Since the issues raised in both the captioned appeals are the same; the subject-matter also being the same; the parties are also same and the challenge is also to the ...
No Acts & Articles mentioned in this case
2024 INSC 500 REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7254 OF 2024
(ARISING OUT OF SLP(C) NO. 29334 OF 2016)
M/S AL-CAN EXPORT PVT. LTD. ….APPELLANT
VERSUS
PRESTIGE H.M. POLYCONTAINERS LTD. & ORS. ….RESPONDENT(S)
WITH
CIVIL APPEAL NO. 7255 OF 2024
(ARISING OUT OF SLP(C) NO. 29335 OF 2016)
J U D G M E N T
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 1 of 58
J. B. PARDIWALA, J:
For the convenience of exposition, this judgment is divided into the following parts:
INDEX
A. FACTUAL MATRIX.............................................................................................. 3
B. SUBMISSIONS ON BEHALF OF THE APPELLANT ....................................... 13
C. SUBMISSIONS ON BEHALF OF THE RESPONDENT NO. 6/Asset
Reconstruction Co. (India) Ltd. (ARCIL) ........................................................ 16
D. ISSUES FOR DETERMINATION ...................................................................... 21
E. RELEVANT STATUTORY PROVISIONS OF THE REVENUE CODE ............... 21
F. ANALYSIS ......................................................................................................... 26
i. Whether the provisions of Order XXI Rule 90 of the Code of Civil Procedure
would apply to the writ proceedings under Article 226 of the Constitution?
26
a. Difference between the auction sale conducted by the court in the execution
proceedings initiated by the decree holder and the auction proceedings
conducted by the State through its revenue authorities like Tahsildar, etc. .. 36
ii. Whether the Additional Commissioner, Konkan Division, Maharashtra had
the jurisdiction to decide the two appeals filed by the respondent nos. 1
and 6 respectively under Section 247 of the Maharashtra Land Revenue
Code, 1966? .................................................................................................... 52
G. CONCLUSION ................................................................................................... 55
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 2 of 58
1. Leave granted.
2. Since the issues raised in both the captioned appeals are the same; the
subject-matter also being the same; the parties are also same and the
challenge is also to the self-same judgment and order passed by the High
Court, those were taken up for hearing analogously and are being disposed of
by this common judgment and order.
3. The captioned appeals arise from the common judgment and order passed by
the High Court of Judicature at Bombay dated 9.12.2015 in Writ Petition (C)
No. 415 of 2011 with Writ Petition (C) No. 418 of 2011 respectively filed by the
appellant herein by which the High Court rejected both the writ petitions and
thereby affirmed the common order dated 18.02.2010 passed by the Additional
Commissioner, Konkan Division, Mumbai setting aside the order of sale
passed by the Tahsildar, Talasari dated 3.12.2008 as affirmed by the Additional
Collector, Thane dated 15.01.2009 passed in favour of the appellant herein.
4. The subject-matter of the present litigation relates to the legality, validity and
propriety of the auction proceedings conducted by the Tahsildar, Talasari of the
subject property which was originally owned by the respondent No. 1 herein,
namely, Prestige H.M. Polycontainers Limited.
5. The subject property owned by the respondent no. 1 herein was put to auction
under the provisions of the Maharashtra Land Revenue Code, 19 66
(hereinafter referred to as “the Revenue Code”). In the said auction
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 3 of 58
proceedings, the appellant herein was declared as the successful bidder and
ultimately, sale certificate was issued by the Additional Collector, Thane in
favour of the appellant.
A. FACTUAL MATRIX
6. This litigation has a chequered history and therefore, it is necessary for this
Court to look into the events that occurred over a period of time giving rise to
the present two appeals before us:
a. The respondent no. 1, M/s Prestige H.M. Polycontainers, executed
necessary loan and security documents in favour of the State Bank of India
thereby mortgaging its property situated at Village Vadavali, Taluka Talsari,
District Thane (Now District Palaghar), Maharashtra (hereinafter referred to
as “the property”) bearing Survey No. 87/11, admeasuring 13,978 sq. mts.
Subsequently, the State Bank of India by an assignment agreement
assigned the debts due and payable to it in favour of the respondent no. 6,
Asset Reconstruction Company (India) Ltd. (hereinafter referred to as
“ARCIL”) under the provisions of The Securitisation and Reconstruction of
Financial Assets and Enforcement Of Security Interest Act, 2002
(hereinafter referred to as the “SARFAESI Act, 2002”).
It is the case of the respondent no. 6 that accordingly it became legally
entitled to recover the debt due and payable from the respondent no. 1 by
way of the sale of the property subject to the pre-existing mortgage in
favour of the respondent no. 6.
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 4 of 58
b. Two demand notices dated 15.10.2007 and 20.11.2007 respectively of Rs.
29,52,000/- were issued as per Form No. 1 under Section 178 of the
Revenue Code and Rule 5(1) of the Maharashtra Realisation of Land
Revenue Rules, 1967 (hereinafter referred to as “the Rules”) to the
respondent no.1 by the office of the Tahsildar.
The notices were pasted on the main door of the respondent no. 1 and also
on the office board of the Gram panchayat.
c. The Office of the Circle Officer, Talasari issued a letter dated 27.11.2007 to
the Tahsildar, Talasari stating that the demand notices were sent to the
respondent no. 1 as it was in arrears of land revenue to the tune of Rs.
