the auction sale of the said Property has
been conducted by Respondent Nos. 1 and 2 contrary to the provisions of the MLRC
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and the rules made thereunder. The Petitioner is a Mortgagee in respect of the said
Property under a registered instrument. The same was brought to the notice of
Respondent No. 2 vide a Letter of the Petitioner's advocate dated 21 st February 2019.
That apart, the correspondence exchanged amongst the MLRC authorities
demonstrates that Respondent No. 2 was made aware of the mortgage created in
respect of the said Property prior to the auction sale. Despite the same, Respondent
No. 2 confrmed the sale in favour of Respondent Nos. 3 and 3A. This was done
without considering or disclosing the Petitioner's rights as a Mortgagee in respect of
the said Property. Moreover, the same is contrary to the provisions of the MLRC.
There is a diference between actual arrears of land revenue and amounts which are to
be recovered in the same manner as arrears of land revenue. In the present case, the
amounts payable by Respondent No. 4 to Respondent Nos. 10 to 15 under the Orders
passed by the Respondent No. 9 are not actual arrears of land revenue but are
recoverable in the same manner and under the same procedure as arrears of land
revenue. Therefore, in so far as the said Property is concerned, the Petitioner would
have a priority in view of its prior registered mortgage in respect of the same. None of
this has been considered by Respondent Nos. 1 and 2 prior to conducting the auction
sale of the said Property or whilst confrming the same in favour of Respondent Nos. 3
and 3A. The auction sale in favour of Respondent Nos. 3 and 3A is illegal, arbitrary,
fraudulent and amounts to a colourable exercise of power. These are the principal
grounds on which the Petitioner has fled the present Petition challenging the auction
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sale of the said Property in favour of the Respondent Nos. 3 and 3A.
4.13. The Petitioner has prayed for the following substantive reliefs in the
Petition :
"A. That this Hon'ble Court be pleased to declare that the entire
exercise of conducting auction of the Subject Property is fraudulent
and non-est and quash and set aside the same;
B. that this Hon'ble Court be pleased to call for the records
pertaining to the Impugned Order and after considering the legality
and validity thereof, be pleased to issue of writ of certiorari or any
other writ, order or direction in the nature thereof quashing and
setting aside the sale and Impugned Order dated February 21, 2019,
being Exhibit C hereto;
C. that strictly in the alternative and without prejudice to prayer
clause (A) and (B) above, in the alternative and only if this Hon'ble
Court is not inclined to quash and set aside the Impugned Order and
sale in favour of Respondent No. 3 and 3A, then this Hon'ble Court
be pleased to pass an order and direction directing the Respondents to
deposit the entire sale consideration in respect of the Subject
Property;"
5. The present Petition was fled on 14 th March 2019. On 20th March 2019,
this Court passed an Order directing the Respondent No. 9 RERA Authority not to
part with the monies deposited by Respondent No. 2 with it pursuant to the auction
sale of the said Property. Further, by an Order dated 27 th March 2019, a statement
made on behalf of Respondent Nos. 3 and 3A that they will not create any third-party
rights with respect to the said Property till the next date of hearing was recorded and
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accepted by this Court. The aforesaid interim orders have been continued from time
to time by various subsequent Orders passed in this Petition.
6. Respondent Nos. 1 and 2 have fled an Afdavit dated 2 nd July 2019
opposing the Petition. Respondent Nos. 1 and 2 have not disputed that Respondent
No. 2 scheduled the auction sale of the said Property on 21 st February 2019 in
furtherance of the Recovery Warrant issued by Respondent No. 9. Respondent Nos. 1
and 2 have contended that on 21 st February 2019, during the auction process, the
Petitioner through its Advocate raised objections by claiming that the said Property
which was put to auction was already mortgaged to the Petitioner. According to
Respondent Nos. 1 and 2, though the Petitioner had raised this objection, it did not
provide details of the loan or mortgage transaction. Moreover, no mutation entry qua
the mortgage had been efected in the revenue record of the said Property. Since
Respondent Nos. 3 and 3A ofered the highest price of Rs. 1,66,40,000/-, the process
of auction was concluded in their favour. Respondent Nos. 1 and 2 have taken the
stand that the entire auction process was conducted in compliance with the provisions
of the MLRC. It is contended that the Petitioner can recover its dues from the other
properties of the borrower. The Petitioner has an alternate remedy to recover the
amounts due from the borrower, in terms of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Securities Interest Act (short 'SARFAESI'). It
is contended that, in terms of Section 169 of the MLRC, the State has frst charge over
the said Property. With these contentions, Respondent Nos. 1 and 2 have sought to
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justify the auction sale and prayed for rejection of this Petition.
7. We have heard Learned Counsel appearing for the respective parties in
this Petition.
8. Shri Tamboly, the Learned Counsel appearing on behalf of the
Petitioner, made the following submissions:
8.1. That the actions of Respondent Nos. 1 and 2 in conducting the auction
sale of the said Property, and passing the impugned Order dated 21 st February 2019,
confrming the sale in favour of Respondent Nos. 3 and 3A, are arbitrary, colourable
and contrary to the principles of natural justice.
8.2. That at the time when the auction was being conducted on 21 st February
2019, the Petitioner's Advocate remained present and informed Respondent No. 2 of
the Petitioner's prior registered mortgage in respect of the said Property. In fact, the
Petitioner through their advocate's Letter dated 21 st February 2019, recorded the
Petitioner's objections to the auction and handed over the same to Respondent No. 2
before the auction was concluded.
8.3. That the authorities, despite being aware of the previous rights of the
Petitioner qua the said Property, proceeded to conclude the auction sale in favour of
Respondent Nos. 3 and 3A, without even mentioning the Petitioner's objections in the
impugned Order dated 21st February 2019.
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8.4. That Respondent No. 2 ought to have provided the Petitioner with an
opportunity of being heard, and ought to have considered its objections before taking
any fnal decision in the matter, and by not doing so, the authorities have acted
arbitrarily and contrary to the principles of natural justice.
8.5. That Section 195 of the MLRC, provides for postponement of auction
sale for any sufcient reason. Therefore, upon the Petitioner having taken a serious
objection to the auction sale and having demonstrated before the auction was
concluded that it held a prior registered mortgage in respect of the said Property, the
same was sufcient reason to postpone the auction sale in order to properly consider
the Petitioner's objection.
8.6. That despite the availability of this provision, the auction sale was
concluded on the same day with undue haste, without considering the Petitioner's
stand in the matter, which demonstrates an absence of bona fdes on the part of the
authorities in conducting the sale. Such undue haste is also demonstrated from the fact
that the Public Notice qua the auction sale was published only on 19 th February 2019
for the auction to be held on 21st February 2019.
8.7. That the said Property could never have been sold by way of public
auction without the Petitioner's consent, in view of its prior registered charge over the
same, and certainly not without recognizing, or being made subject to the Petitioner's
rights as a Mortgagee thereof.
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8.8. That Clause 1.1.49(b) read with Annexure 2 of the Debenture Trust
Deed and Clauses 4.1 and 7.1.16 of the Debenture Trust Deed and the contents of
page 45 of the Petition establishes that a registered mortgage is created in respect of
the said Property in favour of the Petitioner and the said mortgage is an English
Mortgage as defned under Section 58(e) of the Transfer of Property Act, 1882.
8.9. That the content at page 435 of the Afdavit of Respondent No. 2 in
reply to the present Petition establishes that Respondent No. 2 had knowledge of the
Debenture Trust Deed and the Petitioner's mortgage in respect of the said Property
prior to confrming the auction sale of the same in favour of Respondent Nos. 3 and 3A
by the impugned Order dated 21st February 2019.
8.10. That even otherwise, considering that the mortgage in respect of the
said Property in favour of the Petitioner is by a registered instrument, Respondent
Nos. 1, 2, 3 and 3A were bound and deemed to have knowledge of the same in view of
the frst explanation in Section 3 of the Transfer of Property Act, 1882, which reads
thus :
"Explanation I.--Where any transaction relating to immovable property is
required by law to be and has been efected by a registered instrument, any
person acquiring such property or any part of, or share or interest in, such
property shall be deemed to have notice of such instrument as from the date
of registration ......."
8.11. That by Clauses 7.1.16(b) and 10.1.17 (l) of the Debenture Trust Deed,
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the Respondent No. 4 was restrained from creating any leases, sales, charges and
encumbrances over the said Property, without the prior approval of the Petitioner.
