Karnataka High Court
Sri Vasanth Kumar H G vs The State Of Karnataka on 12 March, 2025
Author: Suraj Govindaraj
Bench: Suraj Govindaraj
-1-
NC: 2025:KHC:10768
WP No. 26112 of 2024
C/W WP No. 22999 of 2024
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 12TH DAY OF MARCH, 2025
BEFORE
THE HON'BLE MR JUSTICE SURAJ GOVINDARAJ
WRIT PETITION NO. 26112 OF 2024 (CS-RES)
C/W
WRIT PETITION NO. 22999 OF 2024 (CS-RES)
IN W.P.NO.26112 OF 2024
BETWEEN
1. SRI VASANTH KUMAR H G
S/O LATE GOPALAKRSIHNA
AGED ABOUT 50 YEARS
2. SMT. KOMALA L
W/O VASANTH KUMAR H G
AGED ABOUT 39 YEARS
Digitally signed
by SHWETHA BOTH R/AT NO. 23/1,
RAGHAVENDRA HENNAGARA VILLAGE
Location: HIGH JIGANI HOBLI,
COURT OF
KARNATAKA ANEKAL TALUK
BENGALURU RURAL DISTRICT 562105
...PETITIONERS
(BY SRI: UDAYA HOLLA., SR. ADVOCATE FOR
SRI. M MUNIRAJU., ADVOCATE)
AND
-2-
NC: 2025:KHC:10768
WP No. 26112 of 2024
C/W WP No. 22999 of 2024
1. THE STATE OF KARNATAKA
DEPARTMENT OF CO OPERATION
M S BUILDING
DR. B R AMBEDKAR VEEDHI,
BENGALURU 560 001
REPRESENTED BY ITS SECRETARY
2. THE DEPUTY REGISTRAR
OF CO OPERATIVE SOCIETIES (NI 441)
OFFICE AT NO. 62,
2ND FLOOR, MARGOS RAOD
3RD MAIN, 18TH CROSS
PIPELINE, MALLESWARAM
BENGALURU 560 055
3. CHIEF EXECUTIVE OFFICER
SLV SOUHARDA PATTINA SAHAKARI
NIYAMITAH
OFFICE AT NO. 515
SLV KUTEERAM
10TH CROSS
PADMANABHANAGARA
BENGLAURU 560 070
4. SRI KRISHNAPPA P
S/O LATE PAPPAIAH
AGED ABOUT 55 YEARS
R/AT HOMPALAGATTA VILLAGE
HONAKANAHALLI POST
KASABA HOBLI,
ANEKAL TALUK
BENGALURU DISTRICT 1562100
5. SRI MANJUNATH B N
S/O NATARAJ B
AGED ABOUT 50 YEARS
R/AT NO. 21, 1ST F CROSS
J C NAGAR, NANDI LAYOUT
BENGALURU 560 096
...RESPONDENTS
(BY SRI. YOGESH D. NAIK., AGA FOR R1 & R2;
SRI. ABHISHEK. N.V., ADVOCATE FOR
SMT. GOWHAR UNNISA., ADVOCATE FOR C/R3;
NC: 2025:KHC:10768
SRI. N.S. SRIHARI, ADVOCATE FOR C/R5)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227
OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF
CERTIORARI OR ANY OTHER APPROPRIATE WRIT OR ORDER OR
DIRECTION TO QUASH THE IMPUGNED ORDER DATED 18.09.2024
VIDE IN APPEAL NO. 364/2023 PASSED BY THE HONBLE KARNATAKA
APPELLATE TRIBUNAL AT BENGALURU AND CONSEQUENTLY QUASH
THE AWARD/ORDER DATED 21.12.2020 VIDE CASE NO.
DRD/K.R.S.S.S.L/13448/2019-20 PASSED BY THE 2 RESPONDENT
DEPUTY REGISTRAR OF CO-OPERATIVE SOCIETIES AND
CONSEQUENTLY QUASH THE SALE CERTIFICATE DATED 14.12.2023
REGISTERED ON 15.12.2023 WITH RESPECT TO MORTGAGED
SCHEDULE PROPERTY AS PER ANNEXURE - A. B AND C. AND ETC.
IN W.P.NO.22999 OF 2024
BETWEEN
SRI VASANTH KUMAR H G
S/O LATE GOPALAKRISHNA,
AGED ABOUT 50 YEARS,
R/AT NO. 23/1, HENNAGARA VILLAGE,
JIGANI HOBLI, ANEKAL TALUK,
BENGALURU RURAL DISTRICT - 562105.
...PETITIONER
(BY SRI: UDAYA HOLLA., SR. ADVOCATE FOR
SRI. M MUNIRAJU., ADVOCATE)
AND
NC: 2025:KHC:10768
1. THE STATE OF KARNATAKA
DEPARTMENT OF CO OPERATION,
M S BUILDING,
DR B R AMBEDKAR VEEDHI,
BENGALURU - 560 001.
REPRESENTED BY ITS SECRETARY.
2. THE ASSISTANT REGISTRAR
OF CO OPERATIVE SOCIETIES/ RECOVERY
OFFICER NI-441,
KARNATAKA STATE SOUHARDA,
SAMYUKTA SAHAKARI NIYAMITHA,
NO. 68, 17TH AND 18TH CROSS,
MARGOSA ROAD, MALLESWARAM,
BENGALURU - 560055.
3. CHIEF EXECUTIVE OFFICER,
SLV SOUHARDA PATTINA SAHAKARI
NIYAMITHA,
OFFICE AT NO.515, SLV KUTEERAM,
10TH CROSS, PADMANABHANAGARA,
BENGALURU-560070.
4. SRI. MANJUNATH B.N,
S/O NATARAJ. B,
AGED ABOUT 50 YEARS,
R/AT NO.21, 1ST 'F' CROSS,
J.C. NAGAR, NANDINI LAYOUT,
BENGALURU-560096.
...RESPONDENTS
(BY SRI. YOGESH D. NAIK., AGA FOR R1 & R2;
SMT. GOWHAR UNNISA., ADVOCATE FOR R3;
SRI. N.S. SRIHARI, ADVOCATE FOR R4)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227
OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF
CERTIORARI OR ANY OTHER APPROPRIATE WRIT OR ORDER OR
DIRECTION TO QUASH THE IMPUGNED NOTICE DTD. 02.08.2024
VIDE EP.NO.KA.RAA.SOU.SAM.SA.NI/SA.SAM.SA.NI/VA.A/11/2021-
NC: 2025:KHC:10768
22 ISSUED BY THE R-2 BY INITIATING PROCEEDINGS UNDER RULE
19(3) OF THE KARNATAKA SOUHARADHA SAHAKARI RULES BY
TAKING STEPS FOR EVICTION THE PETITIONER FROM THE
PROPERTY IN QUESTION AS PER ANNX-A. AND ETC.
THESE WRIT PETITIONS COMING ON FOR ORDERS AND
HAVING BEEN RESERVED FOR ORDERS ON 26.11.2024, THIS DAY,
THE COURT PRONOUNCED THE FOLLOWING:
CORAM: HON'BLE MR JUSTICE SURAJ GOVINDARAJ
CAV ORDER
1. The Petitioners in W.P.No.26112/2024 are before this
Court seeking for the following reliefs:
a. To issue a writ of Certiorari or any other appropriate
writ or order or direction to quash the impugned
order dated: 18.09.2024 vide in appeal No.364/2023
passed by the Hon'ble Karnataka Appellate Tribunal
at Bengaluru and consequently quash the
award/order dated: 21.12.2020 vide case No.
DRD/K.R.S.S.S.L/13448/2019-20 passed by the 2nd
respondent-Deputy Registrar of Co-operative
Societies and consequently quash the sale Certificate
dated 14.12.2023 registered on 15.12.2023 with
respect to mortgaged schedule property as per
Annexure-A, B and C and;
b. To grant such other order or further relief as this
Hon'ble Court may deem fit and proper including the
costs of these proceedings to the petitioners.
2. The Petitioners in W.P.No.22999/2024 are before this
Court seeking for the following reliefs:
i. To issue a writ of Certiorari or any other appropriate
writ or order or direction to quash the impugned
order dated: 02.08.2024 vide EP No.
NC: 2025:KHC:10768
Ka.Raa.Sou.Sam.Sa.Ni/VaA/11/2021-22 issued by
the 2nd Respondent by initiating proceedings under
Rule 19(3) of the Karnataka Souhardha Sahakari
Rules by taking steps for eviction the Petitioner from
the property in question as per Annexure-A and;
ii. To grant such other order or further relief as this
Hon'ble Court may deem fit and proper including the
costs of these proceedings to the petitioners.
3. The petitioners contend that the original property
bearing BBMP New Municipal No.4/01 (Old No.418)
BBMP PID No.62-108-4/01, Katha No.418/4-01
situated at 6th Main, 4th cross, BBMP Ward No.65,
Hombegowda Nagara, Wilson Garden, Bangalore,
was acquired by one Sri.N.Gopalakrishna, the father
of petitioner No.1. On his expiry, his wife
Anuradhamma, petitioner No.1 and another son,
H.G. Gopalakrishna, succeeded to the property.
There being a registered partition on 04.07.2013, the
said property came to be allotted to petitioner No.1.
4. For the purpose of putting up construction of a
residential house on the said property, petitioner
No.1, borrowed a sum of Rs.30 lakhs from
NC: 2025:KHC:10768
respondent No.3-SLV Souharda Pattina Sahakari
Niyamitha on 27.11.2015, agreeing to repay the
same by 27.11.2025.
5. The petitioner claims to have put up construction of
several houses in the said property and rented out a
few of them, retaining one house for his own use.
The petitioner claimed that the entire loan amount
was not disbursed in favour of the petitioner, but
only a sum of Rs.25,35,000/- was disbursed. The
petitioners over a period of time have paid an
amount of Rs.49,68,675/- to the said bank, as
regards which receipts have been issued. However,
contending that there are dues owed by the
petitioner, respondent No.3 initiated a dispute under
section 70 of the Co-operative Society Act before
respondent No.2-Deputy Registrar, seeking for
payment of a sum of Rs.39,46,551/- under the
Karnataka State Souharda Co-operative Act.
6. The petitioners claim that this proceeding had been
initiated behind the back of the petitioner inasmuch
NC: 2025:KHC:10768
neither a prior notice was issued nor a notice was
issued by the Deputy Registrar of Co-operative
Societies and by placing the petitioners ex-parte, an
award came to be passed on 21.12.2020 for a sum
of Rs.39,46,551/-.
7. The above said proceeding came to the knowledge of
the petitioners much later, when a notice was issued
by respondent No.3 on 28.10.2023 calling upon the
petitioner to make payment of a sum of Rs.31 lakhs
on or before 26.11.2023, failing which the SLV
Souharda Pattina Sahakari Niyamitha Bank would
take steps for auctioning the property. It is only
thereafter that on enquiry the petitioner came to
know that even in the proceeding before respondent
No.2, a notice had been falsely claimed to have been
issued to the petitioners on 30.08.2019. The said
notice was never served on the petitioners but a
concocted and fabricated acknowledgement had been
produced before respondent No.2. Post the notice
dated 28.10.2023, one another notice dated
NC: 2025:KHC:10768
12.12.2020 came to be issued calling upon the
petitioners to make payment of sum of
Rs.30,14,664/- by 4.01.2024 and it is in that
background, the petitioner after obtaining certified
copies of the award passed by respondent No.2-
Deputy Registrar challenged the same before the
Karnataka Appellate Tribunal in Appeal No.364/2023,
where an ad-interim order was granted on
12.01.2024.
8. Petitioners thereafter came to know of respondent
No.3 having conducted an auction and issuing a sale
certificate to respondent No.5 auction purchaser on
14.12.2023, they claim that no notice of sale had
been issued on the petitioners. The petitioner
continuing to be in possession of the property, they
contend that no auction sale could have been
effected.
9. Even prior to the filing of the appeal before the
Appellate Tribunal, the petitioner had approached
this court by filing writ petition in WP number
- 10 -
NC: 2025:KHC:10768
622/2024 which came to be disposed, reserving
liberty to the petitioner to approach the Appellate
Tribunal.
10. The petitioner claims that post the sale in favour of
respondent No.5, respondent No.5, in the month of
June, 2024 sought to dispossess the petitioner and
the tenants when the petitioner approached the
jurisdictional police who though promised to take
action, but did not do so. Hence the petitioner had
filed a suit in O.S. No.5061/2024 against the Bank
and respondent No.5 where an interim order was
granted in favour of the petitioner restraining the
bank and the purchaser from interfering with their
possession.
11. Separately, the award having been challenged before
the Karnataka Appellate Tribunal, while the said
appeal was pending, the Asst. Registrar of
Cooperative Societies had issued a notice on 02-08-
2024 to the tenants asking them to vacate the
property which came to be challenged by petitioner
- 11 -
NC: 2025:KHC:10768
No.1 in WP number 22999/2024, when the said
notice was stayed subject to the petitioner depositing
a sum of Rs.5,00,000/- with respondent No.3, which
was so deposited.
12. Though the petitioner had contended in the appeal
before the Appellate Tribunal that the award had
been passed behind the back of the petitioner, the
Appellate Tribunal considering that the notice had
been served on one K. V. Kushal who is son of the
petitioners held that the notice has been properly
served and as such held the appeal to be beyond the
period of limitation, dismissed the application for
condonation and consequently dismissed the appeal.
It is in that background that the petitioners are
before this court seeking for the aforesaid reliefs.
13. Sri.Udaya Holla, learned Senior counsel for the
petitioner would submit that,
13.1. The award which has been passed 29.12.2020
is without any notice to the petitioners. A
- 12 -
NC: 2025:KHC:10768
perusal of the award would only indicate the
claim of the Bank and that notice has been
served, the manner of service of notice on
whom it has been served has not been
mentioned in the award, there being non-
service of notice on the petitioners who are the
borrowers/parties, the award is null and void.
13.2. When a claim has been made in a dispute
raised for making payment of monies, it is but
required that notice of the said claim is served
on the person from whom monies are claimed.
Without such service of notice, the matter
ought not to have been proceeded with by the
DRCS and an award passed directing the
petitioners to make payment of allegedly due
amounts could not have been passed.
13.3. In this regard, he relies upon Rule 17(2)(c) of
the Karnataka Souharda Sahakari Niyama
2004, which is reproduced hereunder for easy
reference:
- 13 -
NC: 2025:KHC:10768
17. ರ ಸ ನ ಜ ಮತು ಾ ಾಟ
(2) ರ ಸ ನ ಜ ಮತು ಾ ಾಟ ಅಥ ಾ ಜ ರ ತ ಾ ಾಟದ ಈ ೆಳ ನ
ಯಮಗಳನು" #ಾ ಸತಕ%ದು&; ಎಂದ ೆ.-
( ) ಾ ಾಟ ೆ% ಮುಂ)ೆ ಜ ಾಡ+ೇ-ದ& ಾ ಾಟ ಅ. ಾ/ಯು ಜ
0ೋ2ೕ3ೊಂದನು" ೕಪ56ಋ89ೆ ೈಯ-ಕ ಾ ಅಥ ಾ ಅವನ ಕುಟುಂಬದ ವಯಸ%
ಪ5ರುಷ ಸದಸ>ನ ?ೕ@ೆ ಅಥ ಾ ಅವನ ಅ.ಕೃತ ಏCೆಂಟನ ?ೕ@ೆ Cಾ/ ಾಡತಕ%ದು&.