29,52,000/-. It also noted that since the company was closed, the notices
were affixed on the gate of respondent no. 1 in the presence of panchas.
d. The respondent no. 4 issued a letter dated 14.08.2008 addressed to the
government certified valuer, Mr. Dilip Sahani of the M/s Trimurti Industrial
Engineering Services, with a request to calculate the upset price of the
property for the purpose of recovery of the arrears of land revenue, as the
respondent no. 1 had failed to make the payment towards penalty.
e. The respondent no. 4 thereafter issued a letter dated 18.08.2008
addressed to the Circle Officer, Talasari informing him about the facts of the
case and requesting him to seize and seal the premises of the respondent
no. 1.
f. The respondent No. 4 also issued a letter dated 21.08.2008 addressed to
the Police Inspector, Talasari apprising him of the necessary facts of the
case and further informing that they would undertake the necessary
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 5 of 58
exercise of determining the valuation of the property. In view thereof, the
respondent no. 4 requested him to provide one police guard.
g. The valuation report of the property dated 21.08.2008 was issued by Mr.
G.W. Sahani of M/s Trimurthi Industrial Engineering Services with a
disposal value of Rs. 69,00,000/- and Distressed Value of Rs. 51,75,000/-
h. Although it is the case of the respondent No. 4 that the Director of
Respondent No. 1, viz. Mr. P.K. Gupta had issued a No-Objection
Certificate dated 20.10.2008 for conducting the auction sale of the property,
yet the said fact was outrightly denied by Mr. P.K. Gupta in proceedings
before the Additional Commissioner and the High Court.
i. On 20.10.2008, respondent no. 4 issued a letter to the Sub-Divisional
Officer, Dahanu division, informing him of the valuation of the property at
Rs. 51,75,000/- and requesting him to fix the upset price.
j. On 07.11.2008, the respondent no. 4 issued a letter to the Sub Divisional
Officer, Dahanu Division stating that No-Objection Certificate had been
received from the Director Mr. P.K. Gupta of the respondent no. 1 for the
auction of the Property.
k. On 17.11.2008, the Sub-Divisional Officer, Dahanu Division approved the
price of the land at Rs. 54,33,750 being a total of Rs. 51,75,000 (which had
been fixed by M/s Trimurti Industries Eng. Services, Mumbai) + 2,58,750
(+5%) under Rule 13 of the Rules.
l. Notice dated 18.11.2008 came to be published by the respondent no. 4 in
the newspaper viz. Dahanu Times for public auction furnishing details of
the suit property with the upset price, auction date and time.The notice
specified that if the dues towards the arrears of revenue would not be
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 6 of 58
cleared on or before 03.12.2008, the Property, free from encumbrances
would be put to auction at the Tahsildar’s office.
m. The Board Officer, Talasari issued a letter dated 19.11.2008 to the
respondent No. 4 informing that they had pasted the copy of the notice on
the gate of the property of the respondent no. 1 as per Namuna 5, Rule
12(2)A of the Rules.
n. Respondent no. 4 issued a letter dated 20.11.2008 to the Assistant Director,
Director of Enforcement requesting to keep one representative present on
their behalf on 03.12.2008 at 11 AM.
o. On 21.11.2008, respondent no. 4 issued a letter addressed to the Collector,
Thane; Additional Collector, Thane H.Q. Jawar; Sub-Divisional Officer,
Dahanu Division; Group Development Officer, Talsari; Gram Panchayat
Vadavli-Bhavane and Talathi Saja, Vadavli requesting them to display the
public notice on their office notice boards and to provide a publicity report
regarding the public advertisement of the immovable and movable
properties of the respondent no. 1 proposed to be auctioned on
03.12.2008.
p. Respondent no. 4 issued a letter dated 21.11.2008 to the respondent no. 1
informing that the auction was fixed on 03.12.2008 at 11 AM at the Office
of Tahsildar, Talsari district, Thane. It was further notified that if the amount
toward the arrears would be paid the auction would be cancelled.
q. Respondent no. 4 issued another public notice on 23.11.2008 in the local
newspaper called the Dahanu Times.
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 7 of 58
r. On 29.11.2008, respondent no. 4 requested the Additional Collector Thane,
Head Office Javar, to accord sanction for the auction of the Property since
the arrears had not been received.
s. On 01.12.2008, the Additional Collector Thane, Head Office, Jawar
accorded its sanction for the auction.
t. Ultimately the public auction was held on 03.12.2008 wherein the appellant
was declared as the highest bidder having offered Rs. 54,50,000/-.
u. The appellant was issued the Sale Certificate dated 03.12.2008 of the
Immovable Property which was sold under liquidation by the respondent
no. 4 according to Specimen 8 as per Rule 14(A) of the Rules.
v. On 04.12.2008, the appellant deposited the entire auction amount.
w. On 10.12.2008, the IFCI raised its objections with respondent no. 4 which
came to be recorded in its letter dated 19.12.2008.
x. The respondent No. 1 issued a letter dated 16.12.2008 to the Assistant
Director, FEMA stating that they had not received the Enforcement Order
dated 12.08.2003.
y. On 18.12.2008, respondent no. 4 in its letter recorded that full sale
consideration of the property was deposited by the appellant on
04.12.2008.
z. On 19.12.2008, respondent no. 4 issued a response to the letter dated
10.12.2008 of the IFCI.
aa. On 26.12.2008, the WP (C) No. 2998 of 2008 (renumbered as WP 207 of
2009) was preferred by the respondent no. 1 against the auction and sale
dated 03.12.2008 before the Bombay High Court. Vide the said writ petition
the respondent no. 1 sought a direction to quash and set aside the
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 8 of 58
enforcement order dated 12.08.2003 and all the consequential acts of
recovery of penalty by auction of the properties.
bb. The Bombay High Court by its order dated 31.12.2008 passed in WP (C)
NO. 2998 of 2008 (renumbered as WP 207 of 2009) directed Union of India,
the respondent therein, to provide photocopies of the relevant documents
and to allow inspection.
