Bombay High Court
Shri. Sarjerao Rajaram Veer vs Jyotirling Tractors Pvt. Ltd. Through ... on 8 October, 2024
Author: Sharmila U. Deshmukh
Bench: Sharmila U. Deshmukh
2024:BHC-AS:40890
WP-6481-23.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 6481 OF 2023.
1. Dr. Annasaheb Chougule Urban
Co-Op Bank Ltd., Peth Vadgaon,
Tal. Hatkanangale District-Kolhapur
2. Special Recovery Officer
Dr. Annasaheb Chougule Urban
Co-op. Bank Ltd., Peth Vadgaon,
Tal. Hatkanangale District- Kolhapur ...Petitioners.
Versus
1.Jotirling Tractors
Prop Shri Ramchandra Dnyandev Mane
R/o. Shiroli (Pulachi), Tal. Hatkanangale,
District-Kolhapur
2. Deputy Registrar, Co-operative Societies,
Kolhapur
3. Sarjerao Rajaram Veer
(Since deceased thr. Legal heirs)
3a. Smt. Sangita Sarjerao Veer
Age.43 Occu. Housewife,
3b Sangram Sarjerao Veer
Age 24, Occ Nil
3c Vikram Sarjerao Veer
Respondent Nos.3a to 3c are
(R/o. C/o. Shreyas Grinding,
Megharaj Colony, Shiroli (Pulachi),
Tal. Hatkanangale, District-Kolhapur) ...Respondents.
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WITH
WRIT PETITION NO. 13793 OF 2018.
1. Sarjerao Rajaram Veer
(Since deceased thr. Legal heirs)
1. Smt. Sangita Sarjerao Veer
Age.43 Occu. Housewife,
2. Sangram Sarjerao Veer
Age 24, Occ Nil
3. Vikram Sarjerao Veer
Respondent Nos.3a to 3c are
R/o. C/o. Shreyas Grinding,
Megharaj Colony, Shiroli (Pulachi),
Tal. Hatkanangale, District-Kolhapur ...Petitioners.
Versus
1. Jotirling Tractors Pvt. Ltd.
Thr. Its Prop.
Shri Ramchandra Dnyandeo Mane,
R/o. Shiroli Pulachi, Tal. Hatkanangle,
Dist. Kolhapur,
2.Dr. Annasaheb Chougule Urban Co-operative
Bank Ltd. Peth Vadgaon, Tal. Hatkanangle,
Dist. Kolhapur,
3.Special Recovery Officer,
Dr. Annasaheb Chougule Urban Co-operative
Bank Ltd. Peth Vadgaon, Tal. Hatkanangle,
Dist. Kolhapur,
4. District Sub-Registrar.
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Co-operative Societies, Kolhapur,
5. Divisional Joint Registrar,
Co-operative Societies, Kolhapur Division,
Kolhapur. ...Respondents.
------------
Mr. Umesh R. Mankapure a/w. Ms. Stefy J. Dias for the Petitioner in WP
No.6481/2023 and for Respondent No.2 in WP No.13793/2018.
Mr. Vaibhav Gaikwad for the Petitioner in WP No.13793/2018.
Mr. S. R. Ganbavale for the Respondent No.1.
Ms. T. J. Kapre, AGP for Respondent Nos.4 and 5 in WP No.13793/2018
and for Respondent No.2 in WP NO.6481/2023.
------------
Coram : Sharmila U. Deshmukh, J.
Date : 8th October, 2024.
JUDGMENT:
1. RULE. Rule made returnable forthwith and taken for final
hearing with consent of the parties.
2. Both petitions take exception to the order dated 4 th April 2018
passed in Revision Application 272 of 2017 by the Divisional Joint
Registrar allowing the Revision Application filed by Respondent No.1
cancelling the sale certificate and the sale confirmation issued under
Rule 107 (14) (v) of Maharashtra Co-operative Societies Rules, 1961.