Dಾ9ೆ Cಾ/ ಾಡಲು 3ಾಧ> ಾಗGದ& ಸದ/ 0ೋ2ೕಸನು" ೕಪ56ಋ8ಯ ಇ ೕIನ
ಾಸಸಳ ೆಂದು Jದು ಬಂGರುವ ಸಳದ Kಾವ5Lೇ ಎದು& ಾಣುವಂಥ Nಾಗದ
ಅಂ2ಸತಕ%ದು&, ಜ ಾಡ@ಾ Lೆ ಎಂಬ ಸಂಗ ಯನು" ಜ ಾಡ@ಾದ ಸ ನ
?ೕ@ೆ ಅಥ ಾ ಅದ ೆ% DೊಂG ೊಂOರುವ Kಾವ5Lೇ ಸಳದ ಮತು ವಸೂ
ಅ. ಾ/ಯು ಾ ಾಟ ೆ% DೊಂG ೊಂOರು ೆ ೊಡುವ ಸಲು ಾ
ಅವಶ>Qರುವ5Lೆಂದು NಾQಸು ಾ ಸಳದ ಅಥ ಾ ಸಳಗಳ ಡಂಗುರ DೊRೆಸುವ5ದರ
ಾವ5Lೇ ಅಂಥ ಇತರ ಾO ೆಯ QSಾನGಂದ ಸಹ UೂೕVಸತಕ%ದು&, ಜ ಯ
0ೋ2ೕ ನ ಆGತ ನಮೂGಸ@ಾದ G0ಾಂಕLೊಳ9ೆ ಬರ+ೇ ಾದ +ಾ ೆ
Xಬಲಗನು", ಬOY : ೆಚ[ಗಳ ಬOY ಮತು ಸ ತ ಸಂLಾಯ ಾಡGದ& ಸದ/
ಸ ತನು" ಾ ಾಟ ೆ% ಇಡ@ಾಗುವ5Lೆಂದು G6ಷ\ಪOಸತಕ%ದು&. ಅಂಥ 0ೋ2 ನ
ಒಂದು ಪ^ ಯನು" O-%Lಾರ/9ೆ ಕಳ_ ಸತಕ%ದು&. ವಸೂ ಅ. ಾ/ಯವರು
Lೇ6` ದ ಒ a 0ೋ2ೕಸನು" ಸ ಾ6/ ಾಜ>ಪತ^ದ ಯೂ ಅ.ಸೂIಸತಕ%ದು&.
13.4. NOTE: The reproduction of the said Rule
17 has been made in Kannada since the
said Rules are not available in English, it
would therefore be required for the
Principal Secretary, Cooperative
Department, as also Law Secretary,
Government of Karnataka to get the same
translated into English and after due
- 14 -
NC: 2025:KHC:10768
verification and authentication, publish
the same. All Acts, Rules, notifications,
etc. are required to be available both in
English and Kannada for easy
understanding by all concerned.
13.5. By referring to Clause (c) of Sub-rule (2) of
Rule 17 he submitted that the notice has to be
served on a male member of the borrower or
the male member of his family. In the present
case, admittedly there is no notice which has
been served on the borrower, that is, the
petitioners herein and the person referred to in
the order passed by the Karnataka Appellate
Tribunal, namely Kushal, who is a minor son of
the petitioners. Thus, no service has been
effected on the petitioners or a male member of
the family of the petitioners. Service on the
minor member of the family does not comply
with Clause (c) of Sub-rule (2) of Rule 17 and
as such, there being no service of notice, the
- 15 -
NC: 2025:KHC:10768
DRCS could not have proceeded with the
matter and pass an award. The said award is,
therefore, completely nonest and not binding
on the petitioners. This aspect has not been
taken into account by the Karnataka Appellate
Tribunal in the appeal filed. The Appellate
Tribunal has held a notice in favour of a minor
member to be proper notice which is contrary
to Clause (c) of Sub-rule (2) of Rule 17.
13.6. His further submission is that without notice of
the said award, the limitation period cannot be
computed from the date of the award. The
petitioner coming to know of the award only
when the respondents sought to take
possession of the property, immediately
thereafter the petitioner had filed a suit in O.S.
No.5061/2024 seeking for injunction and
having come to know that award has been
passed against the petitioner, they filed an
appeal in Appeal No.364/2023 before the
- 16 -
NC: 2025:KHC:10768
Karnataka Appellate Tribunal. The Appellate
Tribunal wrongly held that Aadhaar card is not
a proof of the age of a person and except the
Aadhaar card, the appellants having not
produced any documents to show the age of
Kushal who received the notice, the Appellate
Tribunal has wrongly come to a conclusion that
the person who received the notice through
RPAD was minor.
13.7. The appellants having clearly and categorically
established the reason for their non-appearance
on account of non-service of notice before the
DRCS, the Appellate Tribunal has wrongly come
to a conclusion that the appellants have not
made out any ground for their non-appearance
and as such, there would be no requirement to
set aside the exparte Judgment/award and
remit the matter to the DRCS for fresh
consideration and on that basis the Appellate
Tribunal has held that the delay of 2 years, 311
- 17 -
NC: 2025:KHC:10768
days in challenging the exparte award is barred
by limitation and the explanation given for
condonation of delay is not acceptable.
13.8. This, he submits, is an improper application of
law by the Appellate Tribunal. What the
Appellate Tribunal ought to have seen was the
date of knowledge of the award on part of the
appellant which was the date on which
interference with the possession was resorted
to and the time taken by the appellant in
applying for certified copies and filing the
appeal. This not having been done, he submits
that the dismissal of the appeal filed by the
appellant on the ground of rejection of the
application for condonation of delay is not
proper and submits that this Court could take
note of the fact that in fact there is no delay
and take up the matter on merits or in the
alternative remit the matter for fresh
consideration to the Appellate Tribunal on that
- 18 -
NC: 2025:KHC:10768
account. However, he further submits that since
the award of the DRCS itself was ex-parte, this
court could remit the matter to the DRCS for
fresh consideration after providing an
opportunity to the petitioners to submit their
defence, both in writing and oral arguments. He
submits that an ex-parte Judgment cannot be
binding on the petitioners.
13.9. He submits that the respondent-Bank has not
carried out a proper valuation of the property
before bringing the property for auction. The
property has been grossly undervalued.
According to the petitioners, the value of the
property is nearly Four crores. For a loan
amount of Rs.Thirty lakhs, respondent-Bank
has sold the property in an auction for Rs.1.22
crores, which could not have been done. Thus,
he submits that the procedure required has not
been followed by the Bank.
- 19 -
NC: 2025:KHC:10768
13.10. In this regard, Sri.Udaya Holla, learned Senior
counsel relies upon the decision of the Hon'ble
Apex Court in Binayak Swain vs. Ramesh
Chandra Panigrahi and Another1, more
particularly paras 3 and 6 thereof which are
reproduced hereunder for easy reference:
3. After the ex parte decree was passed in Appeal
No. 178 of 1942 by the District Judge on March 9,
1943 the plaintiff executed the decree, attached the
properties in dispute and himself purchased the
properties in court auction. The plaintiff also took
delivery of the properties on May 17, 1946 and since
that date the respondents have been in possession of
the properties and enjoying the usufruct. After the
decree of the High Court dated November 11, 1946
in Second Appeal No. 100 of 1943 the appellant
made an application for restitution in the Court of the
Additional Munsif in Miscellaneous Judicial Case No.
34 of 1947. The plaintiff obtained a stay of the
hearing of the Miscellaneous Judicial Case from the
Court of the Additional District Judge but on March
30, 1948 the order of stay was discharged. In Civil
Revision No. 75 of 1948 the High Court also granted
interim stay in the proceedings in the miscellaneous
judicial case at the instance of the plaintiff but the
order of stay was vacated by the High Court on April
28, 1949. Thereafter the present appellant got the
miscellaneous judicial case stayed till disposal of his
second appeal after remand. On July 12, 1956 the
miscellaneous judicial case was allowed by the Munsif
and an order of restitution was made in favour of the
appellant. The respondents filed an appeal before the
AIR 1966 SC 948
- 20 -
NC: 2025:KHC:10768
Subordinate Judge of Berhampur who allowed the
appeal and set aside the order of restitution. The
appellant took the matter before the High Court in
Miscellaneous Appeal No. 24 of 1958 which was
allowed by P.V. Balakrishna Rao, J. on October 3,
1958 and it was ordered that the restitution of the
properties should be made to the appellant subject to
the condition that he must deposit the amount
decreed in favour of the plaintiff decree-holder. The
order of the learned Single Judge was, however, set
aside in letters patent appeal by a Division Bench
which held that the appellant was not entitled to
restitution of properties sold in the execution case.
6. For the reasons expressed, we are satisfied that
the appellant is entitled to restitution of the
properties sold in execution of the ex parte decree
subject to equities to be adjusted in favour of the
respondent decree-holders. We order that the
appellant should be restored back to possession of
the properties sold in the execution case subject to
the condition that he deposits the amount of Rs 970
in the Court of the Munsif, Aska within two months
from this date. If no deposit is made within this time
this appeal will stand dismissed with costs. But if the
appellant makes the deposit within the time allowed
the sale of the properties in the execution case will
be set aside and the respondents will make over the
possession of the properties sold to the appellant.
The appellant will not be entitled to any past mesne
profits but if the respondents do not deliver the
possession of the properties the appellant will be
entitled to the future mesne profits from the
respondents from the date of deposit till the actual
date of delivery of possession. Learned counsel for
the appellant has informed us that the deposit has
already been made by the appellant in pursuance of
the order of the learned Single Judge of the High
Court dated October 3, 1958. If the deposit has
already been made the appellant will be entitled to
- 21 -
NC: 2025:KHC:10768
take possession of the properties through the
executing court and to future mesne profits from the
date of this judgment till the actual date of delivery
of possession.
13.11. Relying on Binayak Swain's case, he submits
that the Judgment debtor would be entitled for
restitution of the properties sold in execution of
an exparte decree subject to equities to be
vested in favour of the decree holder and on
that basis he submits that award passed by the
Registrar against the petitioner being exparte,
irrespective of the sale of the properties being
effected in an auction, the award being exparte
would have to be set-aside.
13.12. The decision of the Hon'ble Apex Court in Desh
Bandhu Gupta vs. N.L. Anand & Rajinder
Singh2, more particularly paras 9 and 10
thereof which are reproduced hereunder for
easy reference:
1994 (1) SCC 131
- 22 -
NC: 2025:KHC:10768
9. However, there is considerable force in the
contention of the appellant that the procedure
prescribed under Order 21 Rule 66 was flagrantly
violated by the Executing Court. We have already
noted the order of the court to conduct the sale. For
judging its legality and validity, it would be desirable
to have a bird's eye view of the procedure for sale of
immovable property in execution. On an application
for execution filed under Order 21 Rule 5 the court
shall ascertain the compliance of the prerequisites
contemplated under Rule 17 and on finding the
application in order, it should be admitted and so to
make an order, thereon to issue notice under Rule
22, subject to the conditions specified therein. If a
notice was served on the judgment-debtor as
enjoined under Order 5 but he did not appear or had
not shown cause to the satisfaction of the court,
under Rule 23 the court "shall order the decree to be
executed". If an objection is raised to the execution
of the decree, by operation of sub-rule (2) thereof,
"the court shall consider such objections and make
such order as it thinks fit". Thereafter in the case of a
decree for execution against immovable property an
attachment under Rule 54 should be made by an
order prohibiting the judgment-debtor from
transferring or creating encumbrances on the
property. Under Rule 64 the court may order sale of
the said property. Under Rule 66(2) proclamation of
sale by public auction shall be drawn up in the
language of the court and it should be done after
notice to the decree-holder and the judgment-debtor
and should state "the time and place of sale" and
"specify as fairly and accurately as possible" the
details specified in clauses (a) to (d) of sub-rule (2)
thereof. The Civil Rules of Practice in Part L in the
Chapter 12 framed by the High Court of Delhi 'Sale of
Property and Delivery to the Purchaser' Rule 2
provides that whenever a court makes an order for
the sale of any attached property under Order 21,
Rule 64, it shall fix a convenient date not being
- 23 -
NC: 2025:KHC:10768
distant more than 15 days, for ascertaining the
particulars specified in Order 21 Rule 66(2) and
settling the proclamation of sale. Notice of the date
so fixed shall be given to the parties or their
pleaders. In Rule 4 captioned 'Settlement of
Proclamation of Sale, Estimate of Value' it is stated
that on the day so fixed, the court shall, after
perusing the documents, if any, and the report
referred to in the preceding paragraph, after
examining the decree-holder and judgment-debtor, if
present, and after making such further enquiry as it
may consider necessary, settle the proclamation of
sale specifying as clearly and accurately as possible
the matters required by Order 21 Rule 66(2) of the
Code. The specifications have been enumerated in
the rule itself. The proclamation for sale is an
important part of the proceedings and the details
should be ascertained and noted with care. This will
remove the basis for many a belated objections to
the sale at a later date. It is not necessary to give at
proclamation of sale the estimate of the value of the
property. The proclamation when settled shall be
signed by the Judge and got published in the manner
prescribed by Rule 67. The court should authorise its
officers to conduct the sale. Under Rule 68 the sale
should be conducted at "the place and time" specified
or the time may be modified with the consent in
writing of the judgment-debtor. The proclamation
should include the estimate, if any, given by either
judgment-debtor or decree-holder or both the
parties. Service of notice on judgment-debtor under
Order 21 Rule 66(2), unless waived by appearance or
remained ex parte, is a fundamental step in the
procedure of the court in execution. Judgment-debtor
should have an opportunity to give his estimate of
the property. The estimate of the value of the
property is a material fact to enable the purchaser to
know its value. It must be verified as accurately and
fairly as possible so that the intending bidders are
not misled or to prevent them from offering
- 24 -
NC: 2025:KHC:10768
inadequate price or to enable them to make a
decision in offering adequate price. In Gajadhar
Prasad v. Babu Bhakta Ratan [(1973) 2 SCC 629 :
(1974) 1 SCR 372] this Court, after noticing the
conflict of judicial opinion among the High Courts,
held that a review of the authorities as well as the
amendments to Rule 66(2)(e) make it abundantly
clear that the court, when stating the estimated
value of the property to be sold, must not accept
merely the ipse dixit of one side. It is certainly not
necessary for it to state its own estimate. If this was
required, it may, to be fair, necessitate insertion of
something like a summary of a judicially considered
order, giving its grounds, in the sale proclamation,
which may confuse bidders. It may also be quite
misleading if the court's estimate is erroneous.
Moreover, Rule 66(2)(e) requires the court to state
only nature of the property so that the purchaser
should be left to judge the value for himself. But, the
essential facts which have a bearing on the very
material question of value of the property and which
could assist the purchaser in forming his own opinion
must be stated, i.e. the value of the property, that is,
after all, the whole object of Order 21, Rule 66(2)(e),
CPC. The court has only to decide what are all these
material particulars in each case. We think that this
is an obligation imposed by Rule 66(2)(e). In
discharging it, the court should normally state the
valuation given by both the decree-holder as well as
the judgment-debtor where they both have valued
the property, and it does not appear fantastic. It may
usefully state other material facts, such as the area
of land, nature of rights in it, municipal assessment,
actual rents realised, which could reasonably and
usefully be stated succinctly in a sale proclamation
has to be determined on the facts of each particular
case. Inflexible rules are not desirable on such a
question. It could also be angulated from another
perspective. Sub-rule (1) of Rule 66 enjoins the court
that the details enumerated in sub-rule (2) shall be
- 25 -
NC: 2025:KHC:10768
specified as fairly and accurately as possible. The
duty to comply with it arises only after service of the
notice on the judgment-debtor unless he voluntarily
appears and is given opportunity in the settlement of
the value of the property. The absence of notice
causes irremedial injury to the judgment-debtor.
