Deenadayal Nagari Sahakari Bank … vs Munjaji on 16 February, 2022


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Supreme Court of India

Deenadayal Nagari Sahakari Bank … vs Munjaji on 16 February, 2022

Author: M.R. Shah

Bench: M.R. Shah, B.V. Nagarathna

                                                              REPORTABLE
                                   IN THE SUPREME COURT OF INDIA
                                   CIVIL APPELLATE JURISDICTION
                                   CIVIL APPEAL NO. 818 OF 2022


         Deenadayal Nagari Sahakari Bank Ltd. & Another            ..Appellants


                                        Versus


         Munjaji and others                                        ..Respondents


                                              WITH
                                   CIVIL APPEAL NO. 819 OF 2022


         Ratnakar s/o Manikrao Gutte                               ..Appellant


                                        Versus
         Munjaji and others                                        ..Respondents




                                              JUDGMENT

M.R. SHAH, J.

Signature Not Verified

1. Feeling aggrieved and dissatisfied with the impugned judgment
Digitally signed by R
Natarajan
Date: 2022.02.16
15:47:35 IST
Reason:

and order dated 30.07.2021 passed by the High Court of Judicature at

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Bombay, Bench at Aurangabad in Writ Petition No. 570 of 2012, by

which the High Court has allowed the said writ petition preferred by

respondent no.1 herein and has set aside the auction sale in respect of

the lands in question and also ordered that the Sale Certificate dated

19.01.2011 executed by the appellant-bank in Civil Appeal No. 818/2022

in favour of the auction purchaser stands cancelled, both, the Bank as

well as the auction purchaser have preferred the present appeals.

2. The facts leading to the present appeals in a nutshell are as under:

One Vaishnavi Hatcheries Company Limited, of which respondent

no.1 herein is the Director (hereinafter referred to as the ‘borrower’),

borrowed loan from the appellant-bank and one Vaidanath Nagari

Sahakari Bank. As a security to the said loan, four properties, i.e.,

survey nos. 102, 440, 437 & 439 were mortgaged. Property survey No.

439 was mortgaged with Vaidanath Bank, property survey No. 437 was

mortgaged with the appellant-bank and property survey Nos.440 & 102

were jointly mortgaged with the appellant-bank and Vaidanath Bank.

2.1 That the borrower defaulted in payment of the appellant-bank and

Vaidanath Bank in the year 2010. Both the banks initiated separate

recovery proceedings against respondent no.1 and the borrower. A

Recovery Certificate dated 6.2.2010 was issued in favour of the

appellant-bank under Section 101 of Maharashtra Co-operative

2
Societies Act, 1960 (hereinafter referred to as the ‘MCS Act, 1960’).

According to the appellant-bank, a proclamation was published in the

daily newspaper ‘Sakal’ on 22.02.2010 as well as on 23.02.2020,

followed by the publication in the daily newspaper ‘Sakal’ on 24.02.2010.

According to the appellant-bank, a proclamation as per Rule 107(11) of

the Maharashtra Co-operative Societies Rules, 1961 (hereinafter

referred to as the ‘MCS Rules, 1961’) was issued on 26.05.2010 giving

30 days’ time to respondent no.1 to pay the amount.

2.2 That the Deputy Joint Registrar, Co-operative Societies fixed the

upset price at Rs.98,10,000/- vide communication dated 26.07.2010.

Vaidanath Bank also initiated the process of auction of the property in

survey no. 439 in terms of the recovery certificate issued in its favour.

The said proceedings so far as the Vaidanath Bank is concerned had

attained finality. Upset price fixed by the Deputy Joint Registrar, Co-

operative Societies was challenged by respondent no.1 by way of

Revision Petition No. 58/2010 before the Divisional Joint Registrar.

2.3 The appellant-bank issued a tender notice to sell the mortgaged

properties on 9.9.2010, which was published in the daily newspaper on

14.09.2010. On the date fixed for submission of tender, the Divisional

Joint Registrar, Co-operative Societies granted stay of the auction

proceedings in Revision Application No. 58/2010 filed by respondent

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no.1 herein. However, subsequently, the Divisional Joint Registrar

dismissed the said Revision Application vide order dated 23.11.2010.