3. The facts pleaded are that the Respondent No.1 had obtained
financial assistance from the Petitioner bank of Rs.1,50,000/- . As there
was default, application was made for issuance of recovery certificate
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under Section 101 of the Maharashtra Co-operative Societies Act, 1960
(for short, MCS Act). Pursuant thereto, recovery certificate was issued
and the same was put into execution. The property of the Respondent
No.1 came to be attached and sold in auction. Being aggrieved by the
auction sale dated 18th December 2014, Respondent No.1 filed
Revision Application No.139 of 2015 before the Divisional Joint
Registrar challenging the auction sale alleging that after recovery
certificate was obtained, the applicant had deposited certain amounts
and therefore there is due and payable a sum of Rs.1,23,270/- and the
property of Respondent No.1 has been auctioned for Rs.5,15,000/-. The
Divisional Joint Registrar by order dated 22 nd April 2015 rejected the
Revision Application. Subsequently, Application was made for issuance
of sale certificate and confirmation of sale by the Petitioner-bank
which came to be allowed by order dated 1st October 2015.
4. Respondent No. 1 filed Revision Application under Section 154 of
MCS Act challenging the auction sale dated 18 th February 2014, sale
certificate and confirmation of sale dated 1 st October 2015. The
Revision Application No.353 of 2015 came to be decided by order
dated 5th May 2016 holding that the Revision against the auction sale is
not maintainable and only against the sale certificate and confirmation
of sale, matter was remanded for fresh hearing. On remand, the sale
certificate and the sale confirmation was upheld by the Deputy
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Registrar by order dated 7th December 2016.
5. Revision Application No.445 of 2016 was once again filed by
Respondent No.1 before the Divisional Joint Registrar contending that
no notice of auction sale was given to the Respondent No.1 and the
auction sale is illegal. By order dated 19th April 2017 the matter was
again remanded for fresh consideration on sale confirmation and sale
certificate by the Divisional Joint Registrar. Upon remand the Deputy
Registrar once again confirmed the sale certificate and sale
confirmation.
6. Being aggrieved by order dated 15th September 2017 passed by
the Deputy Registrar, Revision Application was again filed by
Respondent being Revision Application No.272 of 2017. The Divisional
Joint Registrar by the impugned order dated 4 th April 2018 allowed the
Revision Application and set aside the sale certificate and the sale
confirmation on the ground that the upset price was approved on 29 th
April 2010 and auction had taken place on 18th February 2014 that is
after four years.
7. Heard Mr. Umesh R. Mankapure for the Petitioner in WP
No.6481/2023 and for Respondent No.2 in WP No.13793/2018 and Mr.
Vaibhav Gaikwad for the Petitioner in WP No.13793/2018, Mr. S. R.
Ganbavale for the Respondent No.1 and Ms. T. J. Kapre, AGP for
Respondent Nos.4 and 5 in WP No.13793/2018 and for Respondent
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No.2 in WP NO.6481/2023.
8. Mr. Mankapure, learned counsel for the Petitioner would submit
that pursuant to the issuance of recovery certificate, same was put
into execution and property of Respondent No.1 was attached and
auctioned. He would submit that the only ground on which sale
certificate and sale confirmation has been set aside is that the upset
price was fixed on 20th October 2010 whereas sale has been conducted
on 18th February 2014 after four years. He has tendered across the bar
a compilation of documents pertaining to the previous revision
Application and the orders which were passed and has taken this Court
in detail through the documents. He submits that every effort has been
made by Respondent No.1 defaulter to stall the proceedings. He
submits that although auction sale was conducted on 18 th February
2014 till date the auction purchaser could not be put into possession by
reason of various orders of remand passed by the Divisional Joint
Registrar. He submits that under Rule 107 (14) in case of sale of any
immovable property the time limit prescribed is 30 days to set aside
the sale on the ground of material irregularity, mistake or fraud and as
per the proviso the sale can be set aside only if the recovery officer is
satisfied that the applicant has sustained substantial injury by reason
of such mistake and fraud. He submits that his first objection is to
maintainability of the Revision Application against the sale certificate
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and sale confirmation. He tenders compilation of judgments and
submits that it is a settled position in law that for the purpose of
challenging either the auction sale or sale confirmation or sale
certificate, revision under Section 154 is not maintainable. He would
submit that the second submission is that the Divisional Joint Registrar
sets aside the sale confirmation and sale certificate on the ground that
upset price has been fixed in the year 2010 and the auction sale has
been conducted in the year 2014. He submits that even if it is accepted,
that the same constitutes a material irregularity, what was required to
be shown is that by reason of the material irregularity, substantial
injury is caused to the applicant. He submits that property has been
sold for a sum of Rs.5,15,000/- whereas the upset price which was fixed
was Rs.2,60,284/-.