Equally publication of the proclamation of sale under
Rule 67 and specifying the date and place of sale of
the property under Rule 66(2) are intended that the
prospective bidders would know the value so as to
make up their mind to offer the price and to attend
at sale of the property and to secure competitive
bidders and fair price to the property sold. Absence
of notice to the judgment-debtor disables him to
offer his estimate of the value who better knows its
value and to publicise on his part, canvassing and
bringing the intending bidders at the time of sale.
Absence of notice prevents him to do the above and
also disables him to know fraud committed in the
publication and conduct of sale or other material
irregularities in the conduct of sale. It would be
broached from yet another angle. The compulsory
sale of immovable property under Order 21 divests
right, title and interest of the judgment-debtor and
confers those rights, in favour of the purchaser. It
thereby deals with the rights and disabilities either of
the judgment-debtor or the decree-holder. A sale
made, therefore, without notice to the judgment-
debtor is a nullity since it divests the judgment-
debtor of his right, title and interest in his property
without an opportunity. The jurisdiction to sell the
property would arise in a court only where the owner
is given notice of the execution for attachment and
sale of his property. It is very salutory that a
person's property cannot be sold without his being
told that it is being so sold and given an opportunity
to offer his estimate as he is the person who
intimately knew the value of his property and
prevailing in the locality, exaggeration may at time
be possible. In Rajagopala Ayyar v. Ramachandra
- 26 -
NC: 2025:KHC:10768
Ayyar [AIR 1924 Mad 431 : ILR 47 Mad 288 : 46 MLJ
104] the Full Bench held that a sale without notice
under Order 21 Rule 22 is a nullity and is void and
that it has not got to be set aside. If an application to
set aside such a void sale is made it would fall under
Section 47.
10. Above discussion indicates a discernible rule that
service of notice on the judgment-debtor is a
fundamental part of the procedure touching upon the
jurisdiction of the Execution Court to take further
steps to sell his immovable property. Therefore,
notice under Order 21 Rule 66(2), unless proviso is
applied (if not already issued under Order 21 Rule
22), and service is mandatory. It is made manifest
by Order 21 Rule 54(1-A) brought on statute by 1976
Amendment Act with peremptory language that
before settling the terms of the proclamation the
judgment-debtor shall be served with a notice before
settling the terms of the proclamation of sale. The
omission thereof renders the further action and the
sale in pursuance thereof void unless the judgment-
debtor appears without notice and thereby waives
the service of notice.
13.13. By relying on Desh Bandhu Gupta's case, he
submits that before auction sale is proposed,
the estimate given by the Judgment detbor as
also decree holder of the value of the property
ought to be collected and it is only on that
basis, as also on evaluation report that the
- 27 -
NC: 2025:KHC:10768
estimate of the value of the property should be
published, so that the intending bidders are not
misled or prevented from offering adequate
price.
13.14. In the present case, he submits that at no point
of time were the Judgment debtors called upon
to indicate their value, it is only subsequently
that they have indicated the value at more than
Rs.Four crores which has not been denied by
the respondents. Thus, he submits that notice
on the Judgment debtor is a fundamental
procedure to be followed before the price were
to be fixed which has been completely violated
by the respondent-Bank.
13.15. The decision of the Hon'ble Apex Court in
Mahakal Automobiles and Anr. Vs. Kishan
Swaroop Sharma3, more particularly para 11
thereof which are reproduced hereunder for
easy reference:
2008(13) SCC 113
- 28 -
NC: 2025:KHC:10768
11. When a property is put up for auction to satisfy a
decree of the court, it is mandatory for the court
executing the decree, to comply with the following
stages before a property is sold in execution of a
particular decree:
(a) Attachment of the immovable property;
(b) Proclamation of sale by public auction;
(c) Sale by public auction.
Each stage of the sale is governed by the provisions
of the Code. For the purposes of the present case,
the relevant provisions are Order 21 Rule 54 and
Order 21 Rule 66. At each stage of the execution of
the decree, when a property is sold, it is mandatory
that notice shall be served upon the person whose
property is being sold in execution of the decree, and
any property which is sold, without notice to the
person whose property is being sold is a nullity, and
all actions pursuant thereto are liable to be struck
down/quashed.
13.16. By relying on Mahakal Automobiles' case, he
submits that it is mandatory that notice shall be
served upon the person whose property is
proposed to be sold in execution and without
such service of notice, no property could be
sold.
13.17. The decision of the Hon'ble Apex Court in M/s
Shalimar Cinema vs. Bhasin Film
- 29 -
NC: 2025:KHC:10768
Corporation and Another.4, more particularly
paras 3 and 4 thereof which are reproduced
hereunder for easy reference:
3. In the view that we propose to take on the second
question, we do not consider it necessary to express
our view on the first question. But we do wish to say
that the court has a duty to see that the
requirements of Order 21 Rule 66 are properly
complied with. In the words of the Judicial
Committee, "In sales under the direction of the court,
it is incumbent on the court to be scrupulous in the
extreme". Though it may not be necessary for the
court to make a valuation and enter it in the sale
proclamation in every case, it is desirable at least in
cases of sale of valuable property that the court
make its valuation and enter it in the sale
proclamation. We think it necessary to add that no
action of the court or its officers should be such as to
give rise to the criticism that it was done in an
indifferent or casual way. We are constrained to
make these observations because it was found by the
learned Single Judge in the present case that there
actually was no application under Order 21 Rule 66
and that the sale proclamation was prepared in a
routine fashion. Having said this much, we now
proceed to consider the second question. The bid list
prepared by the court auctioneer on August 29, 1977
shows that each of the bidders who participated in
the auction on August 29, 1977 put his signature
against the bid offered by him. For example, Sardar
Charanjit Singh, who at one stage offered a bid of Rs
1,70,000 and later raised it to Rs 2,50,000 and again
to Rs 2,90,000 has put his signature at three places
against the three bids offered by him. Similarly, Gian
Chand Sharma, who originally offered a bid of Rs one
1987(4) SCC 717
- 30 -
NC: 2025:KHC:10768
lakh and later raised it to Rs two lakhs has put his
signatures at two places and Tejwant Singh, who
initially offered a bid of Rs 1,80,000 and later raised
it to Rs 2,80,000 has put his signature at two places
against the bids offered by him. At the end of the
document, there is to be found a note by the court
auctioneer stating, "It is one o'clock, considering that
some good bids may come, the auction will be
continued on September 1, 1977 from 10.00 a.m. to
1.00 p.m." It is seen that the bidders who
participated in the auction on August 29, 1977 put
their signatures against the respective bids offered
by them, but not at the end of the document. If the
signatures had been put at the end of the document,
that would have established that the court auctioneer
had indeed announced that the auction was
adjourned to September 1, 1977. The question
whether the sale was adjourned to September 1,
1977 and announcement made on the spot on
August 29, 1977 was expressly raised and put in
issue. One would have thought that the auction
purchaser would have called the court auctioneer as
a witness on his behalf to prove the statement
contained in the bid list. The auction purchaser
refrained from calling him as a witness on his behalf.
On the other hand there is one telling circumstance
in favour of the case put forward by the judgment
debtors. We find from a perusal of the bid lists
prepared on August 29, 1977 and September 1, 1977
that as many as eight persons participated in the
auction on August 29, 1977 and offered their bids
while only four persons participated in the auction on
September 1, 1977 and offered their bids, and, what
is more important, not one of the eight persons who
offered their bids on August 29, 1977 was present to
offer his bid on September 1, 1977. It is a very
curious and significant circumstance. It could not be
that those persons who exhibited the desire to
purchase the property on August 29, 1977 en masse
decided not to participate in the auction on
- 31 -
NC: 2025:KHC:10768
September 1, 1977. In our opinion, the legitimate
inference to be drawn from the circumstance is that
the bidders who participated in the auction on August
29, 1977 were not aware that the auction was being
continued on September 1, 1977. This could only be
if as alleged by the judgment debtors there was no
announcement on August 29, 1977 by the court
auctioneer that the auction would be continued on
September 1, 1977. One of the bidders, who
participated in the auction on August 29, 1977, was
examined as a witness by the judgment debtors. His
bid was in fact the highest bid that was offered on
August 29, 1977. He stated in his evidence that after
he made his bid for Rs 2,90,000, he was informed
that the time for the auction was over and that the
auction would be held again after notice for the same
was published in the newspaper. He said, "My last
bid was for Rs 2,90,000 when I was informed that as
the time is over, the auction would be re-held after
notice for the same as published in the newspaper. I
do not remember whether the date for the next
auction was announced on that day or not. The
auctioneer who was present there had told the
bidders that as the time was over the sale will be
held at a later date after notice for the sale is
published". Relying on the sentence that he did not
remember whether the date for the next auction was
announced on that date or not, it was sought to be
made out that the witness was prevaricating and that
an announcement must have been made on that very
date about the next date of auction. We do not think
that there was any attempt by the witness to
prevaricate. What the witness meant was made very
clear in the very next sentence when he stated that
the auctioneer told the bidders that the sale would be
held at a later date after the notice for the sale was
published. When he was further questioned in cross-
examination, he stated, "Thereafter we were talking
amongst ourselves about the next date on which the
auction was to be held. However, the next date was
- 32 -
NC: 2025:KHC:10768
not announced. I had come to know about the
auction to be held on August 29, 1977 from the
publication in the newspaper as well as from my
personal friends. . . . The next date was not informed
to me by Mr Suraj Prakash. It is wrong to suggest
that the auctioneer had announced the date after the
bidding was over on August 29, 1977. . . . In fact no
date was announced on that date". The evidence of
this witness is strongly supported by the
circumstance already noticed by us that none of the
bidders who participated in the auction on August 29,
1977, participated in the auction on September 1,
1977. There is no conceivable reason as to why this
witness who was the highest bidder on August 29,
1977 should have refrained from participating in the
auction on September 1, 1977. The evidence of this
witness is practically unrebutted since neither the
auctioneer nor any of the bidders who participated in
the auction on August 29, 1977 was examined on
behalf of the auction purchaser. The auction
purchaser examined himself and stated that he was
present at the auction on August 29, 1977 and that
at that time, the auctioneer announced that the
auction would be continued on September 1, 1977.
We do not have the slightest doubt that he is not a
truthful witness. He was unable to explain why he did
not offer any bid if he was present at the auction on
August 29, 1977. He was also unable to give the
name of a single person who offered a bid on August
29, 1977.
4. Both the learned Single Judge of the High Court
and the Division Bench appeared to have been
carried away by the note of the auctioneer in the bid
list of August 29, 1977 ignoring the material fact of
the non-examination of the auctioneer as a witness
by the auction purchaser. The judgment debtors put
the auction purchaser on notice of their case in their
objections to the sale. They adduced evidence in
support of their case. It was the duty of the auction
- 33 -
NC: 2025:KHC:10768
purchaser to adduce the best evidence in support of
his case by examining the auctioneer. He refrained
from doing so. In those circumstances it was not
open to the courts below to rely upon the note made
by the auctioneer in the bid list when the substance
of the note was itself under challenge. In addition,
we have already mentioned the other outstanding
circumstance of the case that not one of the eight
bidders who participated in the auction on August 29,
1977 was present at the auction on September 1,
1977. We are led to the irresistible conclusion that no
announcement was made on August 29, 1977 that
the auction would be continued on September 1,
1977. We are also satisfied that the price of Rs
4,37,000 for a 28/48 share of a cinema in New Delhi
standing on land of the extent of 5000 sq. yard can
hardly be considered an adequate price. No doubt the
auction purchaser stated in his evidence that
Shalimar cinema is situated in a poor locality,
eclipsed by a flyover and was in shambles. He denied
the suggestion that Shalimar cinema was situated on
the best road and in one of the finest colonies of
South Delhi. On the other hand, Swaranjit Singh who
was the highest bidder on September 1, 1977 stated
that he went prepared to the auction to purchase
28/48 share for Rs twelve lakhs. We do not have any
doubt that even in 1977 when prices were not as
high as they are today, the price of Rs 4,37,000 for
28/48 share of the property in question was totally
inadequate. We have, therefore, no option but to set
aside the sale held on September 1, 1977. The
appeal is accordingly allowed. The order of the
learned Single Judge and the Division Bench of the
High Court are set aside and the sale held on
September 1, 1977 is set aside. No costs.
- 34 -
NC: 2025:KHC:10768
13.18. By relying on M/s Shalimar Cinema's case,
he submits that it is the duty of the Court to
ensure that the requirements of Rule 66 of
Order 21 are complied with.
13.19. His further submission is that if sale is
conducted for an inadequate sale consideration,
the Court would be dutybound to set-aside the
sale since the interest of the Judgment Debtor
would be affected irretrievably.
13.20. The decision of the Hon'ble Apex Court in Ram
Kishun and Others vs. State of Uttar
Pradesh and Others.5, more particularly
paras 17 to 22 thereof which are reproduced
hereunder for easy reference:
17. Therefore, it becomes a legal obligation on the
part of the authority that property be sold in such a
manner that it may fetch the best price. Thus
essential ingredients of such sale remain a correct
valuation report and fixing the reserve price. In case
proper valuation has not been made and the reserve
price is fixed taking into consideration the inaccurate
valuation report, the intending buyers may not come
forward treating the property as not worth purchase
2012(11)SCC 511
- 35 -
NC: 2025:KHC:10768
by them, as a moneyed person or a big businessman
may not like to involve himself in small sales/deals.
Valuation and reserve price
18. The word "value" means intrinsic worth or cost or
price for sale of a thing/property. (Vide Union of India
v. Bombay Tyre International Ltd. [(1984) 1 SCC 467
: 1984 SCC (Tax) 17] and Gurbachan Singh v.
Shivalak Rubber Industries [(1996) 2 SCC 626 : AIR
1996 SC 3057] .)
19. In State of U.P. v. Shiv Charan Sharma [1981
Supp SCC 85 : AIR 1981 SC 1722] this Court
explained the meaning of "reserve price" explaining
that it is the price with which the public auction starts
and the auction bidders are not permitted to give bids
below the said price i.e. the minimum bid at auction.
20. In Anil Kumar Srivastava v. State of U.P. [(2004)
8 SCC 671] this Court considered the scope of fixing
the reserve price and placing reliance on its earlier
judgment in Duncans Industries Ltd. v. State of U.P.
[(2000) 1 SCC 633] , explained that reserve price
limits the authority of the auctioneer. The concept of
the reserve price is not synonymous with valuation of
the property. These two terms operate in different
spheres. An invitation to tender is not an offer. It is
an attempt to ascertain whether an offer can be
obtained with a margin. The valuation is a question of
fact, it should be fixed on relevant material. The
difference between the "valuation" and "reserve price"
is that, fixation of an upset price may be an indication
of the probable price which the property may fetch
from the point of view of intending bidders. Fixation of
the reserve price does not preclude the claimant from
adducing proof that the land had been sold for a low
price.
21. In Desh Bandhu Gupta v. N.L. Anand [(1994) 1
SCC 131] this Court held that in an auction-sale and
in execution of the civil court's decree, the Court has
- 36 -
NC: 2025:KHC:10768
to apply its mind to the need for furnishing the
relevant material particulars in the sale proclamation
and the records must indicate that there has been
application of mind and principle of natural justice had
been complied with. (See also Gajadhar Prasad v.