On dismissal of the revision application and vacating the stay, bids were

opened on 29.11.2010. The appellant in Civil Appeal No. 819/2022 –

Ratnakar Gutte was found to be the highest bidder and he offered the

bid of Rs.1,26,00,000/-. The auction purchaser deposited 15% of the

said amount on the same day, i.e., on 29.11.2010. Thereafter, an

application was made to the District Deputy Registrar for seeking

approval to accept the balance 85% of the amount from the auction

purchaser which according to the bank was required as per the circular

issued by the Co-operative Commissioner & Registrar dated 23.07.2004.

The approval was received from the District Deputy Registrar on

29.12.2010. Immediately on receipt of the approval, the auction

purchaser deposited the remaining 85% of the amount on 12.01.2011,

which was within 15 days from the date of approval.

2.4 A Sale Certificate was issued in favour of the auction purchaser on

17.01.2011 and the sale deed was also executed in favour of the auction

purchaser on 19.01.2011. No further steps were taken by respondent

no.1 immediately. He also did not come forward to deposit 5% of the

amount equal to the purchase money within 30 days from the date of the

sale so as to seek setting aside of the sale in terms of Rule 107(13) of

4
the MCS Rules, 1961. No objection was raised before the Recovery

Officer about any irregularity or fraud as required under Rule 107(14) of

the MCS Rules, 1961. It appears that the officers of the bank went to

take possession of the property, they were attacked and therefore the

officers of the bank lodged an FIR on 24.02.2011 for an attack on them

while acquiring possession of the property.

2.5 Thereafter, respondent no.1 challenged the auction proceedings

before the Divisional Joint Registrar by way of Revision Application No.

11/2011 under section 154 of the MCS Act, 1960. Respondent no.1 filed

an FIR being FIR No. 138/2011 alleging that the mortgaged deed of the

property and sale deed with respect to land survey no. 437 (to the extent

of 34R) and land survey no. 440(to the extent of 72R) are illegal. Vide

order dated 13.04.2011, the Divisional Joint Registrar dismissed

Revision Application No. 11/2011 filed by respondent no.1 herein.

Respondent no.1 filed Writ Petition No. 570/2012 before the High Court

challenging order dated 13.04.2011 in Revision Application No. 11/2011

passed by the Divisional Joint Registrar upholding the auction

proceedings. Respondent no.1 also challenged Recovery Certificate

dated 6.2.2010 before the High Court by filing two writ petitions, i.e., Writ

Petition No. 4618/2011 & Writ Petition No. 9282/2011. Both, Writ

Petition No. 4618/2011 & Writ Petition No. 9282/2011 came to be

5
dismissed by the High Court, vide order dated 20.02.2012. By judgment

and order dated 23.09.2013, the High Court quashed the criminal

proceedings initiated by respondent no.1 against the officers of the bank

and others concerned vide FIR No. 138/2011.

2.6 Feeling aggrieved and dissatisfied with the order passed by the

learned Single Judge in Writ Petition No. 4618/2011, respondent no.1

preferred Letters Patent Appeal No. 130/2012. The same came up for

hearing before the Division Bench on 5.3.2014. Respondent no.1

withdrew the said Letters Patent Appeal and therefore the said LPA No.

130/2012 came to be dismissed as withdrawn.

2.7 By the impugned judgment and order dated 30.07.2021, the High

Court has allowed Writ Petition No. 570/2012 challenging order dated

13.04.2011 passed by the Divisional Joint Registrar in Revision

Application No. 11/2011 upholding the auction proceedings and

consequently has set aside the auction sale in respect of lands survey

nos. 440, 437 and 102 dated 29.11.2010. By the impugned judgment

and order, the High Court has also set aside the Sale Certificate in

favour of the auction purchaser dated 19.01.2011. The High Court has

directed the appellant-bank to refund the sale price to the auction

purchaser along with interest @ 10% per annum from the date of deposit

till payment. From the impugned judgment and order passed by the

6
High Court, it appears that the High Court has allowed the writ petition

and set aside the auction sale on the ground that there was a non-

compliance of mandatory provisions of Rule 107(11) (e) (f) and Rule

107(11)(h) of the MCS Rules, 1961.

2.8 Feeling aggrieved and dissatisfied with the impugned judgment

and order passed by the High Court, the bank as well as the auction

purchaser both have preferred the present appeals.

3. Shri Sudhanshu S. Choudhari, learned counsel appearing on

behalf of the appellants in Civil Appeal No. 818/2022 has vehemently

submitted that, as such, respondent no.1 has not deposited even a

farthing towards the loan amount since 2010. It is submitted that he

even did not deposit the amount in terms of the proclamation dated

26.05.2010, nor did he deposit the 5% amount in terms of Rule 107(13)

of the MCS Rules, 1961 for seeking setting aside the auction/sale.