9. Mr. Gaikwad, learned counsel appearing for the Petitioner in
connected Writ Petition adopts the submissions of Mr. Mankapure.
10. Per contra, Mr. Ganbavale, learned counsel appearing for the
Respondent would submit that under Rule 107(14), the Respondent
No.1 was entitled to apply to the recovery officer to set aside the sale.
Pointing out to the definition of the "Recovery Officer" in Rule 2 (h) of
the MCS Rules 1961, he submits that the Recovery Officer exercised
the powers of the Registrar under Section 156 of the MCS Act. He
submits that the Application which was made before Divisional Joint
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Registrar was under Section 156 and not under Section 154 and
therefore the proceedings were maintainable. He would further submit
that in the order dated 22 nd April 2015 passed in Revision Application
No.139/2015, the stand of the Bank was that if the Respondent No.1
paid Rs.1,80,382/- then the bank is ready to withdraw the auction sale.
He submits that subsequently amount was paid, though not within the
period prescribed, and therefore the auction sale could not have been
conducted. He would further submit that in the decision in the case of
Rajesh B. Yemkanmardi and Ors. vs. Praful J. Padiya and Ors. 1 this
court has observed that collusive auction process would amount to
playing fraud and fraud would vitiate the entire auction process
irrespective of whether Revision Application was maintainable against
the sale certificate. He submits that in the present case even in
proceedings under Article 227, issue of fraud can be raised and that
fraud vitiates all acts. He submits that the fraud has been alleged in the
Revision Application pleading that there was no auction sale notice to
the Respondent No.1 and there is illegal auction of property on the
basis of wrong upset price. He submits that it is one of the grounds in
appeal that the Bank has not considered deposit of the amount as per
the recovery certificate and satisfaction of the recovery certificate. He
submits that specific case of fraud is therefore pleaded and by virtue of
1 2021(1) Mh. L. J. 301
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fraud alleged, revision Application is maintainable.
11. Considered the submissions and perused the record.
12. Multiple Revision Applications were filed by Respondent No.1
right from the year 2015 after the auction sale was carried out on 18 th
February 2014. The First Revision Application challenged the auction
sale dated 18th February 2014 and was filed under Section 154 of the
MCS Act which came to be rejected so also the second Revision
Application. On 1st October 2015 sale came to be confirmed under Rule
107(14)(v) and sale certificate was issued. Subsequently even the sale
confirmation and the sale certificate was challenged by Respondent 1
claiming that no opportunity of hearing was given to the applicant
while issuing sale permission and the sale certificate. The provisions of
Rule 107 does not provide for any opportunity of hearing to be given
to the defaulter while issuing sale certificate and for confirmation of
the same. Despite thereof, the Divisional Joint Registrar remanded the
matter twice and on both these occasions, Respondent No.1 was heard
and sale certificate and sale came to be confirmed. Again an attempt
was made by filing Revision Application No.272/2017 challenging the
sale certificate which was confirmed after 2nd remand on 15th
November 2017.
13. Before proceeding to analyze the findings in the impugned order
it would be apposite to have brief look at Rule 107 of MCS Rules 1961
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contained in Chapter XI setting out the procedure for attachment and
sale of property. In the present case we are concerned with the
objections which can be raised under Sub-Rule (13) and (14) of Rule
107. Perusal of Rule 107 would indicate that the same is complete
Code in itself prescribing the procedure for attachment and sale of the
property as also the contingencies in which such sale can be assailed by
any person having interest in the said property. Sub Rule (13) and (14 )
of Rule 107 reads as under:
"(13) Where immovable property has been sold by the
[Recovery Officer] any person either owning such property or
holding any interest therein by virtue of a title acquired before
such sale may apply to have the sale set aside on his depositing
with the Recovery Officer:-
(a) for payment to the purchaser a sum equal to 5 per cent of the
purchase money; and
(b) for payment to the applicant, the amount of arrears specified
in the proclamation of sale as that for the recovery of which the
sale was order together with interest thereon and the expenses
of attachment, if any, and sale and other costs due in respect of
such amount, less amount which may since the date of such
proclamation have been received by the applicant.