Babu Bhakta Ratan [(1973) 2 SCC 629 : AIR 1973 SC
2593] , S.S. Dayananda v. K.S. Nagesh Rao [(1997) 4
SCC 451] , D.S. Chohan v. State Bank of Patiala
[(1997) 10 SCC 65] and Gajraj Jain v. State of Bihar
[(2004) 7 SCC 151] .)
22. In view of the above, it is evident that there must
be an application of mind by the authority concerned
while approving/accepting the report of the approved
valuer and fixing the reserve price, as the failure to do
so may cause substantial injury to the
borrower/guarantor and that would amount to
material irregularity and ultimately vitiate the
subsequent proceedings.
13.21. By relying on Ram Kishun's case, he submits
that the valuation and fixation of reserve price
is a very important part of conducting an
auction. There is a legal obligation on part of
the Authority that the property be sold in such
a manner that it fetches best price while
carrying out a valuation all the concerned facts
have to be taken into consideration.
13.22. The decision of the Hon'ble Apex Court in
Kerala Financial Corporation vs. Vincent
- 37 -
NC: 2025:KHC:10768
Paul and Another.6, more particularly para 20
thereof which are reproduced hereunder for
easy reference:
20. We have already concluded that the decree for
specific performance granted by the High Court
cannot be sustained. We also observed in the earlier
part of our judgment that though KFC has initiated
proceedings under Section 29 of the Act, admittedly,
the State has not framed rules or guidelines in the
form of executive instructions for sale of properties
owned by them. Till such formation of rules or
guidelines or orders as mentioned above, we direct
KFC to adhere to the following directions for sale of
properties owned by it:
(i) The decision/intention to bring the property for
sale shall be published by way of advertisement in
two leading newspapers, one in vernacular language
having sufficient circulation in that locality.
(ii) Before conducting sale of immovable property, the
authority concerned shall obtain valuation of the
property from an approved valuer and in consultation
with the secured creditor, fix the reserve price of the
property and may sell the whole or any part of such
immovable secured asset by any of the following
methods:
(a) by obtaining quotations from the persons dealing
with similar secured assets or otherwise interested in
buying such assets; or
(b) by inviting tenders from the public; or
(c) by holding public auction; or
(d) by private treaty.
2011(4) SCC 171
- 38 -
NC: 2025:KHC:10768
Among the above modes, inviting tenders from the
public or holding public auction is the best method for
disposal of the properties belonging to the State.
(iii) The authority concerned shall serve to the
borrower a notice of 30 days for sale of immovable
secured assets.
(iv) A highest bidder in public auction cannot have a
right to get the property or any privilege, unless the
authority confirms the auction-sale, being fully
satisfied that the property has fetched the appropriate
price and there has been no collusion between the
bidders.
(v) In the matter of sale of public property, the
dominant consideration is to secure the best price for
the property to be sold. This can be achieved only
when there is maximum public participation in the
process of sale and everybody has an opportunity of
making an offer. It becomes a legal obligation on the
part of the authority that property be sold in such a
manner that it may fetch the best price.
(vi) The essential ingredients of sale are correct
valuation report and fixing the reserve price. In case
proper valuation has not been made and the reserve
price is fixed taking into consideration the inaccurate
valuation report, the intending buyers may not come
forward treating the property as not worth purchase
by them.
(vii) Reserve price means the price with which the
public auction starts and the auction-bidders are not
permitted to give bids below the said price i.e. the
minimum bid at auction.
(viii) The debtor should be given a reasonable
opportunity in regard to the valuation of the property
sought to be sold, in absence thereof the sale would
suffer from material irregularity where the debtor
suffers substantial injury by the sale.
- 39 -
NC: 2025:KHC:10768
13.23. By relying on Vincent Paul's case, he submits
that before conducting sale of the immovable
property, valuation has to be obtained from
approved valuer and in consulation with
secured creditor, reserve price for the property
was to be fixed with a notice being served on
the borrower in relation thereto. If the
Judgment debtor were not given a reasonable
opportunity as regards the valuation of the
property, the sale would suffer from material
irregularity.
13.24. The decision of the Hon'ble Apex Court in Nani
Gopal Paul vs. T. Prasad Singh and
Others.7, more particularly para 4 thereof
which are reproduced hereunder for easy
reference:
4. We are of the view that we can take suo motu
judicial notice of the illegality pointed out by the
Division Bench, committed by the Single Judge of the
High Court in bringing the properties to sale.
1995(3) SCC 579
- 40 -
NC: 2025:KHC:10768
Accordingly, we are of the view that the
circumstances are sufficient to vitiate the validity of
the sale conducted by the court receiver as approved
by the learned Single Judge. Confirmation of sale was
illegal. Though, as contended by Shri Ganesh that
normally an application under Order 21, Rule 89 or
Rule 90 or under Section 48 CPC need to be filed
within limitation to have the sale conducted by the
court set aside and that procedure need to be insisted
upon, we are of the view that this Court or appellate
court would not remain a mute or helpless spectator
to obvious and manifest illegality committed in
conducting court sales. We are informed and it is not
disputed that the appellant had deposited only Rs 5
lakhs and balance amount was assured to be
deposited only after delivery of possession. That also
would be illegal.
13.25. By relying on Nani Gopal Paul's case, he
submits that this Court ought not to remain a
mute or helpless spectator to obvious and
manifest legality committed in conducting the
sale. The value of property being more than
Rs.Four crores has been sold for Rs.1.20 crores
which causes tremendous injustice to the
petitioners and as such, he submits that this
Court ought to intervene in the matter.
- 41 -
NC: 2025:KHC:10768
13.26. The decision of the Hon'ble Apex Court in K.
Devadas Kumar vs. A. Umesh and Others8,
more particularly paras 15, 16 and 17 thereof
which are reproduced hereunder for easy
reference:
15. In view of the law laid down by the Apex Court in
the above case regarding trust reposed with the fifth
respondent coupled with the statutory duty cast upon
him it is incumbent upon the sale officer to follow the
mandatory procedure as laid down under the Rules
and law laid down by the Apex Court in the cases
referred to supra to get market value of the
immovable property which would be sold in public
auction for realisation of awarded amount in favour of
the second respondent bank. For the reasons stated
supra, we accept the finding of fact recorded in the
order of the Learned Single Judge regarding non-
following the mandatory procedure as contemplated
under Rule 34(3) and 38(2)(d) and (g) of the Rules by
the fifth respondent and respondent No. 3 in not
giving wide publicity for sale of the property in
question. The auction purchaser was only the person
participated in the public auction therefore his bid was
accepted by fifth respondent. The amount for which
he had bid cannot be construed as the true market
value of the property in question. For this reason also
the Learned Single Judge after perusal of the record
of respondents No. 3 and 5 having regard to the
rights involved in immovable property of the first
respondent herein has rightly exercised his
discretionary power and quashed the confirmation
order of sale and sale certificate issued in favour of
fifth respondent in respect of the property, which
2006 SCC Online Kar 348
- 42 -
NC: 2025:KHC:10768
cannot be found fault with by this Court in exercise of
our jurisdiction and power in this Appeal.
16. The Learned Single Judge after quashing the
confirmation order and issuance of the sale certificate
issued in Form No. 10 dated 11.8.2005, remitted back
the matter to the competent authority viz. respondent
No. 3 to re-do it and to take appropriate decision in
accordance with law. While directing so, he has also
clarified in the operative portion of the order that if
the first respondent herein is willing to pay the entire
award amount with interest and other expenses, it is
open for the second respondent-Bank to consider his
request and settle the matter in full and final
settlement of the claim. In this regard, the Learned
Counsel Mr. Keshav Bhat appearing on behalf of first
respondent submitted that during pendency of the
writ petition first respondent wanted to deposit the
awarded amount with the Bank but the same was not
received by it. Now the first respondent is willing to
deposit the same before the Bank. In this view of the
matter and also for the reason that Learned Single
Judge after recording a finding of fact on the basis of
facts pleaded and recorded produced he has held that
the sale in the public auction is not in conformity with
the provisions of the Act and the rules. Therefore, the
question of remanding the matter to the competent
authority viz. respondent No. 3 to take a decision in
that regard afresh does not arise and therefore that
portion of the remand order is set aside as the same
is wholly unnecessary.
17. Since the first respondent has come forward to
deposit the amount with the second respondent, if it
is deposited within four weeks from the date of receipt
of this order the same may be accepted with interest
payable on the awarded amount. Otherwise, it is open
to the second respondent to recover the same in
accordance with the provisions of the Act and the
Rules by executing the Award against the first
respondent.
- 43 -
NC: 2025:KHC:10768
13.27. By relying on Devadas Kumar's case, he
submits that if this Court were to come to a
conclusion that the sale has been conducted for
lesser value, then this Court could always
quash confirmation of sale and sale certificate,
more so when the sale is not in conformity with
the Act and Rules.
13.28. The decision of the Hon'ble Apex Court in
Satyanarain Bajoria and Another vs.
Ramnarain Tibrewal and Another9, more
particularly paras 15 and 17 thereof which are
reproduced hereunder for easy reference:
15. The lower appellate court after assuming that
there was no proper service of notice under Order 21
Rule 54 of the Code of Civil Procedure went on to the
question of judgment-debtor's having not pleaded any
substantial loss or injury. It will be noticed that it was
a case of typical money lender who has evil-eye to
grab the property of the judgment-debtor somehow or
the other. He allows the first application for execution
to be dismissed; waits for practically three years to
file another execution application claiming a sum of Rs
350 only; sees to it that judgment-debtor is kept
ignorant of the proceedings in court; obtains
(1993) 4 SCC 414
- 44 -
NC: 2025:KHC:10768
permission to himself buy the property; gets the
property sold for recovery of petty amount of Rs
649.45ps and buys the property himself. This again is
a typical illustration of fraudulent conduct of decree-
holder. In such cases the court will even presume loss
and substantial injury to the judgment-debtor. In the
present case there was evidence of value of the
property and both the parties had led evidence in this
behalf and it was too late for the lower appellate court
to blame the executing court for recording evidence
as to the valuation at that stage. The fraud permeates
the whole proceedings. At no stage was the
judgment-debtor made aware of the pending
execution application till even the confirmation of sale
and purchase of the property by the decree-holder
himself.
17. Learned counsel for the decree-holder submitted
that these are questions of fact and since the High
Court dismissed the revision petition in limine this
Court should not interfere with the questions of fact.
If it was merely a case of questions of fact proved on
record, learned counsel for the decree-holder would
have been right. It appears lower appellate court had
no knowledge whatsoever of how even notice under
Order 21 Rule 22 of the Code was required to be
served or the evidence in relation thereto being led in
proceedings for setting aside of the sale at the
instance of the judgment-debtor. The lower appellate
court could not read the order sheet or proceedings
purporting to be under Order 21 Rule 22 of the Code
while dealing with proceedings under Order 21 Rule
90 of the Code and hold that the notices have been
served. Lower appellate court again was mixing up
the service on judgment-debtor of notice under Order
21 Rule 54 of the Code and of proclamation of sale.
The lower appellate court again was ignoring the
importance of notice under Order 21 Rule 54(1-A) and
(2) to enable the judgment-debtor to have notice of
proceedings for settlement of terms of proclamation
- 45 -
NC: 2025:KHC:10768
under Order 21 Rule 66 of the Code. It is true that
now it has been specifically clarified by the
Explanation to Rule 90 of Order 21 of the Code that
"the mere absence of, or defect in, attachment of the
property sold shall not, by itself, be a ground for
setting aside a sale under this rule". But if the
judgment-debtor is kept totally ignorant of the
execution proceedings right from the date of
execution application till sale, it cannot be merely
called a mere irregularity in attachment and thus of
no consequence. Proceedings under Order 21 Rule 66
of the Code for settlement of terms of proclamation of
sale are very material for both the parties, much more
for the judgment-debtor as it is well known that the
decree-holder always tries to undervalue the property
whereas the judgment-debtor tries to overvalue the
property. However, provisions are made in the Code
in sub-rule (2) of Rule 66 of Order 21 that the sale
proclamation shall be drawn up after notice to both
the decree-holder as well as the judgment-debtor and
shall state the time and place of sale and other
requirements mentioned therein. No notice was given
under Order 21 Rule 54(1-A) of the Code which was
mandatory for the court. In any case no notice for
settlement of terms of proclamation of sale was
served on the judgment-debtor personally as
contemplated by sub-rule (2) of Rule 66 of Order 21
of the Code.
13.29. By relying on Satyanarain Bajoria's case, he
submits that when there is a fraudulent conduct
of the decree holder which causes loss and
injury to the Judgment debtor and when the
Judgment debtor is kept in the dark about the
- 46 -
NC: 2025:KHC:10768
execution proceedings, as also when the
property is undervalued, it would be mandatory
for the Court to set-aside the sale.
13.30. On all the above grounds, he submits that the
above petition is required to be allowed and the
relief sought for to be granted.
14. Sri.Abhishek, and Smt.Gowhar Unnisa learned
counsel appearing for the respondent-Bank would
submit that,
14.1. The petitioners are chronic defaulters. Though
the present petition has been filed as regard
one loan, the petitioners have availed three
loans and have defaulted on all the three loans.
The principal amount of loan being
Rs.67,50,000/-, the petitioners are taking
advantage of their default and have not
permitted the Bank to recover the monies.
14.2. Despite service of notice on the petitioners,
they have not appeared before the DRCS
resulting in the award being passed. The fact
- 47 -
NC: 2025:KHC:10768
remains that the person who has received the
notice is the son of the petitioners, whether he
is a minor or not would not be material. It is for
the petitioners to establish that on receipt of
the notice by the minor son, he did not bring it
to the notice of the parents, i.e., the
petitioners, the minor ought not have received
the notice is the submission made. Once the
notice is sent to the address of the recipient,
properly marked and stamped, the notice is
deemed to have been served on the addressee.
14.3. He submits that the chronic default on part of
the petitioners has continued from the year
2016 and despite such a long lapse of time, the
respondent-Bank has been unable to recover
the dues owed to it and it is in that background
that the property was brought for auction.
14.4. His further submission is that various notices
have been issued from time to time. Form No.4
issued on 25.06.2021 was served on Kushal on
- 48 -
NC: 2025:KHC:10768
06.07.2021. Form No. 7 issued on 25.08.2021
was served on the second petitioner on
01.09.2021. The first auction notice dated
30.12.2022 issued to the address of the
petitioner was refused to be accepted, as such,
it is deemed service in terms of Section 27 of
the General Causes Act. The second auction
notice in terms of form 8 and 9 dated
06.07.2023 was served on 15.07.2023 on
Kushal. The third auction notice in form 8 and 9
dated 25.09.2023 was served on 03.10.2023
on the second petitioner. Thus, she submits
that the petitioners have intentionally sought to
refuse the notice and or have got the notice
accepted by their minor son to try and take a
fraudulent contention.
14.5. Be that as it may, Form No.7 having been
for the third auction also being served on the
petitioner No.2, they were aware of the award
- 49 -
NC: 2025:KHC:10768
which had been passed long ago, as far back as
on 01.09.2021 and thereafter chose not to do
anything. They did not challenge the award
before the Appellate Tribunal or come forward
to make payment of due amounts. It is only
after the auction purchaser had submitted a bid
and a sale certificate has been issued and
consequently sale deed has been executed that
the petitioners have approached the Appellate
Tribunal challenging the award. During all this
time the petitioners have not paid any amounts
on that ground she submits that the conduct of
the petitioners is completely malafide.