cc. The Additional Collector, Head Office, Jawar issued a letter dated
07.10.2009 to respondent no. 4, directing him to submit a detailed report
on whether all the conditions as stipulated under Section 208 of the
Revenue Code had been fulfilled.
dd. Respondent no. 4, vide its letter dated 12.01.2009 addressed to the
Additional Collector, Head Office Jawar, informed that except for the writ
petition pending before the High Court of Bombay, no objections were
received. Thereby all requirements under Section 208 of the Revenue
Code had been fulfilled (despite IFCI raising its objections).
ee. On 15.01.2009, the office of the District Collector, Thane informed the
respondent no. 4 that the auction sale had been approved and the appellant
had been declared and confirmed as the auction purchaser of the suit
property as per the Section 208 of the Revenue Code.
ff. Respondent no. 4 issued a letter dated 16.01.2009 to the appellant
informing that the auction sale was approved and the appellant was
declared and confirmed as successful auction purchaser of the property by
the Additional Collector as per the Sections 207 and 208 respectively of the
Revenue Code.
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 9 of 58
gg. The Writ Petition No. 207 of 2009 with Chamber Summons No. 49 of 2009
filed by the respondent no. 1 was permitted by the High Court to be
withdrawn.
hh. On 4.04.2009, respondent no. 6 filed the Writ Petition (C) No. 648 of 2009
before the High Court of Judicature at Bombay challenging legality and
validity of the sale of the said property.
ii. A division bench of the High Court, vide its order dated 16.04.2009 passed
in WP No. 648 of 2009, recorded that as the respondent no. 1 had filed an
appeal under the Revenue Code, the respondent no. 6 should also prefer
an independent appeal. Accordingly, the said writ petition was dismissed.
jj. On 09.07.2009 the respondent no. 1 filed an appeal being the Appeal No.
195 of 2009 under Section 247 of the Revenue Code before respondent
no. 8, the Additional Commissioner, Konkan Division, Maharashtra.
kk. On 17.11.2009, the appellant filed Writ Petition No. 3444 of 2009 in the
High Court of Judicature at Bombay. Vide order dated 17.11.2009 the High
Court directed the respondent no. 4 to release the arrears due to MSEDCL
from the balance auction amount relying on the newspaper auction notice
that mentioned the property was to be free from all encumbrances.
ll. On 18.06.2010 the respondent no. 1 and respondent no. 6 filed Appeal
Nos. 195 and 288 of 2009 respectively under Section 247 of the Revenue
Code against the sale of the property. Both the appeals came to be allowed
by respondent no. 8 by a common order wherein it was held that the order
of sale dated 03.12.2008 and the process followed by respondent no. 4 and
affirmed by the Additional Collector, Thane H.Q. Jawar dated 15.01.2009
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 10 of 58
was illegal and accordingly remanded the entire proceedings to the
Additional Collector, Thane for appropriate fresh adjudication.
mm. Against the aforesaid order dated 18.06.2010, the appellant filed WP No.
L-1564 of 2010/W.P. No. 415 of 2011 and WP No. 418 of 2011 before the
High Court of Judicature at Bombay.
nn. The High Court in WP No. 1564 of 2010 vide its order dated 07.09.2010
stayed the operation of the order dated 18.06.2010 and directed the parties
to maintain the status quo.
7. Both the writ petitions filed by the appellant herein, i.e., Writ Petition (C) No.
415 of 2011 with Writ Petition No. 418 of 2011 ultimately came to be
adjudicated by the High Court and vide its impugned judgment & order dated
9.12.2014 were rejected. The relevant observations made by the High Court
while rejecting both the writ petitions are as under:
“33. Heard the learned counsel for the parties at length. Considering
the submissions made by both the counsel and after going through the
pleadings, the issue involved in the petitions is "whether the Petitioner
has made out a case for setting aside the common order dated
18/02/2010 passed by the Additional Commissioner, Konkan Division in
appeal No.195/2009 and 288/2009".
34. As per section 192 of the code, for holding an auction, the
Collector, has to issue a proclamation in a prescribed form with its
translation in Marathi of the intended sale specifying its time and place,
along with description of the immovable property. Such proclamation is
required to be made by beat of drum at the headquarters of Taluka and
in the village in which the immovable property is situated. As per section
193 of the Code, a written notice of the intended sale of immovable
property and its time and place is required to be affixed in the office of
Collector of District, office of Tahsildar of the Taluka in which the
immovable property is situate and other public building in the Village in
which it is situate and the dwelling place.
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 11 of 58
35. As per section 195, if the sale is postponed for a period longer
than 30 days, for sufficient reason, a fresh proclamation and notice is
required to be issued unless defaulter consents for waiver of it.
36. Section 202 to 210 provide a procedure when payment to be
made, when confirmation of auction sale to be done, how to deal with
objections before confirmation etc.
37. In the present proceedings, admittedly, a fresh notice was issued
by the Authority on 08/11/2008 for public auction in two newspapers i.e.
"Nirdhar" and "Dahanu Times" informing the details of the property and
time and date of auction. The Authority Mandal Adhikari, Talasari issued
letter dated 19/11/2008 to the owner of the property informing that they
have pasted the copy of notice on the gate of the suit property. The
auction was held by the Tahasildar on 03/12/2008 and same was
confirmed on the same date. This shows that the auction took place
before expiry of 30 days from the date of proclamation which is contrary
to section 193 of the Code. Moreover, the Tahasildar confirmed the said
auction sale in favour of the Petitioner on the same day and handed
over possession to the suit property receipt executing a possession
receipt. This means, without waiting for 30 days from the date of
proclamation, the Tahasildar held a public auction and handed over
possession to the Petitioner, which was contrary to law.