8.12. That in case of occurrence of an event of default as defned in Clause
11.3 of the Debenture Trust Deed, the Petitioner is entitled to enforce the mortgage.
8.13. That the clauses of the Debenture Trust Deed mentioned above makes it
clear that the mortgagor did not have any right to deal with the said Property without
the consent of the Petitioner. Moreover, in order to enforce its security, the Petitioner
had the absolute right to deal with the said Property as set out above.
8.14. That apart from the aforesaid contractual rights, the Petitioner has
statutory rights as a Mortgagee under Sections 67, 68, 69 and 69A of the Transfer of
Property Act, 1882.
8.15. That the Petitioner's contractual and statutory rights have been
seriously prejudiced by the actions of Respondent Nos. 1 and 2 in conducting the
auction sale of the said Property, and confrming the same in favour of Respondent
Nos. 3 and 3A.
8.16. That in the alternative at the very least, the sale of the said Property
would necessarily have to be subject to the Petitioner's mortgage rights therein.
8.17. That by the impugned Order dated 21st February 2021, Respondent No.
2 has confrmed the sale of the said Property in favour of Respondent Nos. 3 and 3A,
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but the same was not made subject to the Petitioner's prior charge and rights in
respect of the same, nor was the consent of the Petitioner taken prior to the same.
Such actions are in the teeth of the legal position expounded in the following
Judgments :
i. Kanti Ram & Ors. vs. Kutubuddin Mahomed & Ors.1;
ii. State Bank of Indore vs. Regional Provident Fund Commissioner & Ors.2; and
iii. Vishal N. Kalsaria vs. Bank of India & Ors.3
8.18. That Section 169 of the MLRC, Section 40(1) of RERA and Rule 3 of
the Maharashtra Real Estate (Regulation and Development) (Recovery of Interest,
Penalty, Compensation, Fine Payable, Forms of Complaints and Appeal etc.) Rules,
2017, makes it clear that the stand taken in the Afdavit of Respondent No. 2 in reply
to the present Petition, to the efect that the Government has frst charge over the said
Property, is misconceived and contrary to law.
8.19. That a perusal of Section 169 of the MLRC demonstrates that there is a
clear distinction drawn between actual arrears of land revenue, and monies other than
land revenue, but which are recoverable in the same manner as land revenue. In the
former case, the State Government shall have a paramount charge over the land in
question and precedence over any mortgage in respect of the same. In the latter case,
1 MANU/WB/0007/1894
2 1964 SCC Online MP 45
3 (2016) 3 SCC 762
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the State Government shall have priority over the land only as against unsecured
claims, and not over secured creditors. Under Section 40 of RERA and Rule 3 of the
aforesaid Rules, it is clear that the amounts of refund and interest which have been
awarded by Respondent No. 9 in favour of Respondent Nos. 10 to 15 against
Respondent No. 4 are not actual arrears of land revenue, but are only to be recovered
in the same manner as arrears of land revenue. Hence the same fall under Section
169(2) and not Section 169(1) of the MLRC. In view of the fact that the Petitioner is a
registered Mortgagee in respect of the said Property, its claim over the same shall have
precedence over the State Government in view of Section 169(2) of the MLRC.
8.20. That the above submission is fortifed by the decisions of the Madhya
Pradesh High Court in the case of State of Bank of Indore vs. Regional Provident
Fund Commissioner, Indore & Ors. (supra) and Maulbax vs. Sardarmal & Anr.4,
where it has been held that where monies are to be recovered in the same manner as an
arrear of land revenue, the same does not amount to an arrear of land revenue which
gives the State any precedence over other claims against the defaulter.
8.21. That the stand taken by Respondent No. 2 that the Government has frst
charge over the said Property, is therefore incorrect and contrary to law.
8.22. That Respondent Nos. 1 and 2 conducted the auction sale of the said
Property in gross violation of Sections 176(d), 181 and 194 of the MLRC.
4 AIR 1978 MP 152
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8.23. That for all the above reasons the present Petition deserves to be allowed
and the impugned Order dated 21st February 2019 and the auction sale of the said
Property by Respondent Nos. 1 and 2 in favour of Respondent Nos. 3 and 3A, deserve
to be quashed and set aside.
9. Shri Akshay Patil, the Learned Counsel appearing on behalf of
Respondent Nos. 4 to 8 (Mortgagors) supported the prayers in the present Petition. In
addition to what was argued by the Petitioner's Counsel, he made the following
submissions :
9.1. That the Proclamation of Sale was not done as per Section 192 of the
MLRC or Rule 12 of the Maharashtra Realisation of Land Revenue Rules, 1967.
9.2. That the Notifcation of Sale was not issued nor afxed as per Section
193 of the MLRC.
9.3. That the said Property was not attached as per Rule 11 of the
Maharashtra Realisation of Land Revenue Rules, 1967.
9.4. That the upset price of the said Property was not fxed as per Rule 13 of
the Maharashtra Realisation of Land Revenue Rules, 1967.
9.5. That the auction sale of the said Property by Respondent Nos. 1 and 2
being in violation of the provisions of the MLRC and the Rules framed thereunder, the
sale in favour of Respondent Nos. 3 and 3A stands vitiated, which submission is
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fortifed by the decision of this Court in the case of Vaijnath s/o Trimbak Zarkar vs.
State of Maharashtra5; and the decision of the Nagpur Bench of this Court in
Gitabai vs. Prbhavati6.
9.6. That in the case of Vaijnath (supra), this Court set aside the action of
putting an immovable property to auction in view of the fact that the same was in
violation of Section 194 of the MLRC. Applying that ratio, the sale of the said
Property ought to be set aside in view of the various violations of the MLRC which
have been highlighted above.
9.7. That in the case of Gitabai (supra), the Nagpur Bench of this Court has
held (paragraphs 17 to 22) that Sections 192 and 193 of the MLRC as well as Rules 11
and 12 of the Maharashtra Realisation of Land Revenue Rules, 1967 are mandatory.
The sale in favour of Respondent Nos. 3 and 3A is illegal in view of the fact that the
same is clearly contrary to the mandatory provisions of the MLRC.
9.8. That the Petitioner is a secured creditor as defned under the SARFAESI
Act as well as the Recovery of Debts Due to Banks and Financial Institutions Act,
1993. In that view of the matter, the Petitioner's charge in respect of the said Property
would be paramount and would have priority over any claim of the State towards
revenue. That this submission is fortifed by the Judgment of this Court in the case of
5 Order dated 13th December 2012 in Writ Petition No. 9120 of 2012
6 1982 (84) Bom LR 412
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State Bank of India vs. State of Maharashtra 7, more particularly as set out in paragraphs
19 to 28 and 30 thereof.
9.9. That the entire auction process was conducted with great and undue
haste, contrary to mandatory provisions of the MLRC and the Rules framed
thereunder, and in derogation of the Petitioner's secured rights as a registered
Mortgagee, and therefore the Petitioner deserves to succeed in the present Petition.
10. Initially, Ms. Solunke appeared on behalf of Respondent Nos. 1 and 2.
She submitted that Respondent No. 2 was not aware of the mortgage created in favour
of the Petitioner prior to the fnalization of the sale of the said Property in favour of
Respondent Nos. 3 and 3A. Since she was desirous of taking instructions to answer
our queries, as well as the serious allegations levelled by the Petitioner and
Respondent Nos. 4 to 8 respectively, with respect to non-compliance of the provisions
of the MLRC and the Rules framed thereunder qua the auction sale of the said
Property, we adjourned the matter with a direction that the concerned ofcer be kept
present before us on the adjourned date alongwith the original fle containing the
documents demonstrating all the steps taken qua the auction sale of said Property.
Thereafter, Shri Asif Patel, Additional Government Pleader appeared before us on
behalf of Respondent Nos. 1 and 2. He produced the original fle pertaining to the
auction sale of the said Property from the custody of Respondent No. 2 for our
perusal. The submissions of the Respondent Nos. 1 and 2 as set out in their Afdavit-
7 Order dated 17th December, 2020 in Writ Petition (stamp) No. 92816 of 2020
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in-reply are already set out in paragraph 6 above.
11. Shri Drupad Patil, Learned Counsel appearing for Respondent Nos. 3
and 3A, made the following submissions opposing the Petition:
11.1. That Respondent No. 4 did not challenge the Orders passed by
Respondent No. 9 directing it to refund the amounts paid by Respondent Nos. 10 to 15
fat purchasers with interest, nor did it challenge the demand notices served upon it by
the authorities to recover such amounts. Respondent No. 4 has also not challenged the
auction sale of the said Property in favour of Respondent Nos. 3 and 3A.