14.6. As regards the valuation of the property, she
submits that the valuation is proper and correct
inasmuch as a Valuer has valued the property
and submitted a report on 25.08.2023 in terms
whereof on examination of the property, the
Valuer has reported that the total market value
of the property including land and building
- 50 -
NC: 2025:KHC:10768
would be Rs.1,52,42,562/- and distress value
has been fixed at 80% of the market value at
Rs.1,21,94,050/- and as such, the contention of
the petitioners that the valuation is higher is
not established and is contrary to the valuation
report already on record.
14.7. She submits the valuation of Rs.4 crore as
contended by the petitioners is also not correct
inasmuch as even for the valuation of
1,20,00,000/- on two earlier occasions there
were no bidders and it is only on third occasion
that the auction purchaser has bid for the
property. If at all a property valued at Rs.Four
crores was being auctioned at 1.2 crores, there
would have been many more persons who
would have bid for the property at the auction
and would have been so successful. The fact
that there were no bids received for the first
and second auction and it was sold in the third
auction indicates that the valuation made by
- 51 -
NC: 2025:KHC:10768
the Valuer is probably on the higher side if not
proper and correct.
14.8. Thus, she submits that the notice having been
served properly, valuation having been made,
the petitioners being fully knowledgeable about
all the proceedings from the time of initiation of
the dispute before the Registrar of Cooperative
Societies till the sale of the property in auction,
there are no equities in favour of the
petitioners.
14.9. The petitioners are only delaying the
proceedings, this court ought not to entertain
the same but ought to dismiss the petition.
14.10. She relies on the decision of the Hon'ble Apex
Court in Harihar Banerji and Others vs.
Ramsashi Roy and Others10, more
particularly para 40 thereof which are
reproduced hereunder for easy reference:
Privy Council, (From the High Court of Judicature of Fort William in Bengal)
- 52 -
NC: 2025:KHC:10768
40. Next and lastly as to the service of the notice to
quit. The 106th section of the Transfer of Property
Act, 1882, only requires that such a notice should be
tendered or delivered to the party intended to be
bound by it either personally or to one of his family or
servants at his residence, or if such tender or delivery
be not practicable, affixed to a conspicuous part of the
property. The personal tender or delivery may take
place anywhere: the vicarious tender or delivery must
take place at the residence of the person intended to
be bound by the notice. Well, in the case of joint
tenants, each is intended to be bound, and it has long
ago been decided that service of a notice to quit upon
one joint tenant is prima facie evidence that it has
reached the other joint tenants : Macartney v. Crick
(1805) 5 Esp. 196; Deo d. Bradford, v. Watkins
(1806) 7 East 551; Pollock v. Kelly (1875) 6 I.C.L.R.
367.
14.11. By relying on Harihar Banerji's case, it is
submitted that notice ought to be served to the
intended party personally at his/her residence
or to their family members or servants, further
it may also be affixed at a fairly visible part of
the property. In this case the notice not only
having been personally delivered to the
Petitioner's residence, it was also personally
handed over to a family member and is thus
conclusive proof of service and a prima-facie
- 53 -
NC: 2025:KHC:10768
evidence of the Petitioner's knowledge of the
notice.
14.12. On the bais of the above submissions she
submits that the petition is required to be
dismissed.
15. Sri.N.S.Srihari, learned counsel appearing for the
auction purchaser would submit that
15.1. the auction purchaser's interest has to be
protected, the auction having been completed,
the sale certificate issued in favour of the
auction purchaser, who is now the absolute
owner of the property, the due process of law
having been followed, the auction purchaser
being a bonafide purchaser for value in a public
auction conducted by the Bank, the interest of
the auction purchaser cannot be compromised.
15.2. The sale executed in favour of the auction
purchaser cannot be set aside, even if the
award were to be set aside, the matter could
- 54 -
NC: 2025:KHC:10768
only be limited for consideration of the interse
dispute between the Bank and the borrower,
the auction purchaser's interest can never be
affected, let alone adversely, for any fault on
part of the Bank since the auction purchaser is
required to be treated on different footing and
his rights are required to be protected, so that
no adverse impact would occur in future
actions.
15.3. In this regard, he relies on the following
decisions:
15.4. The decision of the Hon'ble Apex Court in
Padanathil Ruqmini Amma vs. P.K.
Abdulla11, more particularly paras 2, 4, 8, 11
and 13 thereof which are reproduced
hereunder for easy reference:
2. After purchase the suit property was given on
lease by Mohammed Haji to one Raghavan Nair on
2-5-1946. Raghavan Nair in turn sold his rights in
the suit property to one Ayyappan who, in turn, sold
his rights to one Raman Menon. Raman Menon sold
(1993) 4 SCC 414
- 55 -
NC: 2025:KHC:10768
his rights in the said property on 3-10-1950 in
favour of the respondent, P.K. Abdulla.
4. After the ex parte decree was set aside,
proceedings by way of restitution were started by
the first defendant and Karnavan of the Tarwad by
filing EP No. 29 of 1959. All the properties which had
been taken possession of by Mohammed Haji in
execution of the ex parte decree and of which
restitution was sought were set out in a schedule in
the proceedings for restitution. Item No. 6 in EP No.
29 of 1959 was the suit property. EP No. 29 of 1959
had originally contained a prayer for only symbolic
re-delivery of the properties which had been taken
possession of in execution by Mohammed Haji. But
the application was subsequently amended and
actual delivery was asked for.
8. After remand the trial court found that the
Tarwad had obtained possession of the property
pursuant to the restitution proceedings. It also
found that the respondent who was the plaintiff
therein had established his title to the suit property
and his right to recover possession. It accordingly
decreed the suit allowing recovery of possession.
This finding was confirmed by the district court and
by the High Court. Hence the present appeal has
come before us.
11. In the present case, as the ex parte decree was
set aside, the judgment-debtor was entitled to seek
restitution of the property which had been sold in
court auction in execution of the ex parte decree.
There is no doubt that when the decree-holder
himself is the auction-purchaser in a court auction
sale held in execution of a decree which is
subsequently set aside, restitution of the property
can be ordered in favour of the judgment-debtor.
The decree-holder auction-purchaser is bound to
return the property. It is equally well settled that if
at a court auction sale in execution of a decree, the
- 56 -
NC: 2025:KHC:10768
properties are purchased by a bona fide purchaser
who is a stranger to the court proceedings, the sale
in his favour is protected and he cannot be asked to
restitute the property to the judgment-debtor if the
decree is set aside. The ratio behind this distinction
between a sale to a decree-holder and a sale to a
stranger is that the court, as a matter of policy, will
protect honest outsider purchasers at sales held in
the execution of its decrees, although the sales may
be subsequently set aside, when such purchasers
are not parties to the suit. But for such protection,
the properties which are sold in court auctions would
not fetch a proper price and the decree-holder
himself would suffer. The same consideration does
not apply when the decree-holder is himself the
purchaser and the decree in his favour is set aside.
He is a party to the litigation and is very much
aware of the vicissitudes of litigation and needs no
protection.
13. As far back as in 1888, however, a distinction
was made between sales to decree-holders and
sales to outsider purchasers. In the case of Zain-Ul-
Abdin Khan v. Mohd. Asghar Ali Khan [ILR (1888) 10
All 166 : 15 IA 12] , the Privy Council held that
there was a great distinction between the decree-
holders who come in and purchase under their own
decree which is afterwards reversed on appeal and
the bona fide purchasers who come in and buy at
the sale in execution of a decree to which they are
not parties and at a time when the decree is a valid
decree and when this order for sale is a valid order.
It held that the sales in favour of bona fide
purchasers who were not parties to the decree at a
time when the decree was valid would be protected.
In the case before the Privy Council there were three
sets of purchasers. Some of the defendants who had
purchased were the decree-holders. Some persons
had purchased from decree-holders or came under
them, while others were merely purchasers in
- 57 -
NC: 2025:KHC:10768
execution and strangers to the decree upon which
the execution had issued. The Privy Council said that
the decree-holder purchasers as well as persons who
came in under them are in the same position and
they have to be classed under the head of decree-
holders as against strangers to the decree. The Privy
Council was required to consider only the case of
strangers to the decree. But from the judgment it is
quite clear that it categorised the decree-holder
auction-purchaser as well as those claiming under
such decree-holder purchasers in the same category
of decree-holders. This category, therefore, would
be liable to render restitution.
15.5. By relying on Padanathil Ruqmini Amma's
case, he argues that a property sold to a bona-
fide purchaser in an auction-sale which is in
furtherance of executing a decree is protected
and the purchaser cannot be asked to restitute
the property, moreso, in light of the decree
being valid at the time of the auction-sale. The
auction-purchaser in the instant petition having
purchased the property legally in furtherance of
a court decree, while such decree continued to
be valid, would regard him as a bona-fide
- 58 -
NC: 2025:KHC:10768
purchaser and is thus protected from any
restitution thereof.
15.6. The decision of the Hon'ble Apex Court in
Janak Raj vs. Gurdial Singh and Others12,
thereof which are reproduced hereunder for
easy reference:
2. The question involved in this appeal is, whether a
sale of immovable property in execution of a money
decree ought to be confirmed when it is found that
the ex parte decree which was put into execution has
been set aside subsequently.
3. The facts are simple. One Swaran Singh obtained
an ex parte decree on February 27, 1961 against
Gurdial Singh for Rs 519. On an application to
execute the decree, a warrant for the attachment of
a house belonging to the judgment-debtor was
issued on May 10, 1961. At the sale which took
place, the appellant before us became the highest
bidder for Rs 5100 on December 16, 1961. On the
2nd of January 1962, the judgment-debtor made an
application to have the ex parte decree set aside. On
January 20, 1962 he filed an objection petition
against the sale of the house on the ground that the
house which was valued at Rs 25,000 had been
auctioned for Rs 5000 only and that the sale had not
been conducted in a proper manner inasmuch as
there was no due publication of it and the sale too
was not held at the proper hour. By an order dated
April 19, 1962, the executing court stayed the
1966 SCC ONLINE SC 63
- 59 -
NC: 2025:KHC:10768
execution of the decree till the disposal of the
application for setting aside the ex parte decree. On
October 26, 1962 the ex parte decree against the
defendant-judgment-debtor was set aside. On
November 3, 1962 the auction-purchaser made an
application for revival of the execution proceedings
and for confirmation of the sale under Order 21 of
the Rule 92 of the Code of Civil Procedure. On
November 7, 1962 the judgment-debtor filed an
objection thereto contending that the application for
revival of execution proceedings was not
maintainable after setting aside the ex parte decree
and that the auction-purchaser was in conspiracy and
collusion with the decree-holder and as such not
entitled to have the sale confirmed. It is to be noted
here that the case of collusion was not substantiated.
On August 31, 1963 the executing court overruled
the objection of the judgment-debtor and made an
order under Order 21 Rule 92 confirming the sale.
This was affirmed by the first appellate court. On
second appeal to a Single Judge of the Punjab High
Court, the auction-purchaser lost the day. An appeal
under clause 10 of the Letters Patent in the Punjab
High Court met the same fate. Hence this appeal.
4. Before referring to the various decisions cited at
the Bar and noted in the judgment appealed from, it
may be useful to take into consideration the relevant
provisions of the Code of Civil Procedure. So far as
sales of immovable property are concerned, there
are some special provisions in Order 21 beginning
with Rule 82 and ending with Rule 103. If a sale had
been validly held, an application for setting the same
aside can only be made under the provisions of Rules
89 to 91 of Order 21. As is well known, Rule 89 gives
a judgment-debtor the right to have the sale set
aside on his depositing in court a sum equal to five
per cent of the purchase money fetched at the sale
besides the amount specified in the proclamation of
sale as that for the recovery of which the sale was
- 60 -
NC: 2025:KHC:10768
ordered, less any amount which may, since the date
of sale, have been received by the decree-holder.
Under sub-rule (2) of Rule 92 the court is obliged to
make an order setting aside the sale if a proper
application under Rule 89 is made accompanied by a
deposit within 30 days from the date of sale. Apart
from the provision of Rule 89, the judgment-debtor
has the right to apply to the court to set aside the
sale on the ground of a material irregularity or fraud
in publishing or conducting it provided he can satisfy
the court that he has sustained substantial injury by
reason of such irregularity or fraud. Under Rule 91 it
is open to the purchaser to apply to the court to set
aside the sale on the ground that the judgment-
debtor had no saleable interest in the property sold.
Rule 92 provides that where no application is made
under any of the Rules just now mentioned or where
such application is made and disallowed the court
shall make an order confirming the sale and
thereupon the sale shall become absolute. Rule 94
provides that where the sale of immovable property
has become absolute, the court must grant a
certificate specifying the property sold and the name
of the person who at the time of sale was declared to
be the purchaser. Such certificate is to bear date of
the day on which the sale becomes absolute. Section
65 of the Code of Civil Procedure lays down that
where immovable property is sold in execution of a
decree and such sale has become absolute, the
property shall be deemed to have vested in the
purchaser from the time when it is sold and not from
the time when the sale becomes absolute. The result
is that the purchaser's title relates back to the date
of sale and not the confirmation of sale. There is no
provision in the Code of Civil Procedure of 1908
either under Order 21 or elsewhere which provides
that the sale is not to be confirmed if it be found that
the decree under which the sale was ordered has
been reversed before the confirmation of sale. It
does not seem ever to have been doubted that once
- 61 -
NC: 2025:KHC:10768
the sale is con-firmed the judgment-debtor is not
entitled to get back the property even if he succeeds
thereafter in having the decree against him reversed.
The question is, whether the same result ought to
follow when the reversal of the decree takes place
before the confirmation of sale.
5. There does not seem to be any valid reason for
making a distinction between the two cases. It is
certainly hard on the defendant-judgment-debtor to
have to lose his property on the basis of a sale held
in execution of a decree which is not ultimately
upheld. Once however it is held that he cannot
complain after confirmation of sale, there seems to
be no reason why he should be allowed to do so
because the decree was reversed before such
confirmation. The Code of Civil Procedure of 1908
contains eleborate provisions which have to be
followed in cases of sales of property in execution of
a decree. It also lays down how and in what manner
such sales may be set aside. Ordinarily, if no
application for setting aside a sale is made under any
of the provisions of Rules 89 to 91 of Order 21, or
when any application under any of these Rules is
made and disallowed, the court has no choice in the
matter of confirming the sale and the sale must be
made absolute. If it was the intention of the
legislature that the sale was not to be made absolute
because the decree had ceased to exist, we should
have expected a provision to that effect either in
Order 21 or in Part II of the Code of Civil Procedure
of 1908 which contains Sections 36 of 74 (inclusive).
27. For the reasons already given and the decisions
noticed, it must be held that the appellant-auction-
purchaser was entitled to a confirmation of the sale
notwithstanding the fact that after the holding of the
sale the decree had been set aside. The policy of the
legislature seems to be that unless a stranger
auction-purchaser is protected against the
vicissitudes of the fortunes of the suit, sales in
- 62 -
NC: 2025:KHC:10768
execution would not attract customers and it would
be to the detriment of the interest of the borrower
and the creditor alike if sales were allowed to be
impugned merely because the decree was ultimately
set aside or modified. The Code of Civil Procedure of
1908 makes ample provision for the protection of the
interest of the judgment-debtor who feels that the
decree ought not to have been passed against him.
On the facts of this case, it is difficult to see why the
judgment-debtor did not take resort to the provisions
of Order 21 Rule 89. The decree was for a small
amount and he could have easily deposited the
decretal amount besides 5 per cent of the purchase
money and thus have the sale set aside. For reasons
which are not known to us he did not do so.
