Bombay High Court
Nashik District Central Co-Operative ... vs Shri. Somnath Ramchandra Shewale And ... on 27 January, 2025
Author: N. J. Jamadar
Bench: N. J. Jamadar
2025:BHC-AS:4095
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Santosh
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 11132 OF 2018
Somnath Ramchandra Shewale ...Petitioner
Versus
M/s. Saptashrungi Computers and ors. ...Respondents
WITH
REVIEW PETITION NO. 33 OF 2022
SANTOSH
SUBHASH Nashik District Central Co-operative Bank
KULKARNI
Digitally signed by
Ltd., Nashik ...Petitioner
SANTOSH SUBHASH
KULKARNI
Date: 2025.01.28
In the matter between
22:09:25 +0530
Somnath Ramchandra Shewale ...Petitioner
Versus
M/s. Saptashrungi Computers and ors. ...Respondents
WITH
INTERIM APPLICATION (ST) NO. 17681 OF 2022
IN
REVIEW PETITION NO. 33 OF 2022
WITH
WRIT PETITION NO. 2334 OF 2022
Nashik District Central Co-operative Bank
Ltd., Nashik ...Petitioner
Versus
M/s. Saptashrungi Computers and ors. ...Respondents
Mr. P. N. Joshi, a/w Mr. Nikhil Pujari, for the Petitioner in
WP/11132/2018.
Mr. Sachin Gite, for the Petitioner in WP/2334/2022 and for
Respondent No.2 in WP/11132/2018.
Mr. Anilkumar Patil, a/w Digvijay Patil, for Respondent No.1 in
WP/11132/2018 and WP/2334/2022.
CORAM: N. J. JAMADAR, J.
DATE : 27th JANUARY, 2025
1/21
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JUDGMENT:
-
1. Rule. Rule made returnable forthwith and, with the
consent of the parties, heard finally.
2. These petitions assail the legality, propriety and
correctness of the judgment and order dated 17 th April, 2018
passed by the learned District Judge, Malegaon, in Civil Misc.
Appeal No.30 of 2016, whereby a number of orders passed by
the Executing Court, inter alia, confirming the sale and issue of
the sale certificate, were set aside.
3. Shorn of unnecessary details, the background facts
necessary for the determination of these petitions can be stated
as under:
(i) The Nashik District Central Co-operative Bank
Limited - respondent No.2 (the Bank) had extended financial
facilities to M/s. Saptashrungi Computers (the borrower). In the
wake of the default in repayment, the Bank invoked arbitration.
An award for recovery of the amount of Rs.3,54,465/- alongwith
interest due thereon came to be passed in favour of the Bank,
on 3rd January, 2006. Thereupon, the Bank filed execution
proceeding before the Civil Judge, Senior Division, Malegaon,
being Special Darkhast No.29 of 2006. As the decree remained
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unsatisfied for long period, the Bank initiated measures to sale
the properties, in which security interest was credited by the
borrower, in favour of the Bank.
(ii) The execution of the decree by attachment and sale
of the mortgage property reached an advanced stage. On 15 th
September, 2005, the borrower - JD filed an application seeking
deferment of the proceedings in SD No.29 of 2006, as in the
intervening period, the borrower had paid Rs.99,160/- to the
Bank and a cheque of Rs.3,00,000/- drawn on Central Bank of
India, Malegaon Branch, was tendered in pursuance of a
proposal for amicable settlement of the dispute under the
Settlement Scheme.
(iii) By an order of the very date, the learned Judge was
persuaded to reject the application observing inter alia that
since the auction proceedings were underway and the execution
application was pending for more than eight years, the
application deserved to be rejected.
(iv) A sale proclamation under Order XXI Rule 66
followed. On 3rd October, 2015, the borrower - JD again filed an
application (Exhibit-63) before the Executing Court contending,
inter alia, that on 16th September, 2015 the Bank had accepted
the proposal for one time settlement and extended the period to
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repay the loan till 31st February, 2015. Therefore, the execution
proceeding be stayed.