11.2. That the auction sale of the said Property held on 21 st February 2019 is
not illegal or void solely on the ground that no prior notice thereof was given to the
Petitioner Mortgagee. That there is no legal provision requiring such notice in favour
of the Mortgagee.
11.3. That the efect of the mortgage created in favour of the Petitioner was
never refected in the revenue records in respect of the said Property. Hence, the
Petitioner cannot be heard to complain that the revenue authorities have not taken its
mortgage into consideration before proceeding with or concluding the auction sale of
the said Property.
11.4. That a mortgage only creates a limited interest in the property in favour
of the mortgagee. That mortgages are governed by Chapter IV of the Transfer of
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Property Act, 1882. That a mortgage has been defned under Section 58(a) of the
Transfer of Property Act,1882 to mean a transfer of interest in specifc immovable
property for the purpose of securing payment of money advanced or to be advanced by
way of loan. That under Section 50(b) of the Transfer of Property Act, 1882 a simple
mortgage is one where the mortgagor binds himself personally to pay the mortgage
money, without delivering possession of the mortgaged property, and agrees expressly
or impliedly that in the event of his failing to pay as per his contract, the mortgagee
shall have a right to cause the mortgaged property to be sold, and the proceeds of sale
to be applied in the payment of the mortgage money. That a mortgage being a transfer
of interest in immovable property, the mortgagee always has a security in the property
itself. That once the mortgage is created, the interest in the property will always enure
to the beneft of the mortgagee and that any subsequent sale or mortgage of the
property, whether with or without notice to the mortgagee, cannot derogate from the
mortgagee's rights. That this is for the obvious reason that in the case of a mortgage,
the mortgagor is always vested with the right of redemption of the mortgage, and that
any subsequent transferee or mortgagee only acquires the interest which the original
owner had at the time of the transaction.
11.5. That the language of Section 56 of the Transfer of Property Act, 1882
makes it clear that a mortgage is only a creation of a limited interest in the property,
and that the same cannot take away the right of the mortgagor to transfer the property
subsequently.
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11.6. That the Petitioner being a Mortgagee in respect of the said Property,
only has a limited interest therein. The Petitioner cannot resist the sale of the said
Property in favour of Respondent Nos. 3 and 3A. That the Petitioner has a mortgage in
respect of over 23 hectares of land. The said Property which has been auctioned only
admeasures 49 gunthas. That Respondent Nos. 3 and 3A therefore have a right to
claim marshalling of the securities under Section 56 of the Transfer of Property Act,
1882. That this contention of the Respondent Nos. 3 and 3A is fortifed by the decision
of the Supreme Court in the case of J. P. Builder vs. A. Ramdas Rao8.
11.7. That under Section 69 of the Transfer of Property Act, 1882, a
mortgagee has a right to concur in the sale of the land only in case of default on the
part of the mortgagor. In the present case, the Petitioner has not made any averments
with respect to any default committed by Respondent Nos. 4 to 8, nor are Respondent
Nos. 3 and/or 3A aware of any action initiated by the Petitioner against Respondent
Nos. 4 to 8 for any default committed. Therefore, the Petitioner's consent was not
required before confrming the auction sale in favour of Respondent Nos. 3 and 3A.
11.8. That the Debenture Trust Deed is not an English Mortgage. It does not
fulfl the ingredients of an English Mortgage. In fact, the Debenture Trust Deed is
nothing but a joint venture agreement between the parties thereto.
11.9. That the said Property was sold in execution of Orders passed by
8 (2011) 1 SCC 429
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Respondent No. 9 against Respondent No. 4, under the provisions of Section 40 of
RERA. This Section provides for recovery of the amount as arrears of land revenue.
11.10. That in view of Sections 72 and 169(1) of the MLRC, the arrears of land
revenue shall have a paramount charge over the land in question. That therefore the
Petitioner cannot claim a superior charge over the said Property. That Section 169(2)
of the MLRC would not have any application to the present case as the same is
applicable to only claims of the State Government which are sought to be recovered
and not to other claims.
11.11. That the dues sought to be recovered under RERA have primacy over
the dues of the Petitioner, as held by the Supreme Court in the case of Central Bank
of India vs. State of Kerala & Anr.9.
11.12. That Respondent Nos. 3 and 3A are bona fde purchasers of the said
Property. Hence, even if there is any procedural irregularity found in the auction
process, the interests of the Auction Purchasers are required to be protected as held by
the Supreme Court in the cases of Gurjonginder Singh vs. Jaswant Kaur10 and
Janakraj vs. Gurdial Singh11.
11.13. That without prejudice to all their rights and contentions, Respondent
Nos. 3 and 3A are willing to deposit an amount of Rupees One Crore Sixty-Six Lakhs
9 (2009) 4 SCC 94
10 (1994) 2 SCC 368
11 (1967) 2 SCR 77
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for redemption of the mortgage of the said Property.
12. Shri Sariputta, Learned Counsel appearing on behalf of Respondent
Nos. 10 to 15 submitted that his clients are innocent fat purchasers who have been
duped by Respondent No. 4. They purchased fats in the Padmanabh Phase-1 project
of Respondent No. 4, but the same were not delivered in time. Hence, they fled
complaints under Section 18 of the RERA before Respondent No. 9, and succeeded in
obtaining orders of refund of the purchase monies paid by them with interest against
Respondent No. 4. He submitted that his client is entitled to recover their monies in
the manner set out in Section 40 of RERA. He submitted that his clients have sufered
at the hands of Respondent No. 4. He submitted that therefore the proceeds of the
auction sale of the said Property should be handed over to his clients who are innocent
suferers.
13. Before we concluded the hearing of this matter, we had asked the
Counsels for the respective parties to fle their written submissions. The Counsel for
the Petitioner, Respondent Nos. 4 to 8 and Respondent Nos. 3 and 3A respectively,
have fled their written submissions in the matter.
14. We have considered the Petition, the Afdavit in reply fled by
Respondent No.2 and the oral and written submissions of the Learned Counsels for
the parties. We have also perused the original fle produced by Respondent No. 2
pertaining to the auction sale of the said Property. Our fndings in respect of the same
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are as follows:
15. The Petitioner and Respondent Nos. 4 to 8 have entered into the
Debenture Trust Deed dated 16th February 2015. Respondent No. 4 raised funds to the
tune of Rupees One Hundred and Twenty Crores by issuing debentures to the
subscribers thereof. The Petitioner is the Debenture Trustee on behalf of the
debenture holders under the Debenture Trust Deed. To secure the due fulflment of
its obligations of redemption of the debentures on their due dates, Respondent No. 4
has mortgaged various immovable properties in favour of the Petitioner, including the
said Property. This is evident from a reading of Clauses 4.1 and 7.1.16 of the
Debenture Trust Deed quoted above, read with Clause 1.1.49(b) and Annexure 2
thereof. The Debenture Trust Deed has been stamped as a Mortgage Deed under
Article 40(b) of the Maharashtra Stamp Act. This is evident from the Stamp Duty
Challan annexed at page 45 of the Petition. The Debenture Trust Deed has been
registered with the Sub-Registrar of Assurances at Haveli-16 under Registration No.
Havl-16/1511/211/2015. In view of the above, we have no hesitation in holding that the
Petitioner is the Mortgagee of the said Property under the Debenture Trust Deed.
16. The Learned Counsel for the Petitioner has contended that the mortgage
created by Respondent No. 4 in favour of the Petitioner in respect of the said Property,
is an English Mortgage as defned under Section 58(e) of the Transfer of Property Act,
1882. On the other hand, the learned Counsel for Respondent Nos. 3 and 3A
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contended that the mortgage in favour of the Petitioner does not fulfl the ingredients
of an English Mortgage. To address this controversy, let us take a look at Section 58(e)
of the Transfer of Property Act, 1882, which reads as follows:
"(e) English mortgage.--Where the mortgagor binds himself to
repay the mortgage-money on a certain date, and transfers the
mortgaged property absolutely to the mortgagee, but subject to a
proviso that he will re-transfer it to the mortgagor upon payment of
the mortgage-money as agreed, the transaction is called an English
mortgage."