15.7. By placing reliance on Janak Raj's case, he
submits that once a sale is confirmed in
execution of a decree, such a sale continues to
stand confirmed even if the judgement-debtor
succeeds in having the decree against him
reversed in the future. The legislature clearly
comes to the rescue of a stranger auction-
purchaser to protect interests of both the
creditor and the borrower. Hence, in the instant
case, even if the Petitioner were to succeed in
- 63 -
NC: 2025:KHC:10768
stands statutorily protected in the validity of
the sale and hence the outcome of this Petition
would have no bearing in the status of
ownership/title in favour of Respondent No.5.
15.8. The decision of the Hon'ble Apex Court in
Janatha Textiles and Others vs. Tax
Recovery Officer and Anr13, more particularly
paras 17 and 18 thereof which are reproduced
hereunder for easy reference:
17. There is another very significant aspect of this
case, which pertains to the rights of the bona fide
purchaser for value. It was asserted that Respondent
2 is a bona fide purchaser of the property for value.
It was further stated that he had purchased the said
property in a valid auction and he cannot be
disturbed according to the settled legal position.
18. It is an established principle of law, that a third
party auction-purchaser's interest, in the auctioned
property continues to be protected, notwithstanding
that the underlying decree is subsequently set aside
or otherwise. This principle has been stated and
reaffirmed in a number of judicial pronouncements
by the Privy Council and this Court. Reliance has
been placed on the following decisions:
(i) The Privy Council in Nawab Zain-Ul-Abdin Khan v.
Mohd. Asghar Ali Khan [(1887-88) 15 IA 12] for the
2008 12 SCC 582
- 64 -
NC: 2025:KHC:10768
first time crystallised the law on this point, wherein a
three-Judge Bench held as follows: (IA p. 16)
"A great distinction has been made between the case
of bona fide purchasers who are not parties to a
decree at a sale under execution and the decree-
holders themselves. In Bacon's Abridgment, tit.
'Error' it is laid down, citing old authorities, that 'if a
man recovers damages, and hath execution by fieri
facias, and upon the fieri facias the sheriff sells to a
stranger a term for years, and after the judgment is
reversed, the party shall be restored only to the
money for which the term was sold, and not to the
term itself, because the sheriff had sold it by the
command of the writ of fieri facias'. ... So in this case,
those bona fide purchasers who were no parties to
the decree which was then valid and in force, had
nothing to do further than to look to the decree and
to the order of sale."
(ii) In Janak Raj v. Gurdial Singh [AIR 1967 SC 608 :
(1967) 2 SCR 77] the Division Bench comprising
Wanchoo, J. and Mitter, J. held that in the facts of
the said case the appellant auction-purchaser was
entitled to a confirmation of the sale notwithstanding
the fact that after the holding of the sale, the decree
was set aside. It was observed : (AIR p. 613, para
24)
"24. ... The policy of the legislature seems to be that
unless a stranger auction-purchaser is protected
against the vicissitudes of the fortunes of the suit,
sales in execution would not attract customers and it
would be to the detriment of the interest of the
borrower and the creditor alike if sales were allowed
to be impugned merely because the decree was
ultimately set aside or modified."
(iii) In Gurjoginder Singh v. Jaswant Kaur [(1994) 2
SCC 368] this Court relying on the judgment
rendered by the Privy Council held that the status of
- 65 -
NC: 2025:KHC:10768
a bona fide purchaser in an auction-sale in execution
of a decree to which he was not a party stood on a
distinct and different footing from that of a person
who was inducted as a tenant by a decree-holder
landlord. It was held as follows : (SCC p. 370, para
3)
"3. ... A stranger auction-purchaser does not derive
his title from either the decree-holder or the
judgment-debtor and therefore restitution may not
be granted against him but a tenant who obtains
possession from the decree-holder landlord cannot
avail of the same right as his possession as a tenant
is derived from the landlord."
(iv) In Padanathil Ruqmini Amma v. P.K. Abdulla
[(1996) 7 SCC 668] this Court in para 11 observed
as under : (SCC p. 672)
"11. In the present case, as the ex parte decree was
set aside, the judgment-debtor was entitled to seek
restitution of the property which had been sold in
court auction in execution of the ex parte decree.
There is no doubt that when the decree-holder
himself is the auction-purchaser in a court auction-
sale held in execution of a decree which is
subsequently set aside, restitution of the property
can be ordered in favour of the judgment-debtor. The
decree-holder auction-purchaser is bound to return
the property. It is equally well settled that if at a
court auction-sale in execution of a decree, the
properties are purchased by a bona fide purchaser
who is a stranger to the court proceedings, the sale
in his favour is protected and he cannot be asked to
restitute the property to the judgment-debtor if the
decree is set aside. The ratio behind this distinction
between a sale to a decree-holder and a sale to a
stranger is that the court, as a matter of policy, will
protect honest outsider purchasers at sales held in
the execution of its decrees, although the sales may
be subsequently set aside, when such purchasers are
- 66 -
NC: 2025:KHC:10768
not parties to the suit. But for such protection, the
properties which are sold in court auctions would not
fetch a proper price and the decree-holder himself
would suffer. The same consideration does not apply
when the decree-holder is himself the purchaser and
the decree in his favour is set aside. He is a party to
the litigation and is very much aware of the
vicissitudes of litigation and needs no protection."
In para 16, the Court further elaborated the
distinction between the decree-holder auction-
purchaser and a stranger who is a bona fide
purchaser in auction. Para 16 reads as under : (P.K.
Abdulla case [(1996) 7 SCC 668] , p. 674)
"16. The distinction between a stranger who
purchases at an auction-sale and an assignee from a
decree-holder purchaser at an auction-sale is quite
clear. Persons who purchase at a court auction who
are strangers to the decree are afforded protection
by the court because they are not in any way
connected with the decree. Unless they are assured
of title; the court auction would not fetch a good
price and would be detrimental to the decree-holder.
The policy, therefore, is to protect such purchasers.
This policy cannot extend to those outsiders who do
not purchase at a court auction. When outsiders
purchase from a decree-holder who is an auction-
purchaser clearly their title is dependent upon the
title of decree-holder auction-purchaser. It is a
defeasible title liable to be defeated if the decree is
set aside. A person who takes an assignment of the
property from such a purchaser is expected to be
aware of the defeasibility of the title of his assignor.
He has not purchased the property through the court
at all. There is, therefore, no question of the court
extending any protection to him. The doctrine of a
bona fide purchaser for value also cannot extend to
such an outsider who derives his title through a
decree-holder auction-purchaser. He is aware or is
expected to be aware of the nature of the title
- 67 -
NC: 2025:KHC:10768
derived by his seller who is a decree-holder auction-
purchaser."
(v) In Ashwin S. Mehta v. Custodian [(2006) 2 SCC
385] this Court whilst relying upon the
aforementioned two judgments stated the principle in
the following words : (SCC p. 407, para 70)
"70. ... In any event, ordinarily, a bona fide purchaser
for value in an auction-sale is treated differently than
a decree-holder purchasing such properties. In the
former event, even if such a decree is set aside, the
interest of the bona fide purchaser in an auction-sale
is saved."
15.9. By relying on Janatha Textile's case, his
submission is that the legal position as regards
the rights of the bona-fide purchaser for value
in a valid auction as stated in the above cited
case laws stand reaffirmed in this case and this
stand now being a settled law, this Hon'ble
court would have to apply the same in the
instant petition.
15.10. The decision of the Hon'ble Apex Court in
T.S.Nataraj & Ors. vs. State Bank of India
and Ors.14, more particularly para 16 thereof
- 68 -
NC: 2025:KHC:10768
which are reproduced hereunder for easy
reference:
16. The property was put to auction on 29-09-2021
which is the 4th time in line. Every time the
petitioner had notice of the auction and did not come
forward to pay the reserve price and clear the
property from it being auctioned. The defence of the
Bank is that opinions of two independent valuers
were taken and sale notices were affixed at
conspicuous places in the asset and paper
publications were also made. I conclude this only to
observe that the petitioner had notice of the auction
that was taking place. Even then the petitioner did
not protest or come forward with any offer to the
Bank for clearance of the loan and therefore, the
property is auctioned. The 4th respondent emerges
as the successful bidder on 29-09-2021 and
certificate of sale comes to be issued in favour of the
4th respondent on 07-10-2021, the same is
registered before the Sub-Registrar and the 4th
respondent is put in possession of the property. For
close to 4 years the petitioner was given opportunity
to redeem the mortgage by paying the amount. OTS
was also offered to the petitioner but he has not
availed it. Once having failed to avail all the benefits
that the Bank wanted to grant, it cannot be seen that
the petitioner now after the sale certificate is issued,
to contend that he is ready and willing to pay the
auction amount, as also compensate the auction
purchaser. The Apex Court clearly holds that once
the certificate of sale is registered, the right of the
borrower to redeem the mortgage stands
extinguished and thereafter there is no mortgage
exists in the eye of law.
- 69 -
NC: 2025:KHC:10768
15.11. By relying on T.S. Nataraj's case, he submits
that the Petitioner herein was well aware of the
property being put to auction. The bank having
carried out relevant paper publication and
service of notice has rightly and properly
performed its duties. The Petitioner neither
protested the auction nor did endeavour to
come forward with any offer to clear his dues.
The sale having legally and validly being carried
out, and a sale certificate being registered to
that effect, the right of the petitioner to redeem
the mortagaged property stands extinguished in
the eyes of the law.
15.12. The decision of the Hon'ble Apex Court in K.D.
Sharma vs. Steel Authority of India
Limited and Ors.15, more particularly para
nos. 15, 17, 24, 26, 28, & 43 thereof which are
reproduced hereunder for easy reference:
2008 12 SCC 481
- 70 -
NC: 2025:KHC:10768
15. It is well settled that "fraud avoids all judicial
acts, ecclesiastical or temporal" proclaimed Chief
Justice Edward Coke of England before about three
centuries.Reference was made by the counsel to a
leading decision of this Court in S.P.Chengalvaraya
Naidu (Dead) by Lrs. v. Jagannath (Dead) by Lrs.
and Ors.MANU/SC/0192/1994 : AIR1994SC853
wherein quoting the above observations, this Court
held that a judgment/decree obtained by fraud has to
be treated as a nullity by every Court.
17. The Court defined fraud as an act of deliberate
deception with the design of securing something by
taking unfair advantage of another. In fraud one
gains at the loss and cost of another. Even the most
solemn proceedings stand vitiated if they are
actuated by fraud. Fraud is thus an extrinsic
collateral act which vitiates all judicial acts, whether
in rem or in personam.
24. The jurisdiction of the Supreme Court under
Article 32 and of the High Court under Article 226 of
the Constitution is extraordinary, equitable and
discretionary. Prerogative writs mentioned therein
are issued for doing substantial justice. It is,
therefore, of utmost necessity that the petitioner
approaching the Writ Court must come with clean
hands, put forward all the facts before the Court
without concealing or suppressing anything and seek
an appropriate relief. If there is no candid disclosure
of relevant and material facts or the petitioner is
guilty of misleading the Court, his petition may be
dismissed at the threshold without considering the
merits of the claim.
- 71 -
NC: 2025:KHC:10768
26. A prerogative remedy is not a matter of course.
While exercising extraordinary power a Writ Court
would certainly bear in mind the conduct of the party
who invokes the jurisdiction of the Court. If the
applicant makes a false statement or suppresses
material fact or attempts to mislead the Court, the
Court may dismiss the action on that ground alone
and may refuse to enter into the merits of the case
by stating "We will not listen to your application
because of what you have done". The rule has
been evolved in larger public interest to deter
unscrupulous litigants from abusing the process of
Court by deceiving it.
28. The above principles have been accepted in our
legal system also. As per settled law, the party who
invokes the extraordinary jurisdiction of this Court
under Article 32 or of a High Court under Article 226
of the Constitution is supposed to be truthful, frank
and open. He must disclose all material facts without
any reservation even if they are against him. He
cannot be allowed to play 'hide and seek' or to 'pick
and choose' the facts he likes to disclose and to
suppress (keep back) or not to disclose (conceal)
other facts. The very basis of the writ jurisdiction
rests in disclosure of true and complete (correct)
facts. If material facts are suppressed or distorted,
the very functioning of Writ Courts and exercise
would become impossible. The petitioner must
disclose all the facts having a bearing on the relief
sought without any qualification. This is because,
"the Court knows law but not facts".
43. 'Strongly disapproving' the explanation put forth
by the petitioner and describing the tactics adopted
by the Federation as 'abuse of process of court', this
Court observed:
- 72 -
NC: 2025:KHC:10768
There is no doubt left in our minds that the petitioner
has not only suppressed material facts in the petition
but has also tried to abuse judicial process. Apart
from misstatements in the affidavits filed before this
Court, the petitioner Federation has clearly resorted
to tactics which can only be described as abuse of
the process of court. The simultaneous filing of writ
petitions in various High Courts on the same issue
though purportedly on behalf of different associations
of the Officers of the Bank, is a practice which has to
be discouraged. Sri Sachhar and Sri Ramamurthy
wished to pinpoint the necessity and importance of
petitions being filed by different associations in order
to discharge satisfactorily their responsibilities
towards their respective members. We are not quite
able to appreciate such necessity where there is no
diversity but only a commonness of interest. All that
they had to do was to join forces and demonstrate
their unity by filing a petition in a Single Court. It
seems the object here in filing different petitions in
different Courts was a totally different and not very
laudable one.
15.13. By relying on K.D. Sharma's case, his
submission is that an act of suppressing
material facts amounts to a fraud played on the
Court, and any party approaching the Court
especially under the writ jurisdiction ought to
be truthful, frank and open, the petitioners in
this regard having suppressed facts relating to
- 73 -
NC: 2025:KHC:10768
multiple defaulting of loans as well as the
wrongful mentioning of the due loan amount
have patently abused the process of the Court
and hence the instant petition ought to be
dismissed barely on these grounds without
entertaining the merits of this case.
16. Heard Sri. Udaya Holla, learned Senior counsel
appearing for Sri.M.Muniraja, learned counsel for the
petitioners. Sri.Yogesh D.Naik, learned AGA
appearing for respondents No.1 and 2,
Sri.Abhishek.N.V., and Smt.Gowhar Unnisa learned
counsel appearing for respondent/caveator No.3 and
Sri.N.S.Srihari., learned counsel appearing for
respondent No.4. Perused papers.
17. The points that would arise for determination are:
i. Whether the respondent -Bank has
followed the due procedure in respect of
service of notice on the borrowers when
- 74 -
NC: 2025:KHC:10768
the proceedings was pending before the
Deputy Registrar of Cooperative Societies?
ii. Whether service on a minor member of the
family of the petitioners could be held to
be valid service for the DRCS to have
proceeded with the matter?
iii. Whether the respondent-Bank has
followed the due procedure before
bringing the property for auction insofar
as the valuation of the property is
concerned?
iv. Whether the delay of 2 years 3 months and
11 days in filing the appeal before the
Karnataka Appellate Tribunal could have
been condoned?
v. Whether the order of the Appellate
Tribunal suffers from any infirmity
requiring this Court to intercede?
vi. Whether even if the contentions of the
petitioners are accepted, could a
restitution be granted to the petitioners
setting aside sale deed executed by the
Bank in favour of the auction purchaser?
vii. What order?
- 75 -
NC: 2025:KHC:10768
18. I answer the above points as under:
19. ANSWER TO POINT NO.(i): Whether the
respondent -bank has followed the due
procedure in respect of service of notice on the
borrowers when the proceedings was pending
before the Deputy Registrar of Cooperative
Societies?
And
Answer to Point No.(ii): Whether service on a
minor member of the family of the petitioners
could be held to be valid service for the Deputy
Registrar of Cooperative Societies to have
proceeded with the matter?