(ii) If such deposit and application are made within thirty days
from the date of sale, the Recovery Officer shall pass an order
setting aside the sale and shall repay to the purchaser, the
purchase money so far as it has been deposited, together with
the 5 per cent deposited by the applicant :
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Provided that if more persons than one have made deposit and
application under this Sub-rule, the application of the first
depositor to the officer authorised to set aside the sale, shall be
accepted.
(iii) If a person applies under Sub-rule (14) to set aside the sale of
immovable property, he shall not be entitled to make an
application under this Sub-rule.[Provided that, in case the
Recovery Officer fails to handover possession of the property for
any reason within six months from the date of confirmation of
the sale to the purchaser, amount deposited by the purchaser
may be refunded to him on his demand.]
(14) (i) At any time within thirty days from the date of the sale of
immovable property, the applicant or any person entitled to
share in a rateable distribution of the assets or whose interests
are affected by the sale, may apply to the [District Deputy
Registrar] to set aside the sale on the ground of a material
irregularity or mistake or fraud in publishing or conducing
it :Provided that no sale shall be set aside on the ground of
irregularity or fraud unless the [District Deputy Registrar] is
satisfied that the applicant has sustained Substantial injury by
reason of such irregularity, mistake or fraud.
(ii) If the application be allowed, the Recovery shall set aside the
sale and may direct a fresh one. [Expenses of the such set aside
sale shall be borne by the society.]
(iii) On the expiration of thirty days from the date of sale, if no
application to have the sale set aside is made or if such
application has been made and rejected, the [District Deputy
Registrar] shall make an order confirming the sale;
(iv) Whenever the sale of any immovable property is not so
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confirmed or is set aside, the deposit or the purchase money, as
the case may be, shall be returned to the purchaser.
(v) After the confirmation of any such sale, the [District Deputy
Registrar] shall grant a certificate of sale bearing his seal and
signature to the purchaser, and such certificate shall state the
property sold and the name of the purchaser."
14. Reading of the above provisions would indicate that even after
attachment of the immovable property and even where immovable
property has been sold by the Recovery Officer, an opportunity is given
to the defaulter or any person having any interest in the property to
set aside the same subject to the conditions mentioned therein. If the
proceedings are initiated under Sub Rule (13) of Rule 107 by which the
purchase money as well as the amount of arrears is paid within 30 days
from the date of sale, the Recovery Officer is enjoined to pass an order
setting aside the sale and repay the money to the purchaser. If such a
course is adopted by the concerned person then no Application can be
filed under Sub Rule (14) of Rule 107 to set aside the sale on the
ground of material irregularity or mistake or fraud.
15. In the present case, auction sale was conducted on 18 th February
2014 which came to be challenged by way of Revision Application
under Section 154 of the MCS Act. Irrespective of the position whether
the Revision was maintainable or not, the fact remains that the order
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of 24th April 2015 records that as per the statutory provisions, the
defaulter has not deposited the entire dues plus 5% as per Rule
leading to rejection of Revision Application. Once an opportunity was
given to the defaulter under Sub Rule (13) of Rule 107, it was expected
that there would be due compliance in order to secure his own interest
in the property which is stated to be residential house. However
Respondent No.1 did not avail of that opportunity. Although it is
stated that subsequently amounts were paid, the fact remains that
there was non compliance of Sub Rule (13) as noted by the order dated
24th April 2015.
16. Having lost that opportunity, several attempts were then made
by Respondent No.1 by filing Revision Applications for challenging the
sale confirmation and the sale certificate. Sub Rule (14) of Rule 107
provides that within a period of 30 days from the date of sale of
immovable property, the concerned person having interest can apply
to the Recovery Officer to set aside the sale. As per the said provision,
the Application for setting aside sale can be made only on the ground
of material irregularity, mistake or fraud in publishing or conducting it
and that too within a period of 30 days and the proviso makes it clear
that where the sale is sought to be set aside on the ground of
irregularity or fraud, the Recovery Officer must be satisfied that
applicant has sustained substantial injury by reason of such mistake or
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fraud.