(v) By an order dated 3rd October, 2015, the Executing
Court was again persuaded to reject the application observing
inter alia that on that day the execution petition was posted for
the third bid. The Court further noted that while the Court was
passing the order on Exhibit-63, the report of auction came to
be placed before the Court. Hence, the application came to be
rejected.
(vi) On the very day, Somnath Ramchandra Shevale, the
auction purchaser, filed an application to extend the time to
deposit the balance amount of Rs.51,000/-. The said application
came to be allowed by an order dated 3rd October, 2015.
(vii) The auction purchaser made the balance payment
and filed an application (Exhibit-72) for grant of sale certificate
under Order XXI Rule 94 of the Code of Civil Procedure, 1908
("the Code") and the borrower - JD moved an application not to
grant the sale certificate (Exhibit-80). By a common order dated
24th November, 2015 the Executing Court directed issue of sale
certificate in the name of the auction purchaser and disbursed
the amount of Rs.9,04,771/- to the decree-holder, which was
deposited by the auction purchaser.
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4. Being aggrieved, the borrower preferred an appeal, being
Appeal No.30 of 2016, wherein earlier orders were also assailed.
By the impugned order, the learned District Judge, Malegaon,
was persuaded to allow the appeal observing inter alia that the
entire process of auction of the suit property and issue of sale
certificate, in favour of the auction purchaser, appeared to be
illegal. The decree-holder has accepted the consideration under
the Settlement Scheme and simultaneously proceeded with the
execution. Such a course was legally impermissible. The
Executing Court ought to have noted that in pursuance of the
settlement arrived at between the parties the entire settlement
amount was paid and/or tendered and, therefore, the Bank
could not have proceeded with the sale of the immovable
property and issued the sale certificate.
5. The auction purchaser has assailed the aforesaid
judgment and order passed by the learned District Judge, in
WP/11132/2018.
6. Being aggrieved, the Bank has also preferred
WP/2334/20222.
7. It would be contextually relevant to note that in
WP/11132/2018 on 5th August, 2020, this Court directed the
Bank to deposit the amount of Rs.14,04,000/-, paid by the
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auction purchaser, alongwith interest at the rate of 12% p.a. Yet,
the Bank has not brought back the said amount, as ordered.
Instead, the Bank has preferred Review Petition No.33 of 2022
in the said WP/11132/2018, seeking recall of the said order.
8. I have heard Mr. Joshi, the learned Counsel for the
auction purchaser - petitioner in WP/11132/2018, Mr. Gite, the
learned Counsel for the Bank - petitioner in WP/2334/2022
and Review Petition No.32 of 2022 and Mr. Patil, the learned
Counsel for respondent No.1 - borrower in both the petitions.
9. Mr. Joshi submitted that the impugned order, passed by
the learned District Judge, suffers from manifest infirmities.
Firstly, the learned District Judge committed a grave error in
law in entertaining a miscellaneous appeal against a clutch of
orders, which are not appealable under Order 43 of the Code.
All the orders were set aside indiscriminately and in utter
disregard to the issue of jurisdiction. Secondly, the learned
District Judge resorted to a strange procedure of calling upon
the officers of the Bank to file an affidavit in the appeal and
pass order on the strength of the said material, which ought not
to have been looked into. Thirdly, the learned District Judge did
not appreciate the crucial fact that the borrower had not
resorted to the remedies which are available under Order XXI of
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the Code to seek the setting aside of the sale. Fourthly and, at
any rate, the learned District Judge ought to have passed the
consequential orders of refund of the amount, which the auction
purchaser was made to deposit alongwith interest. Since the
Executing Court had already disbursed the decreetal amount to
the Bank, the order setting aside the sale and issue of sale
certificate, without any consequential order, caused grave
prejudice to the purchser.