3.1 It is contended that the High Court has not properly appreciated

the fact that in the earlier two rounds of litigation, respondent no.1 –

borrower failed, i.e., in his challenge to the recovery proceedings and

challenge to the base price. It is submitted that this is the third attempt

to stall the recovery of public money.

3.2 It is further urged that as such the High Court has not properly

appreciated and/or considered that the properties at Survey Nos. 440 &

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102 were jointly mortgaged to the appellant-bank and the Vaidanath

Bank and were inseparable. It is submitted that out of the auction

amount, Rs. 47 lakhs were paid to Vaidanath Bank and despite the

above fact, Vaidanath Bank was not made party before the High Court.

It is submitted that in writ petition No. 570/2012, as such, there was no

challenge to the auction sale of properties bearing survey nos. 102 &

440, jointly mortgaged with the appellant-bank and the Vaidanath Bank.

3.3 It is further contended by learned counsel appearing on behalf of

the appellant-bank that once having held by the High Court that since

respondent no.1 did not exercise the right under Rule 107(13), Revision

Application No. 11/2011 under Section 154 of the MCS Act, 1960 was

not maintainable, thereafter it was not open for the High Court to pass

the impugned judgment and order in the writ petition in which the order

passed in the revision application was under challenge.

3.4 It is submitted that in the present case, Vaishnavi Hatcheries was

the borrower and respondent no.1 is the only Director of the borrower. It

is submitted that the borrower – Vaishnavi Hatcheries has accepted the

auction as it has not challenged the same. It is therefore submitted that

challenge to the auction/sale by respondent no.1 as a director in his

individual capacity was not maintainable.

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3.5 It is further contended that as such respondent no.1 did not raise

any objection before the Recovery Officer in terms of Rule 107(14) of the

MCS Rules, 1961. That in view of the proviso to the said Rule, no sale

could be set aside on the ground of irregularity, mistake or fraud unless

the Recovery Officer is satisfied that the applicant has sustained

substantial injury due to it. It is submitted that in fact the order of the

High Court would cause substantial injury to respondent no.1 as he will

have to pay interest at the rate of 15% per annum from the date of

default, i.e., from 2010 till date. It is submitted that the amount if

calculated at present would come to Rs. 3,54,58,836/- and after addition

of 10% to be paid to the auction purchaser, the amount would be

Rs.6,15,05,589/-.

3.6 It is further submitted that the High Court has not properly

considered the conduct on the part of respondent no.1. This is because

respondent no.1 has filed several proceedings in several Courts to stall

the recovery of the outstanding debt. It is submitted that at this stage, to

initiate a fresh process would cause substantial injury to the appellant as

the life of the machinery auctioned was only three years and the

appellant will not be able to recover the amount which is public money.

It is submitted that the High Court has even erroneously asked the

appellant-bank to repay the sale price to the auction purchaser along

9
with interest at the rate of 10% per annum from the date of deposit till

payment, which is in the nature of a penalty against the bank.

3.7 It is further urged that even otherwise, on facts also, the High

Court has erred in observing and holding that there was a breach of

Rules 107(11)(e), (f) & (h) of the MCS Rules, 1961. That the High Court

has committed a grave error in observing and holding that in terms of

Rule 107(11)(e) and (f), there was no gap of thirty days between the

proclamation and the sale. It is stated that the date of proclamation was

20.02.2010 and 26.05.2010 and the date of auction was 28.09.2020.

Therefore, there was a clear gap of thirty days between the two. It is

submitted that the High Court has erroneously taken the date of

publication of notice as the date of proclamation.

3.8 It is further submitted that the High Court has also committed an

error in holding that there was a breach of Rule 107(11)(f) by not issuing

a fresh proclamation. That the High Court has erred in holding that in

terms of Rule 107(11)(f), a fresh proclamation was required to be issued

since the auction was adjourned for more than seven days. It is urged

that the High Court has not considered that in terms of proviso to Rule

107(11)(f), only where the Recovery Officer or the Sale Officer in his

discretion adjourns the sale for a period longer than seven days, a fresh

proclamation was required to be issued. That in the instant case, there

10
was no such discretion exercised either by the Recovery Officer or the

Sale Officer. It is submitted that the sale was required to be adjourned

as there was a stay of the auction granted on the very date fixed for it by

the Divisional Joint Registrar vide order dated 28.09.2010 at the instance

of respondent no.1, which came to be vacated on 23.11.2010 and

thereafter within a period of seven days the auction was held.