38. It is interesting to note that after handing over possession to the
Petitioner, the Collector, by order dated 16/01/2009 confirmed the sale
of the suit property in favour of the Petitioner. That means, before
confirmation of the auction sale in favour of the Petitioner, the Tahasildar
on his own, without any authority, handed over possession to the
Petitioner. This court, in the matter of Shravan Vithoba Dekate (supra)
in paragraph 12 specifically held that the provisions of the Code in
respect of the auction sale to be strictly followed. The Apex Court, in the
matter of Mathew (supra) categorically held that if the Rules framed for
public auction under the SARFAESI Act are not followed strictly, the
auction sale is required to be set aside. These facts are considered by
the Additional Commissioner at the time of passing the impugned order.
The Additional Commissioner categorically held that the orders passed
by the Tahasildar as well as the Additional Collector were contrary to the
provisions of the Code. Hence, the Additional Commissioner Konkan
Division set aside both the orders and the matter was remanded to the
Additional Collector to decide on its own merits.
39. It is to be noted that, allowing the petition amounts to revival of
illegal order and same is not permitted in view of the Apex Court
judgment in the matter of Maharaja Chintamani (supra).
40. Considering the above mentioned facts that the Tahasildar as
well as the Additional Collector, without following due process of law as
required under the said Code, passed the order dated 3/12/2008 and
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 12 of 58
15/01/2009 and handed over possession of the suit property to the
Petitioner and in view of the law declared by the Apex Court as stated
herein above, I am of the opinion that the Petitioner failed to make out
any case for interference with the well reasoned impugned common
order dated 18/02/2010.
41. Hence, following order is passed:
a. Rule stands discharged.
b. Writ Petitions stand dismissed with cost.
42. At this stage, the learned counsel for the Petitioner submits that
the interim protection granted by this court to continue for a period of 12
weeks to enable the Petitioner to take chance in higher court.
43. Considering the fact that the Petitioner is in possession of the
subject property for last several years and there is a running factory, I
am of the opinion that the interim protection granted by this court
(Coram : S. J. Kathawalla, J.) on 07/09/2010 shall continue for a period
of 12 weeks from today. Same is granted.”
(Emphasis supplied)
8. It appears from the materials on record that against the above referred
impugned judgment passed by the learned Single Judge of the High Court two
appeals were filed, i.e., (Appeal (L) No. 41 of 2016 in Writ Petition (C) No. 418
of 2011 with Appeal No. 42 of 2016 in Writ Petition (C) No. 415 of 2011). Both
these appeals were not pressed by the appellant before the High Court on the
ground that those were not maintainable in law. Thereafter, on 19.09.2016, the
two special leave petitions came to be filed before this Court. It appears that
although the High Court had ordered the parties to maintain status quo pending
the two writ petitions filed by the appellant, yet on 13.10.2016, i.e., much after
the two writ petitions came to be rejected by the High Court, the appellant
created a mortgage on the suit property.
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 13 of 58
9. In such circumstances referred to above, the respondent No. 6 had to file
Contempt Petition No. 81 of 2016 in Writ Petition No. 418 of 2016.
10. We were informed that the said contempt petition is pending as on date before
the High Court. This Court vide its order dated 3.11.2019 directed the Debt
Recovery Tribunal – (I) (hereinafter, “DRT”) at Mumbai to proceed to decide
the original application filed by the respondent no. 6. These proceedings before
the DRT were relating to the Mortgage which came to be created by the
appellant herein. The DRT declared the mortgage over the suit property to be
illegal and allowed the O.A. No. 168 of 2002 against all the defendants with
costs for an amount of Rs. 24,15,20,115.76/- with interest @ 12 per cent per
annum from the date of filing of O.A. till such realisation.
11. In such circumstances referred to above, the appellant is here before this
Court with the present appeals.
B. SUBMISSIONS ON BEHALF OF THE APPELLANT
12. Mr. P.S. Patwalia, the learned Senior Counsel appearing for the appellant,
vehemently submitted that the High Court committed an egregious error in
holding that the auction proceeding conducted by the Tahsildar was a sham
and much contrary to the statutory provisions of the Revenue Code more
particularly Sections 193 and 194 respectively of the Revenue Code.
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 14 of 58
13. The learned Senior Counsel submitted that a written notice of the intended
sale of the suit property with the time and place thereof was affixed strictly in
accordance with the conditions as stipulated under Section 193 of the
Revenue Code. In this regard, our attention was drawn to the findings recorded
by the High court as contained in para 37 of the impugned judgment of the
High Court. The learned Senior Counsel further submitted that the original
owner (respondent no. 1) on his own free will and volition had given his consent
on 20.10.2008 to proceed with the auction sale of the suit property.
14. The learned Senior Counsel further submitted that the appellant is a bona fide
purchaser of the suit property in an auction proceeding duly conducted by the
Tahsildar under the provisions of the Revenue Code. According to the learned
Senior Counsel it is not just sufficient to exhibit some material irregularity or
fraud for the purpose of setting at naught the entire sale. It was argued that the
aggrieved party must go further and establish to the satisfaction of the Court
that the material irregularity or fraud had resulted in substantial injury to it.
15. According to the learned Senior Counsel, even assuming that the aggrieved
party in the present litigation suffered substantial injury by reason of the sale
of the suit property the same would not be sufficient to set aside the sale unless
substantial injury is shown to have been caused by material irregularity or fraud
in publishing or conducting the sale.
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 15 of 58
16. With a view to fortify the aforesaid submission strong reliance was placed on
the decision of this Court in the case of Chilamkurti Bala Subrahmanyam v.
Samanthapudi Vijaya Lakshmi and Another reported in (2017) 6 SCC 770.