19.1. Both the above points having a bearing on each
other are taken up together for consideration.
19.2. The submission of Sri. Udaya Holla, learned
Senior Counsel is that the respondent - Bank
has not followed the due procedure before
bringing the property for auction and in this
regard, he relies on two main aspects, firstly,
as regards service not being effected of the
notice of the proceedings before the Deputy
Registrar of Cooperative Societies and
- 76 -
NC: 2025:KHC:10768
secondly, as regards the valuation made of the
property not being proper before the property
was bought for sale.
19.3. As regards the service of notice, he relies upon
Clause (c) of Sub-Rule (2) of Rule 17 of the
Karnataka Souharda Sahakari Niyama, 2004 to
contend that notice has to be served on the
borrower or a male member of the borrower's
family who is major in age.
19.4. He submits that admittedly notice has been
served on one Kushal, who is the son of the
petitioners who was minor in age at that time.
The service not being effected on the
borrowers, that is the petitioners and having
been effected on a minor, the service is not
proper and sufficient, and/or in compliance with
Clause (c) of Sub-Rule (2) of Rule 17.
19.5. As such, service not being effected properly,
the proceedings could not have gone on, the
- 77 -
NC: 2025:KHC:10768
petitioners could not have been placed ex
parte. This aspect has not been considered in
the right perspective by the Karnataka
Appellate Tribunal. Therefore, the reasoning of
the Appellate Tribunal that service has been
effected properly and thereafter there is a delay
in filing an appeal is unsustainable. This
submission is sought to be supported by placing
reliance on the aforesaid provision. Clause (c)
of Sub-Rule (2) of Rule 17 has been reproduced
hereinabove.
19.6. The same would categorically indicate that a
notice has to be served on the borrower, or a
male member of the borrower's family who is
major in age. Though the aspect of service on a
male member of the family is redundant in
today's time and age, the fact remains that the
service is required to be effected on the
borrower or a member of the borrower's family
who is major in age, if the word male is
- 78 -
NC: 2025:KHC:10768
eschewed. Be that as it may, the person on
whom the service was effected, Kushal, is a
male member of the family. However, he is not
major in age.
19.7. Thus, the service of notice on him is clearly in
violation of the mandate of Clause (c) of Sub-
Rule (2) of Rule 17 and as such, the service
cannot be held to be properly effected on the
borrowers by causing a service of the notice on
a minor member of the family.
19.8. This aspect was not properly considered by the
Deputy Registrar. The Deputy Registrar was
required to ascertain as to who had been
served, if that person was a member of the
family of the borrower if not served on the
borrower and if that service has been effected
on a person who is major in age. The award
passed by the Deputy Registrar only indicates
that service having been effected, the
- 79 -
NC: 2025:KHC:10768
borrowers having not appeared, they were
placed ex parte and the matter proceeded with.
19.9. Thus, this valuable right vested in the borrower
has been diluted by the Deputy Registrar by not
ensuring compliance with Clause (c) of Sub-
Rule (2) of Rule 17.
19.10. Thus, I answer Point No.(i) by holding that
service of notice in a proceeding before the
Deputy Registrar of Co-operative Societies in
pursuance of a dispute raised, more so as
regards a claim for money would have to be
effected in terms of Clause (c) of Sub-Rule (2)
of Rule 17 and any violation thereof cannot be
said to be valid service.
19.11. I answer point no (ii) by holding that service on
a minor member of the family of the petitioners
cannot be held to be valid service for the
Deputy Registrar of Cooperative Societies to
have proceeded with the matter placing the
petitioners exparte.
- 80 -
NC: 2025:KHC:10768
20. ANSWER TO POINT NO. (iii): Whether the
respondent - bank has followed the due
procedure before bringing the property for
auction insofar as the valuation of the property
is concerned?
20.1. The submission of Sri Udaya Holla, learned
Senior Counsel is that the Bank has acted in a
manner contrary to the applicable law. The
respondent - Bank has not carried out proper
valuation of the property before bringing the
same for auction. The property having been
grossly undervalued, the rights of the
petitioners have been adversely affected.
According to him, the value of the property is
about 4 crores, the loan amount being Rs.30
lakhs, the respondent Bank has sold the
property worth 4 crores for a meagre sum of
Rs.1.22 crores.
20.2. The petitioners having been always willing to
make payment of the loan amount along with
the applicable interest, they having been denied
- 81 -
NC: 2025:KHC:10768
the opportunity to make such payment on
account of non-service of notices, the
respondent - Bank has acted in an improper
manner by not properly valuing the property
and going ahead with the sale.
20.3. Learned counsels for the Bank have contended
that despite service of notice, the petitioners
did not appear before the Deputy Registrar of
Cooperative Societies, an award having been
passed, the property was got valued by a
valuer who has valued the property and
submitted a report on 25.08.2023 in terms
whereof the total market value of the property
including land and building has been certified as
Rs.1,52,42,562/- and the distress value has
been fixed at 80% of the market value at
Rs.1,21,94,050/-. The property having been
sold for Rs.1.22 crores, which is just above the
distress value fixed by the valuer, it is
submitted that the valuation report having been
- 82 -
NC: 2025:KHC:10768
secured, the sale having occurred at a higher
value than the valuation report, no fault can be
found therewith.
20.4. As regards the contention of the petitioner that
the value of the property is 4 crores, it is
contended that on two earlier occasions when
the property was brought for sale by fixing the
reserve price at Rs.1,20,00,000/-, there were
no bidders and it is only on the third occasion
that respondent No.5 has bid for the property
and the sale has been confirmed. If at all the
value of the property was Rs.4 crores, their
submission is that there would have been many
more people who would have bid at the auction
and been successful in the said auction for a
price obviously above 1.20 crores, but at price
less than Rs.4 crores. There being no interest
shown for bidding for the property on two
earlier occasions, it cannot now be contended
by the petitioners that the valuation is Rs.4
- 83 -
NC: 2025:KHC:10768
crores, much after the sale has occurred. Thus,
the submission made is that the actions taken
by the Bank are proper and correct and no fault
can be found therewith.
20.5. Sri.Udaya Holla, learned Senior Counsel has
relied upon the decision in Binayak Swain's
case to contend that the sale having occurred
exparte, equities of the borrower would have to
be considered and the sale be set-aside so as to
balance the equity of the borrower.
20.6. That decision, in my considered opinion, would
have to be considered holistically and not only
as regards the sale. Insofar as the decision
relied upon by Shri Udaya Holla learned Senior
Counsel in Desh Bandhu Gupta's case, to
contend that before an auction sale is
proposed, the estimate or the valuation of the
property is to be given to the judgment debtor
as also decree holder in respect of the value of
the property and their input to be collected
- 84 -
NC: 2025:KHC:10768
before fixing the reserve price for the property.
This he submits has not been done, inasmuch
as the respondent-Bank has not called upon the
petitioner judgment debtor to indicate the value
of the property and has not taken the same into
consideration. According to him, the valuation
of the property is more than Rs.4 crore which
ought to have been taken into consideration.
20.7. The decision in Desh Bandhu Gupta's case
was one which had been rendered in respect of
an auction sale conducted in an execution
proceedings by applying Rule 66 of Order 21 of
the Code of Civil Procedure. A perusal of the
said judgment would indicate that on the court
authorizing its officers to conduct the sale
under Rule 68, the sale should be conducted at
the time and place specified or modified with
the consent of the judgment debtor. The
proclamation should include the estimate, if any
given by either the Judgment Debtor or Decree
- 85 -
NC: 2025:KHC:10768
Holder or both the parties. Unless a notice
under Sub Rule (2) of Rule 66 of Order 21 were
waived by the Judgment Debtor, the Judgment
Debtor was required to be given an opportunity
to give the estimate of the property which is a
material fact to enable the purchaser to know
the value.
20.8. The Hon'ble Apex Court has held that the
absence of notices to the Judgment Debtor
causes irremediable injury to the Judgment
Debtor and in the absence of notice to the
Judgment Debtor, the same disables him to
offer his estimate of the value of the property.
The Hon'ble Apex Court has further gone on to
hold that it is very salutary that a person's
property cannot be sold without being told that
it is being so sold and given an opportunity to
offer his estimate as he is the person who
intimately knew the value of his property
prevailing in the locality and has gone on to
- 86 -
NC: 2025:KHC:10768
hold that in terms of Sub-Rule (1-A) of Rule 54
of Order 21, preemptory language having been
used before settling the terms of the
proclamation, the Judgment Debtor has to be
served with the notice, the omission thereof
renders the further action and sale in
pursuance thereof, unless the judgment debtor
appears without notice and thereby waives the
service of notice. In this case, Sri.Udaya Holla,
learned Senior counsel submits that no notice
had been issued, the petitioners have not
waived the notice, the input of the Judgment
debtors not having been considered and the
valuation fixed by the Bank unilaterally would
not enure to the benefit of the Bank, the same
being violatory of the rights of the Judgment
Debtor, this Court ought to intercede.
20.9. The decision in Desh Bandhu Gupta's case
was rendered in the year 1994. Thereafter,
there have been several decisions which have
- 87 -
NC: 2025:KHC:10768
been rendered. On first blush, the decision in
Desh Bandhu Gupta's case, if applied to the
present fact situation, the action taken by the
Bank is in violation of the dicta laid down by the
Hon'ble Apex Court in the above decision. In
pursuance of the said decision, further reliance
has been placed by Sri Udaya Holla on
Mahakal Automobile's case and Shalimar
Cinema's case, to contend that if the sale is
conducted for inadequate sale consideration,
the Court would be dutybound to set aside the
sale. Reference has also been made to the
decision in Ram Kishun's case to contend that
the valuation and reserve price are of
paramount importance. In case, proper
valuation has not been made and the reserve
price is fixed taking into consideration
inaccurate valuation report, the intending
buyers may not come forward treating the
property as not worth the purchase by them
- 88 -
NC: 2025:KHC:10768
and as such, it is contended that there must be
application of mind by the Authority concerned
while approving and accepting the report of the
approved Valuer while fixing the reserve price,
failure to do so would cause substantial injury
to the borrower/guarantor and would amount to
material irregularity and ultimately vitiate the
subsequent proceedings.
20.10. By relying on Vincent Paul's case, it is
contended that though a valuation report could
be obtained from the valuer, consultation with
the secured creditor and the borrower is
necessary. If the Judgment debtor were not
given reasonable opportunity as regards the
valuation, the sale would suffer from material
irregularity. The decision of the Hon'ble Apex
Court in Nani Gopal Paul's case has been
pressed into service to contend that the court
cannot remain a mute or helpless spectator to
obvious and manifest illegality committed in
- 89 -
NC: 2025:KHC:10768
conducting the sale, valuation being one of the
paramount importance, there being an absolute
violation of the said principles of valuation, this
court is required to intercede.
20.11. For similar purposes, reliance is placed on
Devdas Kumar's case and Satyanarain
Bajoria's case.
20.12. On all the basis of the above, it is contended
that the valuation not having been done
properly, the petitioner borrower not being
consulted, the auction sale is improperly
conducted and is required to be set aside.
20.13. The Counsels for the Bank, on the contrary,
have contended that Form No. 7 was issued on
25.08.2021 and served on the second petitioner
on 1.09.2021. The said Form No. 7 indicated
the valuation of the property and it is on that
basis that the first auction notice was issued on
30.12.2022 to the petitioners who refused to
accept the same, the second auction notice in
- 90 -
NC: 2025:KHC:10768
terms of Form Nos.8 and 9 dated 6.07.2023
was issued on 30.12.2022 to the petitioners
who refused to accept the same, the third
auction notice in Form 8 and 9 dated
25.09.2023 was served on 3.10.2023. The
three notices having been served, the
petitioners being fully knowledgeable about the
proposed auction and the valuation, it was for
the petitioners to have come forward and
provided their valuation and/or their objection
to the reserve price fixed. The knowledge of the
award and the proposed auction being available
with the petitioners as far back as on
1.09.2021, the petitioners did not take any
action thereon. They have approached the
Court only after the sale has been completed
falsely contending that they came to know
about it only subsequently.
20.14. They reiterate that the valuation report has
been obtained from a registered Valuer. The
- 91 -
NC: 2025:KHC:10768
property having been brought for sale on three
earlier occasions at a reserve price of
1,20,00,000/- there were no bidders and it's
only on the third occasion that the respondent
No.5, auction purchaser, has come forward to
purchase the same. Thus, they submit that
necessary notices as required in terms of the
decisions relied upon by Sri Udaya Holla,
learned Senior Counsel have been given to the
petitioners, the petitioners themselves having
chosen not to come forward and provide their
input as regard to valuation cannot now
contend otherwise that the valuation is
improper and/or that the property had been
brought for sale for a lesser amount and as
such, the same is not sustainable. The action
on the part of the petitioner is only to delay the
sale and to cause loss, harm and injury to the
auction purchaser.
- 92 -
NC: 2025:KHC:10768
20.15. Sri.N.S.Srihari, the counsel for the auction
purchaser, submits that the auction purchaser
who has come forward to make payment of the
monies and has indeed deposited the said
monies is required to be protected. The dispute
at the most could be inter-se between the Bank
and the borrower as regards the compliance or
not with the applicable requirements. Once an
interest has been created in favour of the
purchaser, such interest being required to be
protected, cannot be negated on the basis of
the ipse dixit of the borrower.
20.16. Reliance is placed on the decision in
Padanathil Ruqmini Amma's case to contend
that a purchaser of a property bona fide cannot
be disturbed on the basis of any particular
dispute raised by the borrower. Apart from this
argument, there are several other arguments
advanced by Sri.Srihari which would be
considered on a later point of time.
- 93 -
NC: 2025:KHC:10768
20.17. Insofar as the present point is concerned, what
would be required to be seen is whether the
Bank has violated the rights of the Judgment
Debtor in not providing an opportunity to the
Judgment Debtor to submit their say as regards
the valuation, thereby rendering the auction
invalid.
20.18. There cannot be any dispute as regards the
contention of Sri Udaya Holla, learned Senior
Counsel that the Judgment Debtor would have
to be given an opportunity of submitting his,
her or their say as regards the valuation made
by the Bank and the valuation at which the
bank proposes to sell the property. The
question here is, whether the bank has issued a
notice to the Judgment Debtor providing an
opportunity to the Judgment
debtors/petitioners to have their say as regards
the valuation?
- 94 -
NC: 2025:KHC:10768
20.19. As submitted by the counsels for the Bank,
Form No.7 was issued on 25.08.2021 and
served on the second petitioner on 1.09.2021
and the first auction notice dated 30.12.2022
sought to be served on the petitioner was
refused to be accepted by the petitioners. The
second auction notice dated 6.07.2023 was
served on 15.07.2023 and the third auction
notice dated 25.09.2023 was served on
3.10.2023. These auction notices having been
served, a perusal of the auction notices are
clearly and categorically indicate the valuation
at which the property is proposed to be
auctioned. If at all the petitioners had any
grievance as regards the valuation and had
their own valuation to submit, it was for the
petitioners to have submitted the same on
receipt of the auction notices. The petitioners
not having submitted their say and/or their
valuation or disputed the valuation of the bank,
- 95 -
NC: 2025:KHC:10768
the petitioners cannot now be heard to say that
their rights in submitting their say as regards
the valuation has been violated, rendering the
auction invalid.
20.20. A person who is in the wrong cannot claim
advantage of the said wrong. A person who has
not complied with the law and/or the rules
applicable thereto and who is in the wrong side
would have to face the consequences of such
action. Merely because the consequences are
harsh and/or that the consequences would
result in the sale of the person's property is no
ground for this court to intercede on equity.