3.9 Making the above submissions, it is prayed to allow the present

appeal and to quash and set aside the impugned judgment and order

passed by the High Court.

4. Shri Nishant Katneshwarkar, learned counsel appearing on behalf

of the auction purchaser, while adopting the submissions made on behalf

of the appellant-bank, has further submitted that the High Court has

erred in holding that the auction purchaser did not deposit the balance

85% amount within the stipulated time. It is submitted that as per

circular dated 23.07.2004 issued by the Cooperative Commissioner &

Registrar, Cooperative Societies, all the proposals for sale confirmation

were required to be submitted to the Assistant Registrar/District Deputy

Registrar. It is submitted that in the present case the bids were opened

and tender was allotted to the auction purchaser as he was the highest

bidder and he deposited 15% of the amount on 29.11.2010. That an

application was made to the District Deputy Registrar for seeking his

11
approval and to accept the balance 85% of the amount. That the same

was required as per circular dated 23.07.2004. That the approval was

received from the District Deputy Registrar on 29.12.2010 and

immediately thereafter within a period of 15 days, i.e., on 12.01.2011,

the auction purchaser had deposited the remaining 85% of the amount

and thereafter the sale certificate came to be issued in favour of the

auction purchaser on 17.01.2011. It is submitted that therefore the High

Court has erred in observing that the auction purchaser did not deposit

the 85% of the balance amount of sale consideration within the

stipulated time provided under the Rules. It is urged that therefore the

High Court has committed a grave error in setting aside the entire sale

which was held in 2010/2011.

5. The present appeals are vehemently opposed by Shri Santosh

Paul, learned Senior Advocate appearing on behalf of respondent no.1.

It is submitted that in the present case, the High Court has rightly held

that the auction sale was in contravention of Rules 107(11)(e), 107(11)

(f), 107(11)(g) & 107(11)(h) of the MCS Rules, 1961.

5.1 It is submitted that according to Rule 107(11)(e) of the MCS Rules,

1961, the proclamation was to be published thirty days before the date

for sale. But in the instant case, no such proclamation was made for the

auction sale held on 29.11.2010. It is submitted that the proclamation

12
was issued on 09.09.2010 and was published on 14.09.2010 for opening

of tender on 28.09.2010, which was within the period of thirty days from

the date of proclamation. It is submitted, therefore the High Court has

rightly held that the auction was in breach of Rule 107(11)(e) of the MCS

Rules, 1961.

5.2 It is further submitted that as per second proviso to Rule 107 (11)

(f) of the MCS rules, if, for any reason, the sale has been postponed

beyond seven days, a fresh proclamation is required to be issued. It is

contended that in the present case, the Divisional Registrar stayed the

auction and the proclamation of auction by order dated 28.09.2010 and

the revision was dismissed on 23.11.2010. The auction was scheduled

to be held on 28.09.2010 but the auction was actually held after 61 days,

i.e., on 29.11.2010 without a fresh proclamation as mandated by second

proviso to Rule 107(11)(f) of the Rules. It is submitted that second

proviso to Rule 107(11)(f) clearly stipulates the mandate of issuing a

fresh proclamation. It does not state that the fresh proclamation is not

necessary if there is a stay by higher authorities/Courts. It is contended

that in the absence of the fresh proclamation, auction held on

29.11.2010 is a nullity.

5.3 It is submitted that the underlying purpose of issuing a fresh

proclamation before an auction is to obtain the best financial return for

13
the property and to oversee a free and fair competition amongst buyers.

It is submitted that the High Court is right in setting aside the auction

sale which was in breach of Rule 107(11)(f) of the Rules.

5.4 It is further submitted that in the present case the property in

question was sold for an amount of Rs.1,26,00,000/- and the very

purchaser valued the same property in four months at Rs.4,91,00,000/-.

It is submitted that in the absence of a fresh proclamation only three

related parties participated in the auction and therefore the property in

question was sold at a very low price.

5.5 It is further submitted that as per Rules 107(11) (g) & (h), it is

mandatory that the auction purchaser deposits 15% of the price

immediately and that he also deposits the remainder 85% within a period

of fifteen days from the date of sale. It is submitted that in the present

case, the auction purchaser deposited 15% of the sale price on

29.11.2010 and the remaining amount was paid after 44 days on

12.01.2011. This is a clear breach of Rules 107(11) (g) & (h). It is

submitted that the High Court is right in setting aside the sale in favour of

the auction purchaser.