10. Mr. Joshi vehemently urged that the auction purchaser.
despite depositing the entire bid amount, has become a victim of
the circumstances. The failure on the part of the Bank to bring
back the amount despite the order passed by this Court causes
grave prejudice to the auction purchaser. Mr. Joshi thus urged
that the impugned order deserves to be quashed and set aside
and the sale confirmed. In the alternative, the Bank and the
borrower be directed to make good the loss to the auction
purchaser.
11. Mr. Gite, the learned Counsel for the Bank, supplemented
the submissions of Mr. Joshi on the aspect of the tenability of
the appeal against the orders which were impugned before, and
set aside by, the learned District Judge. Even otherwise, Mr.
Gite submitted that the judgment debtor had not sought the
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setting aside of the sale on the ground of irregularity or fraud.
The applications preferred by the judgment debtor seeking stay
to the execution proceeding, after the third bid was accepted,
without taking recourse to the provisions contained in Order
XXI Rule 90, could not have been entertained. Mr. Gite further
submitted that from the perusal of the material on record it
cannot be said, even remotely, that the sale was vitiated on
account of either material irregularity or fraud in publishing or
conducting the sale. Therefore, the mere fact that the borrower
had filed a proposal to settle the loan account under the
Settlement Scheme was, by itself, not sufficient to set aside the
sale after the highest bid was accepted in a lawful manner.
12. Mr. Patil supported the impugned order. It was urged that
the illegal manner in which the subject property was sought to
be sold, in a hurried manner, is writ large. The Bank proceeded
to seek the sale of the property of the judgment debtor despite
the proposal for one time settlement tendered by the judgment
debtor having been accepted by the central office of the Bank
and the said fact having been duly communicated to the
concerned branch. The learned District Judge was well within
his rights in directing the Bank to file an affidavit and place the
correct facts before the Court. The affidavit of the Inspector
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makes it beyond cavil that the proposal for one time settlement
alongwith a cheque of Rs.3,00,000/- was accepted and time was
granted to the judgment debtor to make deposit of the balance
amount by 31st December, 2015. Therefore, there is neither any
procedural defect nor jurisdictional error or material irregularity
in exercise of the jurisdiction by the learned District Judge,
which would warrant interference by this Court in exercise of
supervisory jurisdiction.
13. Mr. Patil further submitted that the judgment debtor is
willing to pay the amount of Rs.3,00,000/- to the auction
purchaser and/or Bank and a further sum of Rs.1,50,000/- by
way of compensation for the delayed payment. The Court may
thus work out the equities.
14. To start with, there does not appear much controversy over
the facts. The execution proceeding being SD No.29 of 2006
was filed to execute the award passed by the arbitrator. The
subject property was attached. While the proceedings for sale of
the subject property were underway, the judgment debtor filed
an application on 15th September, 2015 to the effect that on 10 th
September, 2015 a proposal for one time settlement was filed
and a sum of Rs.99,160/- was deposited with the Bank and a
cheque for Rs.3,00,000/- was drawn in favour of the Bank, and
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the said proposal was forwarded to the central office of the Bank
for approval. As noted above, the learned Civil Judge rejected
the application observing that the auction proceedings for sale
of the attached property were underway. On 3 rd October, 2015
the judgment debtor again filed application (Exhibit-63) and
brought to the notice of the Executing Court that on 16 th
September, 2015 the Bank had accepted the one time settlement
proposal and time to make payment was extended till 31 st
December, 2015. Thus, execution proceedings be stayed. The
said application was also rejected and on the very day the bid of
the auction purchaser came to be accepted. By a further order
dated 19th October, 2015, the sale was made absolute in terms of
Rule 92 of Order XXI of the Code. Thereafter, the judgment
debtor filed application (Exhibit-80) seeking stay to the issue of
sale certificate and further proceedings in the execution. By
common order, dated 24th November, 2015, the said application
was rejected.