17. In an English Mortgage, as defned under Section 58(e) of the Transfer
of Property Act, 1882 there is transfer of ownership of the property by the mortgagor
to the mortgagee, with a covenant to repay the debt on a certain date, with a proviso
that on this condition being performed, the mortgagee will retransfer the property to
the mortgagor. The three essential ingredients of an English Mortgage thus are: (i) the
mortgagor binds himself to repay the mortgage money on certain day, (ii) the property
mortgaged is transferred to the mortgagee, and (iii) such transfer is made subject to a
proviso that the mortgagee will reconvey the property to the mortgagor upon payment
of mortgage money as promised.
18. Let us test whether the mortgage of the said Property fulflls these three
ingredients of an English Mortgage. Clause 7.1.16 of the Debenture Trust Deed is
relevant in this regard. The same reads as follows:
"7.1.16 Grant and Transfer, Convey, Assign, Assur
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(a) ...........
(b) In consideration of the Subscriber subscribing / agreeing to
subscribe to the Debentures and with an intention to create a frst and
exclusive charge by way of a mortgage, the Company DOTH
HEREBY GRANT, TRANSFER, CONVEY, ASSIGN AND
ASSURE, UNTO the Debenture Trustee, the Mortgaged Assets of
Project 2 TOGETHER WITH all the present and future structures
to be constructed on Property 2 including the Unites comprised therein
TOGETHER WITH all rights, liberties, privileges, easements,
advantages, assets, benefts, revenues, income and appurtenances
whatsoever to and arising in relation thereto TO HAVE AND TO
HOLD the Mortgaged Assets of Project 2 hereby granted or expressed
so to be UNTO PROVIDED ALWAYS and it is hereby agreed
and declared that if the Company redeems the Debentures in the
manner provided in this Deed and also all other moneys, costs,
charges and expenses by Applicable Law or under these presents or
under the Transaction Documents, payable to the Debenture Holders
then in such case, the Debenture Trustee shall upon the request and at
the cost charges and expenses of the Company re-transfer the
Mortgaged Assets of Project 2 UNTO the Company or to such person
as the Company may direct and shall also deliver to the Company or
such person this Deed and all documents relating to the Mortgaged
Assets of Project 2 which shall be in possession or power of the
Debenture Trustee AND IT IS HEREBY FURTHER AGREED
by and between the parties hereto that until default be made by the
Company redemption / payment / repayment of the Debentures, the
Company shall remain in possession of the Mortgaged Assets of
Project 2 PROVIDED THAT the Company shall while in
possession of the Mortgaged Assets of Project 2 as aforesaid, have no
power to make any leases or sales or other disposal thereof, save and
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except as provided herein or with the previous consent in writing of the
Debenture Trustee (acting for and on behalf of the Debenture
Holders). It is further agreed that simultaneously upon execution
hereof the Company shall deposit the originals of title documents in
respect of Property 2, a list whereof is set out in Part B of Annexure-9
with the Debenture Trustee. The Debenture Trustee shall return the
aforesaid documents to the Company upon Settlement Date of Project
2"
19. The language of the Clause confrms that the mortgaged assets of
Project 2 have been conveyed and assigned by Respondent No. 4 to the Petitioner.
The Clause further provides that in the event Respondent No. 4 redeems the
debentures in the manner provided under the Debenture Trust Deed, then upon its
request, the Petitioner is required to re-transfer the mortgaged assets of Project 2 to
the Respondent No. 4. Therefore, it is clear that the parties intended to transfer the
property with an option to the Mortgagor to get it re-transferred upon payment of the
mortgage money. The said Property forms part of the mortgaged assets of Project 2 as
defned under clause 1.1.49(b) of the Debenture Trust Deed read with Annexure 2
thereof. Hence, we fnd that the mortgage created by Respondent No. 4 in favour of
the Petitioner in respect of the said Property is an English Mortgage as defned under
Section 58(e) of the Transfer of Property Act, 1882.
20. Respondent Nos. 10 to 15 were purchasers of fats in a real estate project
of Respondent No. 4 called Padmanabh Phase - 1. It appears that since Respondent
No. 4 failed to deliver fats to the Purchasers within time, Respondent Nos. 10 to 15
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fled complaints before Respondent No. 9 under Section 18 of RERA, seeking to exit
the project and for refund of the purchase consideration paid by them with interest.
Respondent No. 9 by its Orders dated 14 th and 27th February 2018 held in favour of
Respondent Nos. 10 to 15 and directed Respondent No. 4 to refund the purchase
consideration paid by them with interest. Respondent No. 4 did not challenge those
Orders. They were therefore put to execution. Under Section 40(1) of RERA read
with Rule 3 of the Maharashtra Real Estate (Regulation and Development) (Recovery
of Interest, Penalty, Compensation, Fine Payable, Forms of Complaints and Appeal
etc.) Rules, 2017, the compensation and interest imposed on Respondent No. 4 by
Respondent No.9 is to be recovered as arrears of land revenue in the manner provided
in the MLRC. The relevant provisions in this regard are as follows:
Section 40 (1) of RERA:
"40. Recovery of interest or penalty or compensation and
enforcement of order, etc. - (1) If a promoter or an allottee or a real
estate agent, as the case may be, fails to pay any interest or penalty or
compensation imposed on him, by the adjudicating ofcer or the
Regulatory Authority or the Appellate Authority, as the case may be,
under this Act or the rules and regulations made thereunder, it shall
be recoverable from such promoter or allottee or real estate agent, in
such manner as may be prescribed as an arrears of land revenue."
Rule 3 of the Maharashtra Real Estate (Regulation and Development) (Recovery
of Interest, Penalty, Compensation, Fine Payable, Forms of Complaints and
Appeal etc.) Rules, 2017:
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"3. Manner of recovery of interest, penalty and compensation. - Any
interest or penalty or compensation imposed on a promoter or an
allotee or a real estate agent shall be recoverable under section 40 of
the Act, from such promoter or allotee or real estate agent, as the case
may be, in the same manner as applicable in respect of land revenue
as provided in the Maharashtra Land Revenue Code, 1966 (Mah.
XLI of 1966)."
The above provisions make it clear that the compensation and interest imposed upon
a promoter under RERA is recoverable in the same manner as arrears of land revenue
under the MLRC. It is in furtherance of these provisions that Respondent No. 9
issued a Recovery Warrant to Respondent No. 1 to recover the amounts awarded by it
to Respondent Nos. 10 to 15 from Respondent No. 4 in the same manner as arrears of
land revenue. Respondent Nos. 1 and 2 sold the said Property by public auction in
furtherance of the same. Therefore, the involvement of the revenue authorities under
the MLRC in execution of orders of compensation and interest passed by Respondent
No. 9, fnds its genesis in Section 40 of RERA.
21. One of the central areas of controversy involved in this Petition is the
priority of charges held over the said Property. Is it the Petitioner that has priority
over the said Property by virtue of it being a registered Mortgagee in respect of the
same, as contended by the Counsel for the Petitioner, or is it the State Government
seeking to recover the compensation and interest due by Respondent No. 4 to
Respondent Nos. 10 to 15 in the same manner as arrears of land revenue, that has
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priority, as contended by the learned Advocate on behalf of Respondent Nos. 1 and 2
and the learned Counsel on behalf of Respondent Nos. 3 and 3A. We think that the
answer to this lies in Section 169 of the MLRC, which reads thus:
"169. Claims of State Government to have precedence over all
others. - (1) The arrears of land revenue due on account of land shall
be a paramount charge on the land and on every part thereof and
shall have precedence over any other debt, demand or claim
whatsoever, whether in respect of mortgage, judgement-decree,
execution or attachment, or otherwise howsoever, against any land
for the holder thereof.
(2) The claim of the State Government to any monies other than
arrears of land revenue, but recoverable as a revenue demand under
the provisions of this Chapter shall have priority over all unsecured
claims against any land or holder thereof."