17. The learned Senior Counsel, thereafter, proceeded to argue that the two
appeals filed before the Additional Commissioner, Division Konkan,
Maharashtra were, by themselves, not maintainable in law. Thus, the
Additional Commissioner had no jurisdiction to entertain and decide the two
appeals.
18. In this regard, our attention was drawn to the provisions of Section 247 of the
Revenue Code read in conjunction with Sections 207 and 210 respectively of
the Revenue Code. It was argued that in view of Sections 207 and 210
respectively of the Revenue Code the appeals filed by the respondent no. 1
and 6 before the Additional Commissioner were not maintainable under
Section 247 of the Revenue Code.
19. It was submitted that the suit property was purchased by the appellant in the
year 2008 by depositing the amount of Rs. 55 lakhs in accordance with the
valuation report prepared by two government approved valuers. It was pointed
out that thereafter, the appellant put up a huge industrial unit for the purpose
of manufacturing oxygen cylinders. Various permissions and licences from the
Central Government were obtained for the purpose of setting up the oxygen
cylinder plant. It was also pointed out that as on date more than two hundred
workers are employed in the appellant company.
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 16 of 58
20. In such circumstances referred to above, Mr. Patwalia, the learned Senior
Counsel submitted that if the appellant is asked to hand over the possession
of the entire suit property at this point of time, he would incur irreparable injury,
which cannot be compensated in terms of money.
21. It was submitted that ordinarily the court should not disturb the sale by auction
unless it is an evident case of mala fide or a result of fraud. According to Mr.
Patwalia, sometime back his client had also offered to pay to the lenders the
market value of the suit property. However, such proposal was not entertained
by the bankers.
22. In such circumstances referred to above, the learned senior counsel prayed
that there being merit in his appeals, those may be allowed and an appropriate
order may be passed protecting the interests of all the parties to this litigation.
C. SUBMISSIONS ON BEHALF OF THE RESPONDENT NO. 6/Asset
Reconstruction Co. (India) Ltd. (ARCIL)
23. Mr. Amar Dave, the learned Senior Counsel appearing for the respondent No.
6 made the following submissions:
a. The entire transaction on the basis of which the suit property was taken
over by the appellant was nothing but absolute fraud perpetrated in
collusion with each other.
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 17 of 58
b. The entire process initiated by the Tahsildar was by supressing various
critical facts from time to time from the Additional Collector who under the
scheme of the Act was to approve the process of any such auction and
pursuant thereto to confirm any such sale under the auction.
c. The sequence of events clearly indicate that the Tahsildar did not disclose
to the Additional Collector at the relevant time that there were objections
already received from one of the banks/financial institution i.e., IFCI and
the said objections were summarily rejected solely on the ground that the
sale process in pursuance of the auction was being undertaken as per law.
In this regard, the provisions of Section 208 of the Revenue Code are
extremely vital in so far as the same contemplates that even if there is no
challenge by any other party, the collector himself can set aside any such
sale or not approve the same for valid reasons. The said provision clearly
indicates the legislative intent that if there are valid legal objections (which
in the present case was clearly on the record in so far as IFCI had already
raised issues with regard to the mortgage of the land) and therefore in
terms of the said provision the collector was obliged in law to factor the said
objections and could have examined the issue and not approved the sale.
However, it is apparent that the Tahsildar kept the office of the Additional
Collector in dark about the said objection and hence the entire process was
clearly vitiated.
d. The Tahsildar, with an oblique motive, initiated proceedings for confirmation
of the sale without following the mandatory process as laid under the
scheme of the Act. In fact, the sale was confirmed on 03.12.2008 even
without ensuring whether the complete payments in respect of the sale
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 18 of 58
proceed had been fully realised or not. More surprisingly, the perusal of the
affidavit filed by the Tahsildar in the High court (in the first round of litigation
filed by Prestige) clearly indicates that the attempt was to suppress the fact
to the extent that one of the cheques had been realised after the sale
confirmation 03.12.2008. The cheque was actually realised on 04.12.2008.
No public authority can confirm a sale without even realizing the entire
consideration and any such attempt is clearly indicative of the fraudulent
and collusive nature of the proceedings in question.
e. That the so-called reliance on the letter of ‘No Objection’ being the entire
basis of the starting of the final auction proceeding is clearly indicative of
the fraud perpetuated more particularly when the respondent No. 1
company, i.e., Prestige H.M. Polycontainers Ltd. clearly declared that no
such ‘No Objection’ letter was ever signed by it. Even otherwise the
sequence of events including the newspaper advertisements clearly
indicate that such a plea of taking “no objection” from the owner and then
subsequently asking the owner to make payment before the due date is
indicative of the nature of fraud perpetuated in the present proceedings.
f. The record reveals that the entire valuation of the immovable as well as the
movable properties were done in a self-serving manner, and the same was
done only to benefit the appellant. In this regard, the pleadings clearly
reflect that the movable properties itself were almost having a market value
of around Rs. 3 Crore (if not around Rs. 1 crore as per depreciated value
reflected in the books). In spite of such valuation, the valuer had assigned
only around Rs. 75, 000 for the entire machinery and shown the same as
scrap. That apart, even the valuation of the immovable property was
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 19 of 58
completely incorrect and therefore in the teeth of these glaring facts, the
entire transaction seems to have been engineered in a fraudulent manner.
The appellant cannot be termed as bona fide purchaser.
g. As per the law laid down in the decision of Mathew Varghese v. M.