15. It is imperative to note that the fact that on 21 st
September, 2015 itself the concerned branch of the Bank had
received the communication of acceptance of the proposal of one
time settlement submitted by the judgment debtor could not be
controverted. The record further indicates that on 31 st October,
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2015, before the order on the application of the auction
purchaser to issue the sale certificate and that of the judgment
debtor to stay the issue of sale certificate and execution
proceeding was passed, the judgment debtor had delivered the
cheque for the entire amount as per the terms of the settlement.
Yet the Bank proceeded to seek the due amount, out of the bid
amount, deposited by the auction purchaser, in the execution
proceeding. The learned Civil Judge, it seems, was also not
alive to the consequences that emanated from the acceptance of
one time settlement proposal and the amount thereunder.
16. The submission on behalf of the petitioner that the
judgment debtor ought to have resorted to the provisions
contained in Order XXI Rule 90 to set aside the sale, on the
ground of irregularity or fraud, overlooks the fact that the Bank
which had accepted the one time settlement proposal and also
money thereunder, could not have simultaneously sought the
recovery of the amount under the award by seeking execution of
the said award. The irregularity in the conduct of the sale was
writ large, even if some benefit of doubt is given to the Bank.
The fact that the application was not preferred under specific
provisions of the Code hardly matters. It is trite nomenclature of
the application is not decisive.
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17. The entire endeavour of the judgment debtor was to bring
to the notice of the Executing Court the circumstances which
indicated that, at that stage, the Bank could not have insisted
for the execution of the decree by attachment and sale of the
property of the judgment debtor as the Bank had accepted a
proposal for composition and even part payment thereunder.
The Executing Court brushed aside those objection without
properly considering the import of the auction of the Bank in
accepting the settlement proposal and payment thereunder. The
Executing Court lost sight of the fact that under Rule 2 of Order
XXI where any money payable under a decree of any kind is paid
out of Court in whole or in part to the satisfaction of the decree-
holder, the decree-holder was enjoined to certify such payment
or adjustment to the Court whose duty it is to execute the
decree, and the Court shall thereupon record the same. The
Executing Court was thus required to examine the issue as to
whether there was satisfaction of the decree in part or full. That
exercise could not have been avoided on the premise that the
auction process had already begun.
18. In these circumstances, the order refusing to set aside the
sale under Rule 92 of Order XXI of the Code was amenable to an
appeal under clause (j) of Rule 1 of Order 43. Even otherwise
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the impugned order passed by the learned District Judge
appears to be in consonance with the principles which the
Executing Court was duty bound to keep in mind while selling
the property of a judgment debtor in execution of a decree.
19. The sale of the immovable property of the judgment debtor
draws its legitimacy from the mandate of recovery of decretal
debt. The object of sale of immovable property is neither to
deprive the debtor of the property nor to expropriate the
judgment debtor of a valuable property for a relatively small
debt. If the property is allowed to be sold in execution of a
decree unjustifiably, the instrumentality of law is prone to abuse
in as much as the debtor would be expropriated of a valuable
property in an involuntary sale.
20. The expression, "necessary to satisfy the decree"
contained in Rule 64 of Order XXI clearly indicates the
legislative intent that no sale can be allowed beyond the decretal
amount mentioned in the sale proclamation. A solemn duty is
cast upon the Executing Court to sell only such portion of the
properties as is necessary to satisfy the decree. It is a mandate
of the legislature.
21. A useful reference in this context can be made to the
judgments of the Supreme Court in the cases of S. Mariyappa
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(Dead by L.Rs.) vs. Siddappa and another1, Sai Enterprises vs.
Bhimreddy Laxmaiah and another2 and Ambati Narsayya vs. M.
Subba Rao and another3, wherein the duty of the Executing
Court was expounded, albeit in the context of sale of a larger
prooerty for recovery of a relatively small decreetal amount.
22. In the case of Ambati Narsayya (supra) the question that
arose before the Supreme Court was about the legality of the
sale of 10 acres of land without considering whether a portion of
the land could have been sold to satisfy the decree, for the sum
of Rs.2,395.50. After adverting to the provisions of Order XXI
Rule 64, the Supreme Court enunciated the duty of the
Executing Court, where a large property was sought to be
proceeded against for recovery of a small amount, in the
following words:.