The aforesaid Section makes a clear distinction between actual arrears of land revenue
due on account of land, and amounts other than arrears of land revenue which are
recoverable as arrears of land revenue under the MLRC. In the former case, the
arrears of land revenue due on account of land, amount to a paramount charge on the
land in question, which shall have precedence over all other debts. However, in the
latter case, the claim of the State Government to monies recoverable as other than
arrears of land revenue but in the same fashion, have priority only over unsecured
claims and not over secured debts. Land revenue has been defned in Section 2(19) of
the MLRC to mean, "all sums and payments, in money received or legally claimable by or
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on behalf of the State Government from any person on account of any land or interest in or
right exercisable over land held by or vested in him, under whatever designation such sum
may be payable and any cess or rate authorised by the State Government under the
provisions of any law for the time being in force; and includes premium, rent, lease money,
quit, rent, judi payable by a inamdar or any other payment provided under any Act, rule,
contract or deed on account of any land;". Therefore, it is clear that land revenue means
amounts payable to the State Government on account of land. In the present case, we
are of the opinion that the amounts of compensation and interest which have been
awarded by Respondent No. 9 against Respondent No. 4 and in favour of Respondent
Nos. 10 to 15 cannot be said to be actual arrears of land revenue. They are not dues
payable to the State Government which arise out of any particular land. They are not
even claims of the State Government. They are dues payable by a promotor of a real
estate project to the fat purchasers under orders passed under the provisions of
RERA. The mode of recovery of such amounts is the same as if they were arrears of
land revenue under the MLRC. Hence these amounts clearly cannot be governed by
Section 169(1) of the MLRC. Therefore, the claims of Respondent Nos. 10 to 15 as
awarded by Respondent No. 9 cannot have priority over the properties of Respondent
No. 4 in derogation of the Petitioner's secured interest therein. Having held that the
Petitioner is a secured creditor of Respondent No. 4 and a Mortgagee in respect of the
said Property under the Debenture Trust Deed, we fnd that the Petitioner has
priority in respect of the said Property over the claims of Respondent Nos. 10 to 15. In
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other words, the Petitioner is entitled to have its debts satisfed out of the said
Property in priority over Respondent Nos. 10 to 15.
22. The above fnding is fortifed by a similar fnding of the Madhya Pradesh
High Court in the case of State Bank of Indore vs. Regional Provident Fund
Commissioner (supra) relied upon by the Counsel for the Petitioner. In that case, a
mortgage deed was executed by a company, mortgaging its entire immovable property
in favour of a bank. That company failed and neglected to pay the employer's
contribution due from it under the Employees' Provident Funds Act, 1958. The State,
pursuant to a provision in the Employees' Provident Funds Act, 1958 sought to
recover the contribution as an arrear of land revenue under the Madhya Pradesh Land
Revenue Code, 1959. Despite the bank informing the State of its prior registered
mortgage over the property of the company, the State sold the property to recover the
company's provident fund contribution as arrears of land revenue. The following
observations were made by the Court while holding the sale to be bad in law:
"5. In our judgment, the contentions advanced on, behalf of the
petitioner must be given efect to. Section 8 of the Act provides, inter
alia, that any amount due from the employer in relation to an
establishment to which a Scheme under the Act applies, may, if the
amount is in arrear, be recovered by the appropriate Government in
the same manner as an arrear of land revenue. It does not say that
the amount may be recovered as an arrear of land revenue. It
merely provides the manner of the recovery of the amount
mentioned in Section 8. The manner prescribed for the recovery
of the amount as an arrear of land revenue does not convert the
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amount into an arrear of land revenue; nor does it create any
charge on any property of the employer for the payment of the
amount or give a priority in the manner of payment of the
amount. There is no provision in the Act in regard to the
creation of any such charge or priority for the payment of the
employer's contribution." (emphasis supplied).
23. In view of the above discussion, we accept the Petitioner's submission
that it has priority over the said Property as against the claims of Respondent Nos. 10
to 15.
24. There is another reason to hold that the Petitioner's claim over the said
Property shall take precedence over the claims of the State and Respondent Nos. 10 to
15. At the cost of repetition, we may reiterate that the Petitioner's interest was
secured by way of registered mortgage, quite prior to the adjudication by Respondent
No. 9 of the claims of Respondent Nos. 10 to 15. In this regard, it would be relevant to
note the term 'secured creditor' as defned under Section 2(la) of the Recovery of
Debts Due to Banks and Financial Institutions Act, 1993 ("RDB Act"). The same is
similar to the defnition of the term 'secured creditor' as defned under Section 2(1)
(zd) of the SARFAESI Act. Contextually, we have gone through the defnition of the
term 'secured creditor' as defned under SARFAESI Act, which reads as under:-
"(zd) "secured creditor" means-
(i) any bank or fnancial institution or any consortium or
group of banks or fnancial institutions holding any right, title or
interest upon any tangible asset or intangible asset as specifed in
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clause (l);
(ii) debenture trustee appointed by any bank or fnancial
institution; or
(iii) an asset reconstruction company whether acting as such or
managing a trust set up by such asset reconstruction company for the
securitisation or reconstruction, as the case may be; or
(iv) debenture trustee registered with the Board appointed by
any company for secured debt securities; or
(v) any other trustee holding securities on behalf of a bank or
fnancial institution."
25. Undoubtedly, the Petitioner Debenture Trustee holds rights to recover
debt which amounts to 'fnancial assets' as defned under Section 2(l) of the
SARFAESI Act, which reads as below:-
"2(l) "fnancial asset" means debt or receivables and includes
--
(i)a claim to any debt or receivables or part thereof, whether secured or
unsecured; or
(ii)any debt or receivables secured by, mortgage of, or charge on,
immovable property; or
(iii) a mortgage, charge, hypothecation or pledge of movable property;
or
(iv) any right or interest in the security, whether full or part
underlying such debt or receivables; or
(v) any benefcial interest in property, whether movable or immovable,
or in such debt, receivables, whether such interest is existing, future,
accruing, conditional or contingent; or
[(va) any benefcial right, title or interest in any tangible asset given
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on hire or fnancial lease or conditional sale or under any other
contract which secures the obligation to pay any unpaid portion of the
purchase price of such asset or an obligation incurred or credit
otherwise provided to enable the borrower to acquire such tangible
asset; or
(vb) any right, title or interest on any intangible asset or licence or
assignment of such intangible asset, which secures the obligation to
pay any unpaid portion of the purchase price of such intangible asset
or an obligation incurred or credit otherwise extended to enable the
borrower to acquire such intangible asset or obtain licence of the
intangible asset; or]
(vi) any fnancial assistance;"
26. The conjoint reading of these provisions clearly postulates that, the
Petitioner is a secured creditor as its debt has been secured by way of a registered
mortgage.
27. At this juncture, it is relevant to note Section 31-B of the RDB Act which
gives priority to the claim of the secured creditor reads as under :-
"31-B. Priority to secured creditors - Notwithstanding
anything contained in any other law for the time being in force,
the rights of secured creditors to realise secured debts due and
payable to them by sale of assets over which security interest is
created, shall have priority and shall be paid in priority over all
other debts and Government dues including revenues, taxes
cesses and rates due to the Central Government, State
Government or local authority."
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28. We can fnd a similar provision under Section 26-E of the SARFAESI
Act, which reads as under:-
"26-E. Priority to secured creditors - Notwithstanding anything
contained in any other law for the time being in force, after the
registration of security interest, the debts due to any secured creditor
shall be paid in priority over all other debts and all revenues, taxes,
cesses and other rates payable to the Central Government or State
Government or local authority."
29. Both provisions start with a non-obstante clause, meaning thereby, that
the same would prevail over any other law for the time being in force. The legislative
intent is loud and clear to give an assurance to the secured creditor of having priority
in case of recovery of its dues.
30. In view of the above discussion, we believe that the Learned Counsel for
Respondent Nos. 4 to 8 is correct in relying upon the decision of a Division Bench of
this Court in State Bank of India vs. The State of Maharashtra (supra). In that case it
was held that the dues of secured creditors have priority over the dues recoverable
under the Maharashtra Value Added Tax Act, 2002 ('MVAT'). In the said case, the
Division Bench of this Court has considered the provisions of Section 26-E of the
SARFAESI Act along with Section 31-B of the RDB Act. It is held that the dues of
secured creditors get priority of charge over the dues under the MVAT Act. This
pronouncement would assist the Respondent No. 4 to contend that there is no priority
to the dues recoverable under RERA.
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31. In view of all of the above, we cannot accept the contention of the
Learned Counsel for Respondent Nos. 3 and 3A that dues under RERA would have
primacy over the dues of the Petitioner. The Judgment of the Supreme Court in the
case of Central Bank of India vs. State of Kerala & Anr. (supra) relied upon by Learned
Counsel for Respondent Nos. 3 and 3A will not apply to the facts of the present case.