17. In the present case, even if it is assumed that the Revision
Application was one filed under Sub-Rule (14) of Rule 107, it was not
filed within prescribed period of 30 days and the challenge to the
auction sale or the sale certificate and the confirmation of the sale by
the Respondent 1 did not make out any case of material irregularity,
mistake or fraud. The grounds on which the revision Application was
filed was that no notice of auction sale was given to the applicant, that
there has been illegal auction on the basis of wrong upset price, the
applicant has deposited amount with the opponent bank and satisfied
the recovery certificate.
18. Although it is sought to be alleged by Mr. Ganbavale, that by
reason of the amount having been paid by the defaulter which is lying
with the Petitioner bank, the sale of the property constitutes fraud, the
fact remains that as recorded in the order of 22 nd April 2015, there is
non compliance of Sub Rule (13) of Rule 107. As far as the upset price
being wrong or not giving auction sale notices, the said contentions
cannot constitute an allegation of fraud and at the most can be said to
be allegation of material irregularity in conducting the sale. In order to
challenge the sale on the ground of material irregularity, there has to
be a satisfaction that the applicant has sustained substantial injury by
reason of such material irregularity. From the grounds made out in the
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revision Application and the averments therein, nothing has been
demonstrated to this Court to show that even if the upset price was
fixed four years prior to the auction sale, by reason of the sale,
Respondent No.1 has sustained substantial injury. The proviso is very
clear and specific and unless there is satisfaction recorded in the order
of the Divisional Joint Registrar that there has been a Substantial injury
caused to Respondent No.1 by reason of upset price fixed prior to four
years, the sale confirmation and the sale certificate could not have
been set aside.
19. The whole object of prescribing a time limit of 30 days under
Sub-Rule (14) of Rule 107 and the grounds on which auction sale can be
challenged by the defaulter or any any person interested is to ensure
that the defaulters does not take advantage of the process of law and
stall the auction proceedings and sale in favour of third parties. This is
precisely what has happened in the present case. An auction which has
been conducted in the year 2014 has not yet fructified in favour of the
auction purchaser who has parted with valuable consideration in the
year 2014 and still not put in possession of the auctioned property.
Merely because there is some allegation made in the appeal memo as
regards the upset price, which are bald allegation without any material
to substantiate the said allegations, no conclusion could be reached
that there is material irregularity or fraud in conducting the sale. It
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cannot be disputed that fraud must be pleaded specifically with clear
details and cannot be only alleged and inferred. Perusal of the appeal
memo would indicate that there are no clear pleadings as to fraud and
therefore the contention of Mr. Ganbavale that the Revision
Application would be maintainable where there is fraud in the auction
sale resulting in vitiating and deserved to be rejected.
20. Now coming to the issue as regards the maintainability of the
Revision Application under Section 154, Mr. Ganbavale has submitted
that in view of the definition of Recovery Officer under Rule 2(h), the
revision Application which was filed was in fact the Application under
Section 156 of MCS Act which the recovery officer had power to
adjudicate. Firstly Section 156 of the MCS Act deals with the power of
the Registrar to recover certain sum by attachment or sale of the
property and the said provision cannot be invoked for the purpose of
challenging the auction sale as contemplated under Rule 107 of MCS
Rules, 1961. The reliance on Rule 2(h) of the MCS Rules 1961 is also
misplaced as the said Rule defines the expression "Recovery Officer" to
mean the person who is empowered to exercise the powers of
Registrar under Section 156 of MCS Act.