"7. It is of importance to note from this provision that in
all execution proceedings, the Court has to first decide
whether it is necessary to bring the entire attached proper- ty
to sale or such portion thereof as may seem necessary to
satisfy the decree. If the property is large and the decree to
be satisfied is small, the Court must bring only such portion
of the property, the proceeds of which would be sufficient to
satisfy the claim of the decree holder. It is immaterial
whether the property is one or several. Even if the property is
one, if a separate portion could be sold without violating any
provision of law only such portion of the property should be
sold. This, in our opinion, is not just a discretion, but an
obligation imposed on the Court. Care must be taken to put
only such portion of the property to sale the consideration of
which is sufficient to meet the claim in the execution petition.
1 (2005)10 SCC 235.
2 (2007)13 SCC 576.
3 1989 Supp (2) SCC 693.
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The sale held without examining this aspect and not in
conformity with this requirement would be illegal and
without jurisdiction."
(emphasis supplied)
23. In the aforesaid case, the Supreme Court placed reliance
on the following observations in the case of Takkaseela Pedda
Subba Reddi vs. Pujari Padmavathamma4.
"Under this provision the executing court derives jurisdiction
to sell properties attached only to the point at which the
decree is fully satisfied. The words 'necessary to satisfy the
decree' clearly indicate that no sale can be allowed beyond
the deretal amount mentioned in the sale proclamation. In
other words, where the sale fetches a price equal to or higher
than the amount mentioned in the sale proclamation and is
sufficient to satisfy the decree, no further sale should be
held and the court should stop at the stage."
24. In the case of S. Mariyappa (supra) the decretal debt was
of rupees 8,000/- for recovery of which one acre of agriculture
land was sold without considering the question as to whether
sale of only a part of the property would be sufficient to meet
the decretal debt. The Supreme Court, after adverting to the
previous pronouncement in the case of Desh Bandhu Gupta vs.
N. L. Anand5, set aside the sale for the reason that executing
court had not observed its statutory duties.
25. It is imperative to note that in the aforesaid
pronouncements the Supreme Court has spelled out a solemn
duty on the part of the Executing Court to bring only such
4 (1977)3 SCC 337.
5 (1994)1 SCC 131.
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portion of the property for sale the proceeds of which would be
sufficient to satisfy the decretal debt and went on to hold that
the sale held without examining this aspect and in violation of
this statutory mandate would be illegal and without
jurisdiction, by construing the expression, "necessary to satisfy
the decree" as incorporating the statutory obligation.
26. The aforesaid pronouncements would also govern the
situation at hand as the very necessity of sale, in the context of
the developments which were brought on record and could not
have been seriously controverted by the Bank, was in question.
In the case at hand, the Executing Court was required to pose
unto itself the question as to whether the sale was warranted, in
view of the purported satisfaction of the decreetal debt on
account of the acceptance of the proposal for settlement and the
money thereunder.
27. I am, therefore, not inclined to interfere with the impugned
order to the extent it sets aside the orders of sale and issue of
sale certificate in favour of the auction purchaser.
28. Mr. Joshi was justified in canvassing a submission that
the learned District Judge ought to have passed consequential
orders for return of the purchase money. Having set aside the
sale, the learned District Judge could not have allowed the Bank
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to retain the part purchase price, which was paid to the Bank
by the Executing Court towards the satisfaction of the award,
and permitted the retention of the balance amount in the Court.
Under the provisions of Rule 93 of Order XXI, where a sale of
immovable property is set aside, the purchaser is entitled to an
order for repayment of his purchase money with or without
interest, as the court may direct.
29. The submission of Mr. Joshi that, in the instant case, the
real victim was the auction purchaser cannot be said to be
unfounded. Though Mr. Patil made an endeavour to urge that
the auction purchaser is not as innocent as is sought to be
projected and had known that one time settlement proposal was
accepted, I am of the view that the auction purchaser deserves
the refund of the amount deposited by the auction purchaser
alongwith interest.