The said case relates to recovery of sales tax dues which is considered to be dues of
the State Government. The Sales Tax Act bears a specifc provision under Section
38(c) of giving primacy to that charge. In that context, it was ruled that the non-
obstante clause in the Central Act like SARFAESI could not render the frst charge
created by the State enactments inoperative. However, RERA does not create any
such charge over the assets of the promoter. Therefore, the said ratio has no
application to the facts of the case in hand.
32. We next deal with the contention of the Learned Counsel for
Respondent Nos. 3 and 3A that they as subsequent purchasers are entitled to
marshalling of the securities as contemplated under Section 56 of the Transfer of
Property Act, 1882. For ready reference Section 56 of the Transfer of Property Act is
reproduced herein below:-
"56. Marshaling by subsequent purchaser - If the owner of two
or more properties mortgages them to one person and then sells one or
more of the properties to another person, the buyer is, in the absence
of a contract to the contrary, entitled to have the mortgage-debt
satisfed out of the property or properties not sold to him, so far as the
same will extend, but not so as to prejudice the rights of the mortgagee
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or persons claiming under him or of any other person who has for
consideration acquired an interest in any of the properties."
33. In order to appreciate the applicability of Section 56 of the Transfer of
Property Act, 1882, one has to understand the essential ingredients for invocation of
this equitable principle. These are as under:-
(i) the owner of two or more properties must have mortgaged them to one
person;
(ii) he should have subsequently sold one or more of such properties to a
third person;
(iii) the exercise of this right must not prejudice the rights of the mortgagee
or of persons claiming under him, or of any other person who has, for consideration
acquired an interest in any of the properties, and
(iv) there must be no contract to the contrary.
34. It is true that in the absence of a contract to the contrary, the buyer can
get mortgage debts satisfed out of the other property not sold to him. This is what
Respondent Nos. 3 and 3A contend. They submit that, the Petitioner has a number of
properties of Respondent No. 4 mortgaged to it and can recover its dues from the
same. They contend that several properties were mortgaged to the Petitioner which
are separate properties having distinct revenue extracts. Therefore, according to the
Auction Purchasers, the Petitioner Mortgagee can enforce its dues against the rest of
the mortgaged properties so that the sale of the said Property in their favour can be
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saved.
35. We fnd that Section 56 of the Transfer of Property Act, 1882 has an
inbuilt proviso that the subsequent buyer cannot exercise such a right of marshalling
which could cause prejudice to the rights of the mortgagee. Thus, even if right of
marshaling under this Section may arise, the exercise of the same must not cause
prejudice to the rights of the mortgagee or any person claiming through such
mortgagee.
36. The question of prejudice is essentially purely one of fact which has to
be assessed from the facts and circumstances of each case. Since it is a question of
fact, the matter must be examined from the view point of whether the exercise of such
right of marshalling by Respondent Nos. 3 and 3A would cause any prejudice to the
Petitioner i.e. the prior Mortgagee. We are conscious of the fact that we cannot go
into disputed questions of fact in a Writ Petition. Proceeding on the basis of the
record before us, it is ex-facie clear that the various pieces of land were mortgaged to
the Petitioner under the Debenture Trust Deed. The said Property, i.e. land bearing
Survey No. 95/3, admeasuring 49 ares, is one of them. Funds were raised by
Respondent No. 4 by issuance of debentures to the tune of Rupees One Hundred and
Twenty Crores. The properties have been mortgaged to secure the timely redemption
of these debentures. The Petition discloses that Respondent No. 4 did not redeem the
debentures on time, constituting an event of default under the Debenture Trust Deed.
Respondent No. 4 has not disputed this position before us. A Legal Notice dated 6 th
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June 2018 was issued by the Petitioner to Respondent No. 4 which states that the
outstanding dues have increased to Rs. 252.89 crores as on that date. At the time of
hearing, the Learned Counsel for the Petitioner submitted that the outstanding dues
have today crept up to the tune of Rs. 450 Crores. We, of course, are not entering
into the correctness of this submission, or in fact the arena of ascertaining the actual
dues. However, if the contention of the Petitioner is correct, the outstanding dues
payable by Respondent No. 4 are substantial.
37. In the course of executing the recovery warrant issued by Respondent
No. 9 under Section 40(1) of RERA, the Additional Tehsildar got the said Property
valued. The communication dated 25th January 2019 of the Additional Tehsildar
disclosed at pages 331 and 332 of the Petition states that the properties owned by
Respondent No. 4 at Village Chovisawadi have an estimated valuation of Rs. 28.60
Crores. Out of this the said Property bearing S. No. 95/3 has been valued at Rs.
1,59,52,800/-. This would not cover the Mortgage Debt claimed by the Petitioner. In
order to exercise the right of marshalling, Respondent Nos. 3 and 3A as the
subsequent purchasers must come with such a specifc case and amply demonstrate
the same. They have done neither. In absence of the same, it is not possible for us to
hold that the Petitioner Mortgagee shall not be prejudiced if it is to recover its dues
from the other mortgaged properties, excluding the said Property, especially in view
of the substantial dues claimed by it. Therefore, the Auction Purchasers have failed to
demonstrate that they are entitled to marshalling of securities under Section 56 of the
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Transfer of Property Act, 1882.
38. The Judgment of the Supreme Court in case of J. P. Builder vs. A.
Ramdas Rao (supra) on which the learned Counsel for Respondent Nos. 3 and 3A has
placed reliance does not carry his case any further. In this decision itself, it has been
held that the question of prejudice is purely one of fact and the same depends upon
various factors. The right of marshaling was upheld in the facts of that case.
However, we are unable to hold so in favour of Respondent Nos. 3 and 3A in the facts
of the present case in view of our fndings above.
39. There is another reason to hold that the disputed auction sale has
caused prejudice to the rights of the Petitioner as a prior Mortgagee. As narrated
above, several properties were mortgaged to the Petitioner. The said Property was
one of them. At the time of hearing, the Learned Counsel for the parties showed us a
plan of Village Chovisawadi and the various lands which have been mortgaged to the
Petitioner. The said Property is road facing. The Learned Counsel for the Petitioner
contended that this would have a bearing on its value and make it more marketable.
He further pointed out that all of the mortgaged properties in that Village were
contiguous pieces of land. If the Petitioner were to enforce its security by dealing with
all of the mortgaged properties as one lot, the same could fetch a much higher value.
On the other hand, he submitted that if the said Property is allowed to be sold in
isolation, as has been done by the impugned auction sale, the same would have a
rippling efect of diminishing the market value of the lands adjoining it, as the
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Petitioner would not be able to deal with the same in one lot, or as contiguous pieces
of land. He therefore submitted that the prejudice caused to the Petitioner's security
by the auction sale of the said Property is palpable. If the said portion is excluded,
then certainly it would diminish the commercial value of the rest the of the mortgaged
property and thus, it would cause prejudice to the rights of Mortgagee. In view of the
same, and in the absence of any material to the contrary being produced by
Respondent Nos. 3 and 3A, we cannot accept their submission that by permitting
them to have the securities marshalled under Section 56 of the Transfer of Property
Act, 1882, no prejudice shall be caused to the Petitioner.
40. We next turn to the Petitioner's contention that the action of
completing the auction process and confrming the sale of the said Property in favour
of Respondent Nos. 3 and 3A was arbitrary, mala fde and contrary to the principles of
natural justice. In this regard, we note that admittedly the Public Notice for auction
sale of the said Property was published in the local newspaper on 19 th February 2019.
The auction sale was fxed just two days later i.e. on 21 st February 2019. On the date of
the auction, the Petitioner had admittedly remained present through its Advocate and
submitted its objections vide its Advocate's Letter dated 21 st February 2019. The
same clearly mentions that the Petitioner claims to have a prior registered mortgage
over the said Property. This has also been admitted by Respondent No. 2 in the
Afdavit in Reply to the above Petition. The relevant averment in the Afdavit in this
regard is as follows :
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"..........At the time of the auction process, the advocate from the
petitioner trustee has came at the place and given written objection
thereby stated that the said property along with the other properties
have mortgaged in their favour by the respondent no. 4 to 8 and
further requested to withdraw the said notice and cancel the entire
auction.........."