This court is required to apply the law as is,
more so in terms of commercial matters where
Banks are involved and Banks are required to
recover the amounts due. The petitioners
though having been served notices on multiple
occasions have chosen to take a bystanders'
perspective, have kept quiet, not complied with
- 96 -
NC: 2025:KHC:10768
their obligations, and thereafter have come
forward making allegations against the Bank,
which cannot be countenanced either in law or
fact.
20.21. As aforesaid, the petitioners being in the wrong
would have to take the consequences of their
wrongs, even if the said consequences are
harsh. The valuation having been
communicated to the petitioner, the property
having been brought for sale at the said
valuation being fixed as a reserve price on two
earlier occasions, no one having come forward
to purchase the property at that price and its
only in the third auction that respondent No.5
has come forward, I am of the considered
opinion that the Bank has acted in a proper
manner. The opportunity which was required to
be extended by the Bank has been so
extended, it is the petitioners who have not
availed of the opportunity. Non-availing of the
- 97 -
NC: 2025:KHC:10768
opportunity cannot result in the petitioners
contending that the petitioners have been
denied the opportunity. It was always available
for the petitioners to avail the opportunity
granted by the Bank. Not having done so, the
petitioners cannot cry foul. The petitioner
knowing fully well that they could have paid the
due amounts before the auction was completed,
did not do so, which resulted in the auction
taking place, if at all the petitioner claim that
the property was valued at 4 crores, the
petitioners could have brough a person who
could have purchased the property at that price
on the three accossions that the auction was
conducted, thus the say of the petitioners has
only remained a claim and there is no
substance in it.
20.22. In that view of the matter, I answer point No.
(iii) by holding that the respondent-Bank has
followed the due procedure before bringing the
- 98 -
NC: 2025:KHC:10768
property for auction. The petitioners have been
provided an opportunity to have their say on
the valuation of the property. The petitioners
being in default cannot contend otherwise and
as such, the valuation of the property made is
proper and correct.
21. ANSWER TO POINT NO. (iv): Whether the delay
of 2 years 3 months and 11 days in filing the
appeal before the Karnataka Appellate Tribunal
could have been condoned?
21.1. The contention of Sri.Udaya Holla, learned
Senior Counsel for the petitioners is that there
is no delay of two years, three months and
eleven days in filing the appeal before the
Karnataka Appellate Tribunal. The petitioners
have filed the appeal as soon as they came to
know about the auction which has been
conducted. The petitioners have been placed
exparte before the DRCS, had not participated
in those proceedings and as such, the date on
which the award was passed cannot be taken
- 99 -
NC: 2025:KHC:10768
into consideration for the purpose of calculation
of the period of limitation or the delay in filing
the appeal.
21.2. The submission of the counsels for the Bank is
that the Form No.7 having been served on the
petitioners on 1.09.2021, they were aware of
the award which had been passed as on that
date. Thereafter, they chose not to take any
action until the auction was completed. The
details of the award having been incorporated
in Form No.7 served on 1.09.2021 they being
aware of the award, the date of knowledge
would have to be taken into consideration as on
1.09.2021 and therefore, the appeal filed was
barred by the law of limitation, the petitioners
waited and watched as a bystander during the
time auctions were conducted, the petitioners
cannot contend that they did not have any
knowledge of the award or the proceedings
- 100 -
NC: 2025:KHC:10768
taken thereafter. It is these two contentions of
both the sides which are required to be
considered by this court.
21.3. There is no dispute that the petitioners were
placed exparte before the DRCS and the DRCS
passed an exparte award. An award passed by
the DRCS is required to be challenged within a
period of 30 days from the date of the order
2.08.2024.
21.4. The contention of the petitioners as aforesaid is
that they came to know about the award only
when they came to know about the auction.
This contention cannot be accepted inasmuch
as, Form No.7 was issued by the respondent
bank on 25.08.2021 which was served on the
second petitioner on 1.09.2021, the first
auction notice also came to be subsequently
issued on 30.12.2022 which was refused to be
received by the petitioners, the second auction
- 101 -
NC: 2025:KHC:10768
came to be issued and served on 6.07.2023
and third auction notice came to be issued and
served on 25.09.2023.
21.5. Thus, not only when the Form No.7 was served
on the petitioner No.2 on 1.09.2021 and the
first auction notice was refused service of by
the petitioners on 30.12.2022, the petitioners
did not take any action to challenge the award
passed by the DRCS which had by then come to
their knowledge.
21.6. The first cause of action, for the petitioners
arose when Form No.7 was served on
1.09.2021. Even if it were to be accepted, that
the petitioners had been wrongfully placed
exparte and the matter proceeded with, the
petitioners having come to know of the said
award on 1.09.2021, were required to
challenge the said award within the time
prescribed thereafter and/or within a
- 102 -
NC: 2025:KHC:10768
reasonable time seeking for condonation of
delay on account of the petitioners not being
able to file the appeal due to reasons beyond
their control which could have been considered
by the Karnataka Appellate Tribunal.
21.7. The petitioners instead of doing so even after
having come to know of the award on
1.09.2021, they stayed quiet when the first
auction failed, they also stayed quiet when the
second auction failed, probably they were
expecting the third auction to also fail and
continue to be in possession of the property.
21.8. Expectations of a party cannot decide the legal
rights of the party. A person may have
expectations and may hedge on the risk by
hoping that the auction would not succeed.
However, in the present case, unfortunately
when the third auction has taken place
successfully and respondent No.5 has
- 103 -
NC: 2025:KHC:10768
successfully bid for the property and made
payment of the due amounts, the petitioners
cannot now come forward crying foul
contending that they came to know about the
auction only after the auction was completed.
The conduct of the petitioners clearly indicates
otherwise.
21.9. The notice in Form No.7 had been served on 1-
9-2021 on the petitioner No.2, the petitioners,
who are husband and wife, have continued to
take advantage of the delay in the auction
proceedings and now have come forward to
deprive the auction purchaser of his rights,
which, in my considered opinion, cannot be so
done.
22. Answer to point No. (v).: Whether the order of
the Appellate Tribunal suffers from any
infirmity requiring this Court to intercede?
22.1. The contention of Sri. Udaya Holla, learned
Senior Counsel in this regard is that the Court
- 104 -
NC: 2025:KHC:10768
has to consider the matter equitably the
property being subject matter of the security
and auction, being a residential property, which
has been rented out to several persons and the
petitioners also being residents of one of the
portions, if the auction were to be confirmed,
the petitioners and the other persons would be
evicted from the property causing untold harm
and injury to them.
22.2. His submission is also that the valuation has
not been done properly and this Court ought to
set aside the auction and permit the petitioner
to now make payment of the due amounts
which the petitioners are willing to pay. This
aspect of the petitioners willing to make
payment of the due amounts could be
permitted to be considered by the respondent -
Bank. By enquiring with the respondent - Bank
if the Bank was willing to receive the monies
now from the petitioners and close the matter,
- 105 -
NC: 2025:KHC:10768
the respondent - Bank contented otherwise and
stated that now that the auction has been
completed, the respondent-Bank does not wish
to enter into any compromise with the
petitioners. This aspect was further
compounded by the auction purchaser. The
auction purchaser now contending that a right
having been created in favor of the auction
purchaser, the auction purchaser having acted
in a bonafide manner, his rights cannot be
negated.
22.3. These contentions being required to be
considered in terms of the applicable law, the
transaction being commercial in nature, I am
afraid, I am unable to accept the submission
and the request of Sri.Udaya Holla, learned
Senior Counsel that the matter has to be looked
into equitably and that this Court is required to
set aside the auction so that the use of the
property for residential purpose by the
- 106 -
NC: 2025:KHC:10768
petitioner and certain others are not adversely
affected, the transaction being commercial in
nature, the petitioners having borrowed money
from a Bank were always aware that they had
to repay the amounts within the timeframe,
they having not repaid the monies, proceedings
having been initiated before the DRCS, though
the service of notice was effected on their
minor son, which is not in accordance with
Clause (c) of Sub-Rule (2) of Rule 17, the fact
remains that the minor son had knowledge of
the said notice and it cannot be expected that
the minor son did not bring it to the notice of
the petitioners, the minor son being 17 years of
age as on the date of service of notice. Even if
it were to be accepted that the minor son did
not bring the said service of notice to the
knowledge of the petitioners, i.e., his parents,
subsequently as indicated in answer to point
No.(iii), Form No.7 was served on the second
- 107 -
NC: 2025:KHC:10768
petitioner, the first auction notice was refused
to be accepted by the petitioners, the second
and third auction notices were served on the
petitioners, which would indicate that the
petitioners had complete knowledge and were
waiting on the sidelines as bystanders to see
what happens.
22.4. This aspect has been properly considered by
the Karnataka Appellate Tribunal and the delay
not being capable of condoned by adverting to
the facts of the matter has dismissed the
appeal. I do not find any infirmity in the said
order of the Appellate Tribunal taking into
consideration the arguments which have been
advanced in this matter dehors the aspect of
limitation.
22.5. All the facts indicate that the petitioners wanted
to take advantage of the delay and have only
come forward after the auction has been
- 108 -
NC: 2025:KHC:10768
confirmed in favour of the auction purchaser
who has paid all the amounts.
22.6. Thus, I answer point No. (v) by holding that the
order of the Appellate Tribunal does not suffer
from any legal infirmity requiring this court to
intercede.
23. ANSWER TO POINT NO. (v): Whether even if
the contentions of the petitioners are accepted,
could a restitution be granted to the petitioners
setting aside sale deed executed by the Bank in
favour of the auction purchaser?
23.1. The contentions of the petitioners have not
been accepted. Hence, exfacie, this point need
not be answered. However, since several
arguments have been advanced on this aspect,
this court would be dutybound to consider the
arguments addressed by the learned counsel
for the petitioner and learned counsel for the
auction purchaser.
23.2. The submission of Sri.Udaya Holla, learned
Senior Counsel by relying on Binayak Swain's
case supra is that when an auction is set aside,
- 109 -
NC: 2025:KHC:10768
restitution would normally follow and if this
court were to set aside the auction of the Bank
in respect of the properties of the petitioner,
this court would have to direct the restitution of
the property.
23.3. The submission of Sri.Srihari, the counsel for
the auction purchaser, is that the auction
purchaser is a bonafide purchaser for value
having participated in a public auction, and as
such, his interests are required to be protected.
Reliance has been placed on Padanathil
Ruqmini Amma's case to contend that the
Hon'ble Apex Court has held that property sold
to a bona fide purchaser in an auction sale, in
furtherance of execution of decree, is protected
and the purchaser cannot be asked to restitute
the property, even if the decree was later-on
held to be invalid, so long as the decree was
valid at the time of the auction sale.
- 110 -
NC: 2025:KHC:10768
23.4. In the present case, his submission is that even
if this court were to come to a conclusion that
the award passed by the DRCS is required to be
set aside, even then, equity having been
created in favor of the auction purchaser, who
has acted in furtherance of the said award
which has not been challenged within time, the
auction purchaser who has invested his hard-
earned money cannot be deprived of the said
property.
23.5. Reliance in this regard is also placed on Janak
Raj's case to contend that when the auction
purchaser is a stranger, his interests are
required to be protected. It is only in the case
of the decree holder being the auction
purchaser in the execution proceedings, the
decree holder knowing fully well that there is a
possibility of the decree being set aside and
having taken the risk of purchase of the
property in execution proceedings, would be
- 111 -
NC: 2025:KHC:10768
bound by any order setting aside the decree.
Insofar as the third party is concerned, he not
being in control of the proceedings and not
being a party to the proceedings, if a decree
were to be set aside, such third party purchaser
cannot be deprived of the purchase.
23.6. Reliance is also placed on Jantha Textile's
case, to contend similarly that a purchaser who
is bona fide, cannot be deprived of the benefits
of the auction.
23.7. Lastly, a submission is made by Sri.Srihari that
the aspect of restitution being equitable one,
the petitioners have not acted in an equitable
manner they have, in fact, acted in a dishonest
manner, played fraud on the Court by not
participating in the proceedings. They not
having discharged their obligations in a proper
manner cannot seek for equity when they have
acted in a manner contrary to the applicable
law.
- 112 -
NC: 2025:KHC:10768
23.8. The facts indicated above and the arguments
indicated above and been considered, it is clear
that respondent No.5, auction purchaser is a
third party to the transaction. Respondent No.5
is neither the decree holder nor a person
claiming under the decree holder. Respondent
No.5 had answered the auction notification
issued by the Bank, had participated in the
auction and was declared a successful bidder.
Pursuant thereto, the auction purchaser has
made payment of the due amounts which have
been received by the Bank, sale having been
confirmed. Thus, insofar as the auction
purchaser is concerned, the auction purchaser
has acted in the terms and in the manner that
the auction purchaser was required to act. The
auction purchaser has therefore discharged all
his obligations and therefore, in my considered
opinion, as rightly contended by Sri.Srihari, has
acted in a bona fide manner. It is the
- 113 -
NC: 2025:KHC:10768
petitioners who, as indicated above, have acted
in a malafide manner and have come forward
only after the auction sale has been completed.
23.9. By relying on Binayak Swain's case, the
submission made was that if a decree were to
be set aside, restitution can be ordered.
23.10. This aspect has been considered in detail in
Janak Raj's case and Janata Textile's case.
There is a distinction which has been drawn
between a stranger to the proceedings who is
considered to be bona fide and a party to the
proceedings. In Binayak Swain's case, the
purchaser in the auction was the decree holder
and it is in those circumstances that once a
decree was set aside, restitution was ordered,
though much subsequently.
23.11. The Hon'ble Apex Court in Janak Raj's case
and Janata Textile's case has drawn a
distinction between a stranger auction
purchaser and a decree holder purchaser and
- 114 -
NC: 2025:KHC:10768
has held that a stranger auction purchaser is
required to be protected, if he has acted bona
fide he not being part of the proceedings
between the decree holder and the judgment
debtor.
23.12. In the present proceedings, there is no
allegation made as regards the conduct of the
auction purchaser, though there have been
allegations made as regards the valuation of the
property made by the bank. Those aspects have
also been adverted to hereinabove and negated.
Thus, when there is no allegation made against
the third-party auction purchaser as regards his
conduct, his participation and his being successful
in the auction proceedings as held by the Hon'ble
Apex Court in Janakaraj's case and Janata
Textile's case, the auction purchaser being a
third-party or a stranger acting in a bona fide
manner, his interest would have to be protected
and even if all the other contention of the
- 115 -
NC: 2025:KHC:10768
Judgment Debtor that the award is not passed
properly and or the valuation has not been made
properly or accepted, a stranger auction
purchaser having acted bona fide cannot be put
at a disadvantage and restitution ordered.
23.13. As such, I answer point No.(vi) by holding that
even if the contentions of the petitioner were
accepted and the award passed is set aside, the
auction conducted in pursuance of an award, the
purchaser being a stranger to the transaction who
has acted in a bona fide manner against whom
there are no allegations of malafide, the sale
deed in favour of the auction purchaser cannot be
set aside and restitution ordered in favour of the
Judgment Debtor. In the present case, the
contentions of the petitioners not having been
accepted, the question of consideration of the
argument of restitution also would not arise.
24. ANSWER TO POINT NO. (vi): What Order?
- 116 -
NC: 2025:KHC:10768
In view of my answers above, no grounds being made
out, both the petitions stand dismissed. The
respondents are at liberty to take such action as is
permissible under law against the petitioners.
SD/-
(SURAJ GOVINDARAJ)
JUDGE
LN