5.6 It is submitted that in the case of Shilpa Shares and Securities and

others vs. National Cooperative Bank Limited, reported in (2007) 12

SCC 165 wherein the very same Rules 107(11) (g) &(h) were under

14
consideration and admittedly like in the present case the amount of

remaining 85% was not paid within fifteen days from the date of sale,

following the earlier decision of this Court in the case of Balram vs. Ilam

Singh, reported in (1996) 5 SCC 705, it has been held that failure to pay

85% of the purchase money within stipulated time renders the auction

sale a nullity and that there was no valid auction sale. It is submitted

that in the aforesaid decision it is held that failure to deposit the amount

within the stipulated time vitiates the auction process.

5.7 Now insofar as the reliance placed upon Section 154 of the MCS

Act, 1960 by the bank is concerned, it is submitted that the said

provision cannot be pressed into service when the auction has been

held in a completely illegal manner and in blatant violation of the rules

which are mandatory in nature. It is contended that in the present case

as there was no fresh proclamation issued and the auction was hastily

conducted after the stay was vacated, therefore the High Court has

rightly entertained the writ petition and has rightly set aside the auction

sale.

5.8 Relying upon the decisions of this Court in the cases of Ram

Kishun vs. State of Uttar Pradesh, reported in (2012) 11 SCC 511 and J.

Rajiv Subramaniyan vs. Pandiyas, reported in (2014) 5 SCC 651, it is

vehemently submitted by the learned Senior Advocate appearing on

15
behalf of the respondent – borrower that as observed by this Court in the

aforesaid two decisions the bank has to act fairly and all efforts should

be made to get the best price for the mortgaged property. It is submitted

that in the aforesaid decisions, it is held that the condition precedent for

taking away someone’s property or disposing of the secured assets is

that the authority must ensure compliance with the statutory provisions.

It is submitted that in the present case, while conducting the auction sale

and selling the property, the statutory provisions have not been followed

and in fact the property in question was sold at a lower price and

therefore the High Court has rightly quashed and set aside the auction

as well as the sale in favour of the auction purchaser.

5.9 Making the above submissions and relying upon the aforesaid

decisions, it is prayed to dismiss the present appeals.

6. We have heard the learned counsel for the respective parties at

length.

By the impugned judgment and order, the High Court has set aside

the auction sale conducted on 29.11.2010 and has cancelled the Sale

Certificate dated 19.01.2011 in favour of the auction purchaser on the

ground that the auction sale/sale was in breach of Rules 107(11) (e), (f),

(g) & (h) of the MCS Rules, 1961.

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6.1 What was challenged before the High Court was the order passed

by the Divisional Joint Registrar passed in Revision Application No.

11/2011 under Section 154 of the MCS Act, 1960. However, it is

required to be noted that even the High Court in the impugned judgment

and order has specifically observed in paragraph 31 that as the borrower

did not exercise the right under Rule 107(13) of the MCS Rules, it was

not competent for the borrower to prefer revision before the Divisional

Joint Registrar under Section 154 of the MCS Act, 1960. Therefore,

once the revision application before the Divisional Joint Registrar under

Section 154 of the MCS Act, 1960 was held to be not maintainable

and/or competent at the instance of the borrower – respondent no.1

herein, thereafter the High Court ought not to have considered the writ

petition on merits.

7. Even otherwise on merits also, the High Court has erred in

entertaining the writ petition filed by the borrower and quashing and

setting aside the auction sale/sale by not bearing in mind the following

aspects:

firstly, that after conducting the auction sale and sale of the property

in favour of the auction purchaser, the borrower never applied to the

Recovery Officer to set aside the sale on the grounds of material

irregularity, mistake or fraud in publishing or conducting it;

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secondly, as per proviso to Rule 107(14)(i) of the MCS Rules, no

sale shall be set aside on the ground of irregularity or fraud unless the

Recovery Officer is satisfied that the applicant has sustained substantial

injury by reason of such irregularity, mistake or fraud; and

thirdly, as per Rule 107(14)(iii), on the expiration of thirty days from

the date of sale, if no application to have the sale set aside is made or if

such application has been made and rejected, the Recovery Officer shall

make an order confirming the sale. Rule 107(14) reads as under:

“(14)(i) At any time within thirty days from the date of the sale of
immovable property, the applicant or any person entitled to share in a
rateable distribution of the assets or whose interests are affected by the
sale, may apply to the [District Deputy Registrar] to set aside the sale on
the ground of a material irregularity or mistake or fraud in publishing or
conducing it:

Provided that no sale shall be set aside on the ground of irregularity or
fraud unless the [District Deputy Registrar] is satisfied that the applicant
has sustained substantial injury by reason of such irregularity, mistake or
fraud.