Amritha Kumar reported in 2014 (5) SCC 610, it is now well settled that
30 days’ sale notice is mandatory. The High Court correctly placed reliance
on the said judgment of this Court to come to the conclusion that sale was
conducted in breach of various provisions of the Revenue Code which are
mandatory in nature.
h. In fact, 30 days’ notice is not just mandatory for the purpose of giving an
opportunity to the defaulter but also to invite maximum publicity and get
maximum offer. Admittedly, no 30 days’ sale notice was given. Further, no
wide publicity was made.
i. There are various illegalities in confirming the sale as well. In a process of
sale, first the sale is to be conducted, then the proceeds are required to be
received. It is only after the receipt of the proceeds that the sale
confirmation is required to be made by collector and thereafter sale
certificate and possession is to be handed over. In the present case, the
sale was conducted and concluded on the same day i.e., 03.12.2008. The
sale certificate was issued on the same day without the confirmation from
the collector and the possession was handed over on the very next day.
j. From a bare perusal of Section 212 of the Revenue Code, it is evident that
the purchaser can be put into possession only after confirmation of sale
and the sale certificate being handed over to the purchaser. However, in
the present case, the appellant was put in possession on 04.12.2008 and
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 20 of 58
the sale of property was confirmed on 15.01.2009 by the Additional
Collector, which is per se illegal in nature. The haste with which the
proceedings were undertaken speaks for itself.
k. Indisputably, objection was raised by the IFCI on 10.12.2008, which has
been recorded by the Tahsildar in its letter dated 19.12.2008.
l. On 07.01.2009, the Additional Collector, Head Office Jawar directed
respondent no. 4 to submit a detailed report on whether it had fulfilled all
the conditions as stipulated under Section 208 of the Revenue Code.
However, vide its letter dated 12.01.2009 addressed to the Additional
Collector, Head Office Jawar, respondent no. 4 informed that except for the
WP in the High Court of Bombay, no other objection was received and
thereby all requirements under Section 208 of the Revenue Code had been
fulfilled, despite IFCI having raised its objections vide a letter dated
10.12.2008.
24. As regards the offer put forward by the appellant to deposit the requisite
amount as per the market value of the property, Mr. Dave fairly submitted that
sometime back, the appellant had offered to pay to the lenders but as the
lenders found the offered amount to be very meagre the said proposal was not
accepted. According to Mr. Dave, the market value of the suit property as on
date could be around Rs. 6 to 7 crores.
25. In such circumstances referred to above, the learned Senior Counsel prayed
that there being no merit in the appeals those may be dismissed with costs.
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 21 of 58
D. ISSUES FOR DETERMINATION
26. Having heard the learned counsel appearing for the parties and having gone
through the materials on record, the following questions of law fall for our
consideration:
a. Whether the provisions of Order XXI Rule 90 of the Code of Civil Procedure
would apply to the writ proceedings under Article 226 of the Constitution?
b. Whether the Additional Commissioner, Konkan Division, Maharashtra had
the jurisdiction to decide the two appeals filed by the respondent nos. 1 and
6 respectively under Section 247 of the Maharashtra Land Revenue Code,
1966?
E. RELEVANT STATUTORY PROVISIONS OF THE REVENUE CODE
27. Before adverting to the rival submissions canvassed on either side, it is
necessary for us to look into few relevant provisions of the Revenue Code:
“S. 69. Settlement of assessment to be made with holder directly from
State Government.—The settlement of the assessment of each
portion of land, or survey number, to land revenue, shall be made with
the person who is primarily responsible to the State Government for
the same.
xxx xxx xxx
S. 169. Claims of State Government to have precedence over all
others.—(1) The arrears of land revenue due on account of land shall
be a paramount charge on the land and on every part thereof and shall
have precedence over any other debt, demand or claim whatsoever,
whether in respect of mortgage, judgment-decree, execution or
attachment, or otherwise howsoever, against any land or the holder
thereof.
(2) The claim of the State Government to any monies other than
arrears of land revenue, but recoverable as a revenue demand under
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 22 of 58
the provisions of this Chapter, shall have priority over all unsecured
claims against any land or holder thereof.
xxx xxx xxx
S. 178. When notice of demand may issue.—(1) A notice of demand
may be issued on or after the day following that on which the arrear
accrues.
(2) The Commissioner may from time to time make orders for the issue
of such notices, and with the sanction of the State Government shall
fix the costs recoverable from the defaulter as an arrear of revenue,
and direct by what officer such notices shall be issued.
S. 179. Occupancy or alienated holding for which arrear is due may be
forfeited.—The Collector may declare the occupancy or alienated
holding in respect of which an arrear of land revenue is due, to be
forfeited to the State Government, and subject to rules made in this
behalf, sell or otherwise dispose of the same under the provisions of
section 72 or 73 and credit the proceeds, if any, to the defaulter’s
accounts :
Provided that, the Collector shall not declare any such occupancy or
alienated holding to be forfeited–
(a) unless previously thereto he shall have issued a proclamation and
written notices of the intended declaration in the manner provided by
sections 192 and 193 for sales of immovable property, and
(b) until after the expiration of at least fifteen days from the latest date
on which any of the said notices shall have been affixed as required
by section 193.
xxx xxx xxx
S. 192. Procedure in effecting sales.—(1) When any sale of either
movable or immovable property is ordered under the provisions of this
Chapter, the Collector shall issue a proclamation in the prescribed form
with its translation in Marathi of the intended sale, specifying the time
and place of sale, and in the case of movable property whether the
sale is subject to confirmation or, not and when land paying revenue
to the State Government is to be sold, the revenue assessed upon it,
together with any other particulars he may think necessary.
(2) Such proclamation shall be made by beat of drum at the
headquarters of the taluka and in the village in which the immovable
property is situate if the sale be of immovable property ; and if the sale
be of movable property, the proclamation shall be made in the village
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 23 of 58
in which such property was seized, and in such other places as the
Collector may direct.
(3) A copy of the proclamation issued under this section where it
relates to the sale of any holding shall be sent to the Co-operative
Bank or the Land Development Bank or both operating within the area
in which the holding is situated.