41. Thus, by his own admission, Respondent No. 2 had notice of the
Petitioner's claim over the said Property, prior to the auction process being
concluded. The principles of natural justice demand that the representation made by
the Petitioner ought to have been considered before concluding the auction sale. This
is more so in light of the fact the Public Notice announcing the auction sale was issued
merely two days prior thereto. The Petitioner raised a timely objection and asserted its
rights in respect of the said Property which was proposed to be sold before the auction
was concluded, which ought to have been considered by the authorities before
concluding the sale. The utter haste in which the auction was held and the sale was
concluded within two days of the same being announced publicly, and that too despite
a serious objection being taken by the Petitioner at the time of the auction, leaves
much to be desired, and smacks of arbitrariness and colorable exercise of power. The
Petitioner is correct in submitting that the same smacks of an absence of bona fdes.
When the Petitioner appeared before the revenue authority in a timely manner, and
raised a serious objection to the sale of the said Property by claiming rights therein,
the same ought to have been considered and investigated and dealt with before any
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fnal decision was taken. The authorities instead concluded the auction sale on the
same day and passed the impugned Order dated 21 st February 2019 without
considering, or even adverting to the Petitioner's objections.
42. At the time of hearing, the Learned Counsel for the Petitioner
contended that despite the Petitioner's objections, taken by its Advocates vide their
Letters dated 21st February 2019 and 28th February 2019, Respondent Nos. 1 and 2
issued a Sale Certifcate dated 11th March 2019 in favour of Respondent Nos. 3 and 3A.
We fnd that this is in the teeth of Section 208 of the MLRC, which reads thus:
"208. On the expiration of thirty days [or, as the case may be,
one hundred and eighty days] from the date of the sale, if no such
application as is mentioned in section 207 has been made, or if such
application has been made and rejected the Collector shall make an
order confrming the sale :
Provided that, if he has reason to think that the sale ought to be set
aside notwithstanding that no such application has been made, or on
ground other than those alleged in any application which has been
rejected, he may, after recording his reasons in writing, set aside the
sale."
Clearly, the sale was not only confrmed within 30 days, but the Sale Certifcate was
also issued before the expiry of thirty days. This too demonstrates the undue haste
with which the authorities have proceeded to conclude the auction sale of the said
Property in favour of Respondent Nos. 3 and 3A, and completely vitiates the sale
procedure.
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43. There is another reason to hold that there was undue haste on the
part of the authorities in concluding the sale. The Learned Counsel for the
Petitioner is correct in placing reliance upon Section 195 of the MLRC, which
reads thus:
"195. Postponement of sale: The Sale may from time to time be
postponed for any sufcient reason:
Provided that, when the sale is postponed for a period of longer than
thirty days, a fresh proclamation and notice shall be issued unless the
defaulter consents to waive it."
This provision clearly demonstrates that Respondent No. 2 had the power to
postpone the auction sale for any sufcient reason. In our opinion, when the Petitioner
came forward with an objection pointing out that it had a registered mortgage over the
said Property which was the subject matter of the auction, the same was sufcient
reason for the authority to postpone the same. It could have postponed the sale,
investigated the claim of the Petitioner, and if the same was not found to be genuine, it
could have conducted the sale thereafter. No prejudice would have been caused to any
party if such course of action was adopted. On the contrary, the Petitioner, sufered
serious prejudice by its objections being disregarded and the sale being concluded
despite the same. In fact, we have found the Petitioner's claim as a Mortgagee to be
genuine as noted above. That being the case, the authorities have clearly acted with
undue haste and with a premeditated intention to conclude the sale on 21 st February
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2019 itself, whatever the circumstances or objections raised. We fnd that this conduct
vitiates the sale.
44. Apart from the above, it is required to be noted that when a transfer of
immovable property is efected by way of a registered instrument, a subsequent
purchaser is said to have implied notice of the same. Section 3 of the Transfer of
Property Act, 1882 takes into its ambit not only the actual notice but also implied
notice by way of a registered instrument, provided that the instrument is required by
law to be registered. Mere non-entering the encumbrances in the revenue records as
contended on behalf of Respondent Nos. 1 and 2 and 3 and 3A cannot be an excuse.
Moreover, the second proviso to Section 149 of the MLRC exempts the obligation of
reporting the acquisition of rights by a registered instrument to the revenue
authorities. Section 149 reads as follows:
"149. Acquisition of rights to be reported. - Any person acquiring
by succession, survivorship, inheritance, partition, purchase,
mortgage, gift, lease or otherwise, any right as holder, occupant,
owner, mortgagee, landlord, Government lessee or tenant of the land
situated in any part of the State or assignee of the rent or revenue
thereof, shall report orally or in writing his acquisition of such right to
the Talathi within three months from the date of such acquisition,
and the said Talathi shall at once give a written acknowledgement of
the receipt of such report to the person making it:
Provided that, where the person acquiring the right is a minor or
otherwise disqualifed, his guardian or other person having charge of
his property shall make the report to the Talathi:
Provided further that, any person acquiring a right with the
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permission of the Collector or by virtue of a registered document
shall be exempted from the obligation to report to the Talathi:
Provided also that, where a person claims to have acquired a right
with the permission of the Collector where such permission is required
under the provisions of this Code or any law for the time being in
force, such person shall on being required by the Talathi so to do
produce such evidence of the order by which such permission is given as
may be required, by rules made under this Code.
Explanation I.- The rights mentioned above include a mortgage
without possession, but do not include an easement or a charge not
amounting-to a mortgage of the kind specifed in Section 100 of the
Transfer of Property Act, 1882.
Explanation II.- A person in whose favour a mortgage is discharged or
extinguished or lease determined, acquires a right within the meaning
of this Section.
Explanation III.- For the purpose of this Chapter, the term "Talathi"
includes any person appointed by the Collector to perform the duties of
a Talathi under this Chapter." [emphasis supplied]
45. Apparently, the revenue authorities were well cautioned about the prior
mortgage of the Petitioner, but acting in a hasty manner, they proceeded with the
auction which shows complete disregard and mala fdes on their part.
46. The Petitioner has placed reliance on the decision of the Supreme Court
in the case of Vishal N. Kalsaria vs. Bank of India and others (supra) to contend that the
consent of the creditor was necessary before the sale of mortgaged property. In the
said case, a lease was created after the property was mortgaged. In that context, it has
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been held that the consent of the creditor ought to have been taken before granting
leasehold rights relating to the property which has been mortgaged to the bank, a
secured creditor. In the case at hand also, the Additional Tehsildar was well aware
about the prior mortgage created in favour of the Petitioner by way of a registered
instrument, but he still did not bother to obtain the Mortgagee's consent.
47. In view of the same, we fnd that the Learned Counsel for the Petitioner
is correct in pointing out the prejudice caused to the Petitioner's contractual and
statutory rights as a registered Mortgagee of the said Property by the conclusion of the
auction sale in favour of Respondent Nos. 3 and 3A. The learned Counsel for
Respondent Nos. 3 and 3A contended that the Petitioner being a Mortgagee of the
said Property only had a limited interest therein. He submitted that as a Mortgagee,
the Petitioner could not object to the auction sale of the said Property as its rights as a
Mortgagee were not afected in law. We thereupon enquired with the learned Counsel
whether his clients were willing to have the sale of the said Property in their favour
confrmed, subject to the Petitioner's secured charge in respect of the same. The
learned Counsel for Respondent Nos. 3 and 3A categorically responded in the
negative. He stated that in such an event his clients would prefer to take a refund of
the amounts paid by them in furtherance of the auction sale. We fnd this stand of the
Auction Purchasers to be untenable. They cannot on the one hand contend that the
Petitioner's rights as a Mortgagee in respect of the said Property are unafected by the
auction sale in their favour, and on the other hand contend that the sale in their favour
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be unconditional and without reference to the Petitioner's rights therein. The
argument is self - defeating and cannot be countenanced.
48. This leaves us to consider the submissions made by the Learned Counsel
for the Petitioner that the auction sale of the said Property was efected contrary to the
provisions of Chapter XI of the MLRC and the Rules framed thereunder. We have
perused the documents annexed to the Petition, the Afdavit in Reply, and those
found in the original fle produced by Respondent No. 2 for our perusal, to check the
aspect of compliance of the procedural aspect by the authorities. In this regard, the
following chronological list of dates is relevant:
Date Event
16.02.2015 The Debenture Trust Deed was executed between the Petitioner and
Respondent Nos. 4 to 8 under which the mortgage of the said Property
was created in favour of the Petitioner.
12.02.2016 Respondent No. 4 executed the Supplementary Deed of Mortgage in
favour of the Petitioner.