(ii) If the application be allowed, the Recovery shall set aside the sale and
may direct a fresh one

(iii) On the expiration of thirty days from the date of sale, if no application
to have the sale set aside is made or if such application has been made
and rejected, the [District Deputy Registrar] shall make an order
confirming the sale;

Provided that if he shall have reason to believe that the sale ought to be
set aside notwithstanding that no such application has been made or on
grounds other than those alleged in any application which has been made
and rejected, he may, after recording his reasons in writing, set aside the
sale.

(iv) Whenever the sale of any immovable property is not so confirmed or is
set aside, the deposit or the purchase money, as the case may be, shall
be returned to the purchaser.

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(v) After the confirmation of any such sale, the [District Deputy
Registrar] shall grant a certificate of sale bearing his seal and signature to
the purchaser, and such certificate shall state the property sold and the
name of the purchaser.”

7.1 In the present case, Sale Certificate was issued in favour of the

auction purchaser on 19.01.2011 after a period of thirty days from

holding the auction sale. At this stage, it is required to be noted that

even the Sale Certificate was issued by the Bank/Recovery Officer only

after the receipt of the approval of the District Deputy Registrar. While

approving the sale, the District Deputy Registrar noted in the approval

dated 29.11.2010 that the valuation of the land was determined at Rs.

98,10,000/- according to the letter issued by the Government approved

Valuer dated 10.06.2010 which was the upset price and the amount

realised was Rs.1,26,00,000/-, which is higher than the upset price.

Therefore, as such, even the District Deputy Registrar also did not doubt

the valuation and the amount realised, i.e., Rs. 1,26,00,000/- against the

upset price of Rs.98,10,000/-. Therefore, once the borrower failed to

apply to the Recovery Officer to set aside the auction sale on the

grounds of material irregularity, mistake or fraud in publishing or

conducting the auction sale within a period of thirty days from the date of

sale of immovable property, thereafter it was not open for the borrower to

challenge the sale on the ground of material irregularity. All the grounds

19
on which the High Court has set aside the auction sale/sale were

available with the borrower and the borrower did not apply to set aside

the sale on the said grounds of material irregularity, mistake or fraud.

Therefore, once the borrower failed to apply to the Recovery Officer to

set aside the sale on the ground of material irregularity within a period of

thirty days from the date of sale of the immovable property and thereafter

the Sale Certificate has been issued, normally the borrower cannot be

permitted to challenge the same subsequently, having not raised any

objection at the appropriate time and stage as per the statute, otherwise

the statutory provisions would become nugatory and unworkable.

7.2 It is also required to be noted that even under Rule 107(14)(i) of

the MCS Rules, 1961, no sale shall be set aside on the ground of

material irregularity, mistake or fraud unless the Recovery Officer is

satisfied that the applicant had sustained substantial injury by reason of

such irregularity, mistake or fraud. In the present case, there is no

finding recorded by the High Court that the borrower had sustained

substantial injury and by reason of such irregularity the auction sale had

to be set aside. Under the above circumstances also, setting aside of

auction sale/sale by the High Court is just contrary to the proviso to Rule

107(14)(i) of the MCS Rules, 1961.

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8. One another ground on which the High Court has set aside the

auction sale is that as the auction was postponed by seven days, fresh

proclamation ought to have been issued. Therefore, according to the

High Court, not issuing the fresh proclamation and conducting/holding

the auction was in breach of Rule 107(11)(f) of the MCS Rules. The

High Court has also observed and held that as the auction was

held/conducted within a period of thirty days from the date of issuance of

proclamation, the same is in violation of Rule 107(11)(f) of the MCS

Rules. Rule 107(11)(f) of the MCS Rules reads as under:

“(f) When any immovable property is sold under these rules, the sale shall
be subject to the prior encumbrances on the property, if any. The applicant
shall, when the amount for the realisation of which the sale is held
exceeds Rs. 100, furnish to the Sale Officer within such time as may be
fixed by him or by the Recovery Officer, an encumbrance certificate from
the Registration Department for the period of not less than twelve years
prior to the date of attachment of the property sought to be sold, or in
cases falling under the proviso to sub-rule (10), prior to the date of the
application for execution. The time for production of the encumbrance
certificate may be extended at the discretion of the Sale Officer or the
Recovery Officer, as the case may be. The sale shall be by public auction
to the highest bidder:

Provided that it shall be open to the Sale Officer to decline to accept the
highest bid where the price offered appears to be unduly low or for other
adequate reasons:

Provided further that the Recovery Officer or the Sale Officer may, in his
discretion, adjourn the sale to a specified day and hour, recording his
reason for such adjournment. Where a sale is so adjourned for a longer
period than seven days, a fresh proclamation under clause (e) shall be
made, unless the defaulter consents to waive it.

The sale shall be held after the expiry of not less than thirty days
calculated from the date on which notice of the proclamation was affixed in
the office of the Recovery Officer. The time and place of sale shall be fixed
by the Recovery Officer and the place of sale shall be the village where
the property to be sold is situated or such adjoining prominent place of
public resort as may be fixed by the Recovery Officer:

21

Provided that in cases where an encumbrance certificate is not obtainable
owing to the destruction of the connected records, an affidavit from the
village Talathi or corresponding officer in regard to the encumbrances
known to him supported by a certificate from the Registration Department
that the encumbrance certificate cannot be granted owing to the
destruction of the connected records shall be accepted in place of an
encumbrance certificate.”

8.1 In the present case, the tender notice was issued and published in

the daily newspaper on 9.9.2010. The date fixed for submission of the

tender was 28.09.2010. At the last moment, i.e., on 28.09.2010, the

borrower filed revision application no. 58/2010 before the Divisional Joint

Registrar challenging the auction proceedings and the Divisional Joint

Registrar granted stay of the auction proceedings on 28.09.2010. The

revision application came to be dismissed by the Divisional Joint

Registrar vide order dated 23.11.2010. On dismissal of the revision

application and vacating the stay against the auction proceedings, the

bank/Recovery Officer opened the bids on 29.11.2010 in which the

auction purchaser was found to be the highest bidder who offered

Rs.1,26,00,000/- against the upset price of Rs. 98,10,000/-. Therefore,

as such, within a period of seven days from the date of vacating stay and

dismissal of the revision application, the auction was held. Therefore, it

cannot be said that the auction sale was in breach of Rule 107(11)(f) of

the MCS Rules. The period during which the stay was in operation was

to be excluded. Even otherwise, proviso to Rule 107(11)(f) is applicable

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to issue a fresh proclamation in case the sale is adjourned for a longer

period than seven days by the Recovery Officer or the Sale Officer. The

said proviso is not applicable in a case where at the last moment the

borrower obtains a stay of the auction which is vacated after some time,

i.e., after a period of seven days. Once the sale was required to be

adjourned because of the stay order obtained by the borrower and the

stay continued for more than seven days which came to be vacated

subsequently, how such a person/borrower can be permitted to take the

benefit of his action of obtaining the stay and thereafter to contend that

even if the sale was adjourned for more than seven days due to the stay

order obtained by him, there shall be a fresh proclamation. This can be

said to be giving a premium to such a borrower. If the

contention/submission on behalf of the borrower is accepted that second

proviso to Rule 107(11)(f) does not state that the fresh proclamation is

not necessary if there is a stay of auction by higher authorities/Courts, in

that case, every dishonest borrower who wants to scuttle or delay the

auction/sale will approach the Court/appropriate authority at the eleventh

hour and obtain stay of the auction which may continue for more than

seven days and he would then contend that as more than seven days

have passed, fresh proclamation has to be issued. The aforesaid

position cannot be accepted.

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9. Now insofar as the finding recorded by the High Court that the

auction was conducted/held within a period of thirty days from the date of

proclamation and therefore there is a breach of Rule 107(11)(f) is

concerned, it appears that the High Court has considered 09.09.2010 as

the date of proclamation. However, it is to be noted that 09.09.2010 was

the date on which the tender notice indicating the date of auction/sale

was issued. The same was published in the daily newspaper on

14.09.2010 fixing the date of auction/sale on 28.09.2010. It was not a

proclamation. Prior thereto, the proclamation/public notice dated

20.02.2010 was published in the daily newspaper ‘Sakal’ on 22.02.2010,

23.02.2010 and 24.02.2010. Even thereafter also, Public Advertisement

dated 26.05.2010, which also can be said to be a proclamation as per

Rule 107(11)(f) of the MCS Rules, 1961, was issued. Therefore, the

High Court is factually incorrect in concluding that the auction sale was in

breach of Rule 107(11)(f) of the MCS Rules, 1961.