S. 193. Notification of sales.—(1) A written notice of the intended sale
of immovable property, and of the time and place thereof, shall be
affixed in each of the following places, namely :–
(a) the office of the Collector of the district,
(b) the office of the Tahsildar of the taluka in which the immovable
property is situate,
(c) the Chavdi, or some other public building in the village in which it
is situate, and
(d) the defaulter’s dwelling place.
(2) In the case of movable property, the written notice shall be affixed
in the Tahsildar’s office, and in the Chavdi, or some other public
building in the village in which such property was seized.
(3) The Collector may also cause notice of any sale, whether of
movable or immovable property, to be published in any other manner
that he may deem fit.
(4) A notice referred to in this section shall be in such form as may be
prescribed.
S. 194. Sale by whom to be made ; time of sale, etc.—(1) Sales shall
be made by auction by such persons as the Collector may direct.
(2) No such sale shall take place on a Sunday or other general holiday
recognized by the State Government, nor until after the expiration of
at least thirty days in the case of immovable property, or seven days
in the case of movable property, from the latest date on which any of
the said notices shall have been affixed as required by section 193.
S. 195. Postponement of sale.—The sale may from time to time be
postponed for any sufficient reason : Provided that, when the sale is
postponed for a period longer than thirty days a fresh proclamation
and notice shall be issued unless the defaulter consents to waive it.
S. 196. Sale of perishable articles.—Nothing in sections 192, 193, 194
and 195 applies to the sale of perishable articles. Such articles shall
be sold by auction with the least possible delay, in accordance with
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 24 of 58
such orders as may from time to time be made by the Collector either
generally or especially in that behalf.
S. 197. When sale may be stayed.—If the defaulter or any person on
his behalf, pays the arrear in respect of which the property is to be sold
and all other charges legally due by him at any time before the property
is knocked down, to the person prescribed under section 170 to
receive payment of the land revenue due, or to the officer appointed
to conduct the sale or if furnishes security under section 191, the sale
shall be stayed.
xxx xxx xxx
S. 200. Mode of payment when sale is subject to confirmation.—(1)
When sale is subject to confirmation, the party who is declared to be
the purchaser shall be required to deposit immediately twenty-five per
centum of the amount of his bid, and in default of such deposit, the
property shall forthwith be again put up and sold.
(2) The full amount of purchase money shall be paid by the purchaser
before the sunset of the third day after he is informed of the sale having
been confirmed, or if the said third days be a Sunday or other
authorized holiday, then before sunset of the first office day after such
day. On payment of such full amount of the purchase money, the
purchaser shall be granted, a receipt for the same, and the sale shall
become absolute as against all persons whomsoever 2[after the expiry
of a period of seven days from the date of sale, if no application is
made under section 206, or if made, after it is rejected.]
xxx xxx xxx
S. 207. Application to set aside sale of immovables.—(1) At any time
within thirty days from the date of sale of immoveable property an
application may be made to the Collector to set aside the sale on the
ground of some material irregularity, or mistake, or fraud, in publishing
or conducting it, but, except as is otherwise provided in sections 208,
209 and 210, no sale shall be set aside on the ground of any such
irregularity or mistake, unless the applicant proves to the satisfaction
of the Collector that he has sustained substantial injury by reason
thereof :
[Provided that, such application may be made by a defaulter who is a
person belonging to a Scheduled Tribe or any person on his behalf,
within one hundred and eighty days from such date.]
(2) If the application be allowed, the Collector shall set aside the sale,
and direct fresh one.
xxx xxx xxx
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 25 of 58
S. 208. Order confirming or setting aside sale.—On the expiration of
thirty days or, as the case may be, one hundred and eighty days] from
the date of the sale, if no such application as is mentioned in section
207 has been made, or if such application has been made and rejected
the Collector shall make an order confirming the sale :
Provided that, if he has reason to think that the sale ought to be set
aside notwithstanding that no such application has been made, or on
ground other than those alleged in any application which has been
rejected, he may, after recording his reasons in writing, set aside the
sale.
S. 209. Purchaser may apply to set aside sale under certain
circumstances.—Except in a case, where land has been sold for
arrears which form a charge on the land, the purchaser may, at any
time within thirty days from the date of sale, apply to the Collector to
set aside the sale on the ground that the defaulter had no saleable
interest in the property sold; and the Collector shall, after due enquiry,
pass such order on such application as he deems fit.
S. 210. Application to set aside sale by person owning to holding
interest in property.—(1) Where immoveable property has been sold
under this code, any person either owning such property or holding an
interest therein by virtue of a title acquired before such sale may, at
any time within thirty days from the date of sale, apply to the Collector
to have the sale set aside on his depositing—
(a) for payment to the purchaser a sum equal to five per cent of the
purchase money;
(b) for payment on account of the arrear, the amounts specified in the
proclamation of sale as that for the recovery of which the sale was
ordered, less any amount which may have been paid since the date of
sale on that account ; and
(c) the cost of the sale :
[Provided that, such application may be made by any such person
belonging to a Scheduled Tribe within one hundred and eighty days
from the date of sale.]
(2) If such deposit is made within thirty days, 2[or as the case may be,
one hundred and eighty days] from the date of sale, the Collector shall
pass an order setting aside the sale.
xxx xxx xxx
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 26 of 58
S. 247. Appeal and appellate authorities.—(1) In the absence of any
express provisions of the Code, or of any law for the time being in force
to the contrary, an appeal shall lie from any decision or order passed
by a revenue or survey officer specified in column 1 of the Schedule E
under this Code or any other law for the time being in force to the
officer specified in column 2 of that Schedule whether or not such
decision or order may itself have been passed on appeal from the
decision of order of the officer specified in column 1 of the said
Schedule :
Provided that, in no case the number of appeals shall exceed two.