30. The material on record indicates that an amount of
Rs.9,04,771/-, out of the purchase money, deposited by the
auction purchaser, was paid to the Bank - decree-holder,
pursuant, to an order dated 20th October, 2015. The rest of the
amount, the Court is informed, still remains deposited with the
Court and has since been invested in an interest bearing
account. Thus the said balance amount alongwith the interest
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accrued thereon till date can be ordered to be refunded to the
auction purchaser.
31. As regards the amount of Rs.9,04,771.17, Mr. Gite
submitted that, the Bank is under liquidation. Therefore, the
Bank may not be saddled with the liability to pay interest. In
opposition to this, it was submitted on behalf of the auction
purchaser that this Court had already directed the Bank to
bring back the said amount alongwith interest at the rate of
12% p.a. Thus, the Bank must bring back the said amount
alongwith interest at the said rate as the said order has till date
been not varied.
32. It is true this Court had directed the Bank to bring back
the said amount of Rs.14,04,000/- alongwith interest at the rate
of 12% p.a. At the same time, the fact that the Bank is in the
financial doldrums, cannot be completely lost sight of. It seems
that an administrator has been appointed. A direction for
payment of interest at the rate of 12% p.a., in the circumstance
of the case, may ultimately impair the interest of the innocent
members and depositors of the Bank. I am, therefore, inclined
to scale down the rate of interest.
33. A direction for payment of simple interest at the rate of 9%
p.a. would meet the ends of justice. As regards the proposal of
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the judgment debtor to deposit the sum of Rs.3,00,000/- (the
instrument for which was tendered on 31st October, 2015) and a
further sum of Rs.1,50,000/-, it may not be appropriate to pass
a final order in this proceeding. The proper cause would be to
restore the execution proceeding and grant liberty to the
judgment debtor to deposit the said amount, without prejudice
to his rights and contentions. If the Bank decides to accept the
said amount, it may certify the satisfaction of the award to the
Executing Court. If not, appropriate orders can be passed by
the Executing Court in the said execution proceeding, taking
into consideration the consequences that followed the tender of
the said amount under the Settlement Scheme.
34. Hence the following order:
:ORDER:
(A) WP/2334/2022 stands dismissed.
(B) WP/11132/2018 stands partly allowed.
(C) The impugned judgment and order stands modified as
under:
(i) The order setting aside the sale and issue of sale
certificate in favour of the purchaser stands affirmed.
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(ii) The auction purchaser is entitled to the refund of the
purchase money.
(iii) The Bank shall refund the amount of Rs.9,04,771/-
alongwith simple interest at the rate of 9% p.a. from 20 th
October, 2015 to the auction purchaser, within a period of
two months.
(iv) The Executing Court shall refund the balance amount
which remains deposited with the Court, alongwith
interest accrued thereon, to the auction purchaser,
within a period of one month from the date of the
communication of this order.
(v) The execution proceeding SD No.29 of 2006 stands
restored to the file of the Executing Court.
(vi) The Judgment Debtor is at liberty to deposit the amount
of Rs.3,00,000/- and a further sum of Rs.1,50,000/-, as
proposed, with the Executing Court, without prejudice to
his rights and contentions.
(vii) If the Bank decides to accept the said amount, the Bank
shall certify the satisfaction of the award to the Executing
Court.
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(viii) If the Bank does not accept the said amount, the
consequences that follow from the default on the part of
the Bank to accept and appropriate the amount of
Rs.3,00,000/-, tendered by the Judgment Debtor on 31 st
October, 2015, would be a matter for consideration by the
Executing Court in the event the Bank proceeds with the
execution.
(ix) Writ petitions stand disposed.
(x) In view of disposal of petitions, Review Petition No.33 of
2022 and IA(St)/17681/2022 also stand disposed.
[N. J. JAMADAR, J.]