10. Now insofar as the finding recorded by the High Court and reliance

placed upon the decisions of this Court in the cases of Shilpa Shares

and Securities (supra) and Balram (supra) that there was a breach of

Rule 107(11)(g) & (h) of the MCS Rules by not depositing the balance

85% sale consideration within a period of 15 days is concerned, the

same is also factually incorrect. The bids were opened on 29.11.2010

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and the auction purchaser was found to be the highest bidder who

offered Rs. 1,26,00,000/-. On the very day, he deposited 15% of the sale

consideration. On 01.12.2010, an application was made to the District

Deputy Registrar, which was required as per circular dated 23.07.2004

issued by the Co-operative Commissioner & Registrar, Cooperative

Societies. The District Deputy Registrar approved the said proposal

which was received on 29.12.2010 and within a period of fifteen days

from the date of such approval, the auction purchaser deposited the

remaining 85% of the amount. Therefore, it cannot be said that there

was any breach of Rule 107(11)(g) &(h) of the MCS Rules, 1961 as

observed and held by the High Court.

11. Even the conduct on the part of the borrower is also required to be

noted and considered at this stage. A huge sum of Rs. 3,54,58,836/-

was due and payable. He has not paid/deposited even a farthing

towards the loan amount since 2010. However instead, he lodged an

FIR against the Bank Officers alleging that the mortgaged deeds of the

property and sale deed of the land Ghat No. 437 (to the extent of 34R)

and Ghat No. 440 (to the extent of 72R) are illegal. The said criminal

proceedings came to be quashed by the High Court vide order dated

23.09.2013. Number of proceedings were initiated by the borrower and

all efforts were made by him to delay the auction/sale of the mortgaged

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properties without paying a single rupee. Pursuant to the proclamation

issued on 26.05.2010 under Rule 107(11) of the MCS Rules, 1961, thirty

days’ time was given to the concerned borrower to repay the debt, but no

steps were taken by him. The borrower was fully aware of this

publication. Thereafter, public notice was issued on 09.09.2010, which

was published on 14.09.2010 fixing the date of sale/auction on

28.09.2010. On that day, stay order was obtained by the borrower.

Before the High Court, it was the third round of litigation initiated by the

borrower. In the first round of litigation, he challenged the upset price

fixed by the Divisional Joint Registrar which was filed on 28.09.2010

being the last date of submission of the tender. The said revision

application No. 58/2010 came to be dismissed by the Divisional Joint

Registrar on 23.11.2010. Thereafter, the auction was held and the sale

certificate was issued in favour of the auction purchaser on 17.01.2011

and the sale deed was executed in favour of the auction purchaser on

19.01.2011. Even at that stage also, he could have applied for setting

aside the sale by depositing 5% of the amount equal to the purchase

money in terms of Rule 107(13) but the borrower failed to avail the said

opportunity. He even did not raise any objection before the Recovery

Officer about the alleged material irregularity as required under Rule

107(14). Instead, he challenged the auction proceedings before the

Divisional Joint Registrar by way of revision application No. 11/2011

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under Section 154 of the MCS Act, 1960, which even as observed by the

High Court was not competent at the instance of the borrower. From the

aforesaid, it is clear that at every stage without paying a single rupee due

and payable, the borrower tried to stall the auction/sale proceedings.

12. Now insofar as the reliance placed upon the decisions of this Court

in the cases of Shilpa Shares and Securities (supra) and Balram (supra)

by the learned counsel appearing on behalf of the borrower is

concerned, the same shall not be applicable to the facts of the case on

hand, in view of our findings recorded hereinabove.

13. In view of the above discussion and for the reasons stated above,

the present appeals succeed. The impugned judgment and order dated

30.07.2021 passed by the High Court of Bombay, Bench at Aurangabad

in Writ Petition No. 570/2012 is hereby quashed and set aside and

consequently Writ Petition No. 570/2012 filed by the borrower-

respondent no.1 herein stands dismissed.

The present appeals are accordingly allowed. However, there shall

be no order as to costs.

…………………………………J.

                                          [M.R. SHAH]


NEW DELHI                                 ………………………………..J.
FEBRUARY 16, 2022.                        [B.V. NAGARATHNA]


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