14.02.2018 Orders passed by Respondent No. 9 disposing of the complaints fled
27.02.2018 by Respondent Nos. 10 to 15 and directing Respondent No. 9 to refund
the amounts paid by them with interest.
23.04.2018 Recovery Warrant was issued by Respondent No. 9 in terms of Section
40(1) of the RERA.
24.05.2018 The Collector, Pune, directed the Additional Tehsildar to initiate
recovery of the sums, in terms of the provisions of MLRC, with a
description of property (the said Property was not mentioned).
11.06.2018 The Additional Tehsildar issued a Demand Notice under Rule No. 5 of
the Maharashtra Recovery of Land Revenue Rules ("MRLR Rules").
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23.07.2018 The Additional Tehsildar issued a Notice of Attachment under Rule 6
of the MRLR Rules (without a description of the said Property)
September The Additional Tehsildar issued Proclamation under Rule 6 of MRLR
2018. Rules (without a description of the said Property)
23.10.2018 The Talathi issued a Demand Notice under Sections 174 and 178 of the
MLRC to Respondent No. 4.
15.09.2018 The Additional Tehsildar issued a Notice of Attachment to the
borrower specifying the property to be attached (the said Property has
not been mentioned).
21.09.2018 The Talathi gave a description of the property owned by the
Respondent No. 4 - borrower.
22.09.2018 The Talathi informed the SDO that the mutation entry relating to the
RERA dues has been efected in the revenue record and sought
valuation.
19.01.2019 Valuation Report of the said Property showing its value to be Rs.
1,59,52,800/- was received from the Sub-registrar.
24.01.2019 Panchanama was prepared by the Talathi of various properties owned
by the Respondent No. 4 including the said Property.
25.01.2019 The Additional Tahsildar sought approval from the SDO for
conducting auction of the properties owned by the borrower (including
the said Property).
04.02.2019 The SDO approved the Valuation Report and permitted initiation of
recovery proceedings by way of auction as per the MLRC.
05.02.2019 The Tehsildar issued a letter to the concerned authority for issuing
Public Notice regarding auction sale of the said Property.
19.02.2019 Public Notice qua the auction sale was published in the daily local news
paper 'Sakal'.
21.02.2019 Auction was scheduled as per the Public Notice.
21.02.2019 The Petitioner raised oral and written objections and requested
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Respondent No. 2 to withhold the auction.
21.02.2019 The Additional Tehsildar conducted the auction in which the bid of
Respondent Nos. 3 and 3A for sum of Rs. 1,66,40,000/- was accepted
for sale of the said Property.
21.02.2019 Respondent Nos. 3 and 3A Auction Purchasers deposited 1/4th amount
of the sale consideration.
Respondent No. 3 and 3A Auction Purchasers deposited the balance
sale consideration with the Additional Tehsildar.
08.03.2019 The auction sale was confrmed by the Additional Tehsildar.
11.03.2019 Sale Certifcate was issued by the authorities in favour of Respondent
Nos. 3 and 3A.
49. Since the dues payable by Respondent No. 4 to Respondent Nos. 10 to
15 are to be recovered in the same manner as arrears of land revenue, the provisions of
Chapter XI of MLRC which provides for the manner of realization of land revenue,
would be applicable.
50. Sections 181 and 182 of the MLRC, authorize the Collector to attach a
defaulter's immovable property and take it under his management. The procedure for
efecting sale can be found under Sections 192 and 193 of the MLRC. It is clear from
these provisions that a proclamation of sale has to be issued, specifying the time and
place of the sale. The proclamation is to be made by a specifc mode, i.e. customary
mode by beat of drum at the place where the immovable property is situated.
Moreover, under Section 193 of the MLRC, a written notice of the intended sale along
with the time and place is to be afxed at the Ofces of the Collector and the
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Tehsildar of the relevant place. Every auction sale must be preceded by an order of
attachment of said property. These provisions are mandatory. The Learned Counsel
for Respondent Nos. 1 and 2 failed to show us that either due proclamation was issued
or the said Property was attached prior to the auction sale being conducted.
51. During the course of making submissions, the revenue authorities relied
upon the Proclamation dated 15th October 2018 issued in Form No. 3 in terms of Rule
9 of the MRLR Rules. This in fact, was a form for attachment of movable property.
Be that as it may, it does not bear reference to the property which came to be attached.
There appears to be a vague reference of land bearing 'Survey No. 94 and others' that
too in the context of land in respect of which there are arrears of land revenue. There
is absolutely no mention of the said Property. On 23 rd July 2018, the Additional
Tehsildar issued a Written Notice of Attachment in Form No. 2 as per Rule 6 of the
MRLR Rules. However, the same does not bear reference to the said Property.
Another Notice issued by the Additional Tehsildar in the month of September 2018
equally does not bear a specifc reference to the said Property. By no stretch of
imagination can the same be termed to be an attachment of the said Property.
52. As already held above, the sale was confrmed within a period of thirty
days of the auction being held, contrary to the provisions of Section 208 of the MLRC.
Moreover, the auction sale was held within two days of the Public Notice in respect of
the same being issued on 19th February 2019. The same is contrary to the mandatory
30 day period mentioned in Section 194 of the MLRC. It is thus, evident that the
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mandatory provisions of the MLRC are not followed while conducting the auction
sale.
53. The reliance placed by the learned Counsel for Respondent Nos. 3 and
3A on the Judgments of the Supreme Court in the cases of Gurjonginder Singh vs.
Jaswant Kaur (supra) and Janakraj vs. Gurdial Singh (supra) are distinguishable and
not applicable in the facts of our case. They were passed in the context of sales made
in execution of decrees passed under the Civil Procedure Code, 1908 and not in the
context of sales under the provisions of the MLRC. Moreover, contrary to the
submission of the learned Counsel for Respondent Nos. 3 and 3A, these Judgments
cannot be cited to propagate an absolute proposition that even if there is any
procedural irregularity found in the auction process, the interests of the auction
purchasers are required to be protected. If such a submission is to be accepted, then
no concluded auction sale could be interfered with at the pleasure of the auction
purchaser, even if the same is in the teeth of mandatory legal provisions, as is the case
in the present Petition.
54. The statutory requirements under Chapter XI of the MLRC bear a
specifc purpose. The mandatory 30 day period between the public announcement of
the auction sale and the holding of the auction gives time to the defaulter to comply
with his obligations or for anybody on his behalf to come forward to his rescue. That
apart, it gives time to any other interested party to lay claim in respect of the property
put up for auction, such as the Petitioner in the present case. It gives time to
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interested members of the public to assess their options and participate in the auction
with sufcient time at their disposal. It is meant to make the process transparent and
above reproach. The conclusion of the sale by Respondent Nos. 1 and 2 without any
proclamation or attachment of the same, and within forty-eight hours of the public
announcement, betrays the process to be murky and anything but transparent. The
same is in the teeth of mandatory legal provisions of the MLRC and the same vitiates
the sale.
55. In view of our fndings recorded above, we fnd that the auction sale of
the said Property, the conclusion of the same in favour of Respondent Nos. 3 and 3A
and the issuance of the Sale Certifcate dated 11 th March 2019 in favour of Respondent
Nos. 3 and 3A are void and legally unsustainable. We accordingly exercise our
jurisdiction under Article 226 of the Constitution of India to quash and set aside the
same. The Petition is made absolute in terms of prayer clauses A and B, which read as
follows:
"A. That this Hon'ble Court be pleased to declare that the
entire exercise of conducting auction of the Subject Property is
fraudulent and non-est and quash and set aside the same;
B. that this Hon'ble Court be pleased to call for the records
pertaining to the Impugned Order and after considering the legality
and validity thereof, be pleased to issue of writ of certiorari or any
other writ, order or direction in the nature thereof quashing and
setting aside the sale and Impugned Order dated February 21, 2019,
being Exhibit C hereto;"
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56. Since we have set aside the auction sale of the said Property, we direct
that the sale proceeds deposited by Respondent Nos. 3 and 3A be refunded to it. The
same are lying deposited with Respondent No. 9 under Orders passed in this Petition.
We direct Respondent No. 9 to refund the amount of Rs. 1,66,40,000/- with accrued
interest to Respondent Nos. 3 and 3A. We sympathize with the Respondent Nos. 10
to 15 fat purchasers; however, their remedy lies elsewhere.
57. Rule is made absolute in the above terms with no order as to costs.
(VINAY JOSHI, J. ) ( S.J. KATHAWALLA, J. )