21. Although the provisions of Rule 107 read with Sub Rules
prescribe the manner in which the challenge can be made to the
auction sale, pursuant to the attachment in execution of the recovery
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certificate, a Revision Application was filed repeatedly by Respondent
No.1 under Section 154 of MCS Act and entertained by the statutory
authorities without noticing clear provisions of law contained in Rule
107 and the legal position which is now no longer res integra and
settled by various decisions of this Court. In the decision of Rajesh
Yemkanmardi (supra) it has been held that revision under Section 154
of the MCS ACT against confirmation of sale and issuance of sale
certificate is not maintainable as the same are not orders within
meaning of Section 154 of the Act and that adequate and efficacious
remedy is provided under Rule 107(14)(i) of the Rules. The issue was
also considered by the Apex Court in the case of Deendayal Nagari
Sahakari Bank Limited and Anr. vs. Munjaji and Ors. 2, where the Apex
Court has held that once the borrower fails to apply to the Recovery
Officer to set aside the auction sale on the ground of material
irregularity, mistake or fraud within a period of 30 days from the date
of sale of immovable property thereafter it is not open for the
borrower to challenge the same on the ground of material irregularity.
In view of the clear enunciation of law by the Apex Court, apart from
the fact that no revision Application was maintainable to challenge the
same, the borrower did not have any remedy left to challenge the sale
on the ground of material irregularity once the period of 30 days have
2 (2022) 7 Supreme Court Cases 594
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expired.
22. The Learned Single Judge in the case of Ramchandra Sitaram
Mulik and Anr vs. Janata Nagari Shakari Patsnastha Ltd. Hupari and
Ors.3 has also has also taken a view that no revision is maintainable
against sale and confirmation certificate issued by the Deputy
Registrar. In recent decision of this Court in Accentuate Developers
Pvt. Ltd. vs. Anushool Metals Pvt. Ltd. and Ors. 4 the challenge was to
auction sale and learned Single Judge have held that the auction sale
cannot be challenged by way of Revision under Section 154 of MCS Act.
From the long line of decisions which have been referred to it is very
clear that auction sale or the sale confirmation and the sale certificate
cannot be challenged by way of revision under section 154 of the MCS
Act.
23. The decision in the case of Rajesh Yemkanmardi (supra) has
taken a view that where there is fraud, which is demonstrable revision
Application would be maintainable, as fraud would vitiate the entire
auction process on the well settled proposition of law that fraud
vitiates all acts and can be raised in any proceedings. However in the
present case there is no material which has been brought on record to
prove fraud. The submissions of Mr. Ganbavale read with the grounds
in the revision Application do not set out any case of fraud. Even if it is
3 2018(2) Mh. L. J. 245
4 Writ Petition No.2919/2008 dated 14/6/2024.
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held that the upset price was fixed prior to four years the same would
not constitute fraud but would amount to material irregularity which as
held by the Apex Court in the case of Deendayal Nagari Sahakari
(supra) had to be raised within a period of 30 days and thereafter no
such ground assailing the same would be raised. The fraud which
according to Mr. Ganbavale has occurred is that the recovery certificate
stood satisfied as the amount was deposited by the Petitioner. The
provisions of Sub- Rule (13) of Rule 107 provides for deposit within a
period of 30 days from the date of sale and admittedly in the present
case the deposit, if any, was beyond the said date. In that event, the
sale cannot be set aside on account of deposit if any made by
Respondent No.1 and it is open for Respondent No.1 to adopt
appropriate proceedings for recovery of the said amount.
24. Considering the above, in my view as the sale certificate and the
confirmation of sale was not an order as is the consistent view of the
co-ordinate Benches of this Court to which I am respectfully bound,
Revision under Section 154 of the MCS Act before the Joint Divisional
Registrar was not maintainable. Even for the Revision Application to
be maintainable on ground of fraud there must be clear and specific
pleading of fraud which pleadings are absent in the present case. The
allegations made in the Revision Application are bald and vague
allegations, on the basis of which no finding of fraud can be reached.
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25. In light of the above, impugned order dated 4 th April 2018 passed
by the Divisional Joint Registrar setting aside the sale confirmation and
sale certificate is clearly unsustainable and is hereby quashed and set
aside. Consequently, the Petition succeeds.
26. Rule is made absolute in the above terms. In view of disposal of
petitions, Interim/Civil Applications, if any, do not survive for
consideration and stand disposed of.
[Sharmila U. Deshmukh, J.]
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Signed by: Rajeshwari S. Karve
Designation: PA To Honourable Judge
Date: 15/10/2024 20:18:30