(2) When on account of promotion of change of designation an appeal
against any decision or order lies under this section to the same officer
who has passed the decision or order appealed against, the appeal
shall lie to such other officer competent to decide the appeal to whom
it may be transferred under the provisions of this Code.
xxx xxx xxx
S. 250. Periods within which appeals must be brought.—No appeal
shall be brought after the expiration of sixty days if the decision or
order complained of have been passed by an officer inferior in rank to
a Collector or a Superintendent of Land Records in their respective
departments ; nor after the expiration of ninety days in any other case.
The period of sixty and ninety days shall be counted from the date on
which the decision or order is received by the appellant. In computing
the above periods, the time required to obtain a copy of the decision
or order appealed against shall be excluded.
S. 251. Admission of appeal after period of limitation.—Any appeal or
an application for review under this Chapter may be admitted after the
period of limitation prescribed therefor when the appellant or the
applicant, as the case may be, satisfies the officer or the State
Government to whom or to which he appeals or applies, that he had
sufficient cause for not presenting the appeal or application, as the
case may be, within such period.”
F. ANALYSIS
i. Whether the provisions of Order XXI Rule 90 of the Code of Civil
Procedure would apply to the writ proceedings under Article 226 of the
Constitution?
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 27 of 58
28. We shall now proceed to record our findings on the submissions canvassed
on either side. We start with the decision of this Court in the case of
Chilamkurti (supra) as strong reliance has been placed on the same on behalf
of the appellant. This judgment has been relied upon to make good the
contention that the provisions of Order XXI Rule 90 of the Code of Civil
Procedure (hereinafter, “CPC”) should be made applicable to the present
litigation or in other words even in the writ proceedings under Article 226 of the
Constitution. This decision is relied upon to fortify the submission that merely
establishing a material irregularity or fraud is not sufficient to set aside the
auction sale. It is necessary for the party aggrieved to go further and establish
to the satisfaction of the court that the material irregularity or fraud in the
conduct of the auction has resulted in substantial injury to the said party.
Conversely, even if the party aggrieved has suffered substantial injury by
reason of the sale, the same would not be sufficient to set aside the auction
sale unless substantial injury has been shown to have been caused by a
material irregularity or fraud in publishing or conducting the sale.
29. In Chilamkurti (supra), the respondent no. 2 before this Court was the State
Bank of India. The State Bank of India was the plaintiff decree holder, whereas
the respondent No. 1 was the defendant judgment debtor. The State Bank of
India obtained a money decree against the judgment debtor in a suit. As the
judgment debtor failed to satisfy the decree, the State Bank of India filed
execution application and brought the scheduled property owned by the
judgment debtor to auction sale through the process server of the Court of
Senior Civil Judge, Kovvur in the execution proceedings for the realisation of
decretal dues. The suit scheduled property was accordingly attached by the
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 28 of 58
executing court under a warrant. The property was ultimately put to auction
sale. The appellant before this Court in the said proceedings was the highest
bidder. The judgment debtor being dissatisfied with the auction conducted
under the supervision of the executing court filed an application under Order
XXI Rule 90 of the CPC seeking setting aside of the sale on the ground that
the proclamation did not give clear 15 days’ notice and the same was illegal.
30. The Senior Civil Court, Kovvur found no merit in any of the objections raised
by the judgment debtor and accordingly dismissed the application. The
judgment debtor thereafter preferred an appeal before the High Court. The
High Court allowed the appeal and set aside the order of the executing court
inter alia holding that if the judgment debtor deposits a sum of Rs. 7,15,000/-
(Rs. Seven Lakh Fifteen Thousand Only) being the price fetched at the public
auction within a period of three weeks from the date of the receipt of a copy of
the judgment, the sale held would not be given effect to.
31. Aggrieved by the aforesaid, the auction purchaser preferred appeal before this
Court. A Division Bench of this Court in Chilamkurti (supra) relying on the
decision of this Court in Saheb Khan v. Mohd. Yousufuddin reported in
(2006) 4 SCC 476, allowed the appeal filed by the successful auction
purchaser holding as under: -
“14. The law which governs the controversy involved in this appeal is
laid down by this Court in Saheb Khan v. Mohd. Yousufuddin [Saheb
Khan v. Mohd. Yousufuddin, (2006) 4 SCC 476] (a three-Judge
Bench). While examining the scope of Order 21 Rule 90 of the Code,
Ruma Pal, J. speaking for the Bench held as under: (SCC pp. 480-
81, paras 12-14)
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 29 of 58
“12. We are unable to sustain the reasoning of the High Court.
Order 21 Rule 90 of the Code of Civil Procedure allows, inter
alia, any person whose interests are affected by the sale to
apply to the court to set aside a sale of immovable property sold
in execution of a decree on the ground of “a material irregularity
or fraud in publishing or conducting” the sale. Sub-rule (2) of
Order 21 Rule 90 however places a further condition on the
setting aside of a court sale in the following language:
‘90. (2) No sale shall be set aside on the ground of irregularity
or fraud in publishing or conducting it unless, upon the facts
proved, the court is satisfied that the applicant has sustained
substantial injury by reason of such irregularity or fraud.’
13. Therefore before the sale can be set aside merely
establishing a material irregularity or fraud will not do. The
applicant must go further and establish to the satisfaction of the
court that the material irregularity or fraud has resulted in
substantial injury to the applicant. Conversely even if the
applicant has suffered substantial injury by reason of the sale,
this would not be sufficient to set the sale aside unless
substantial injury has been occasioned by a material irregularity
or fraud in publishing or conducting the sale. (See Dhirendra
Nath Gorai v. Sudhir Chandra Ghosh [Dhirendra Nath
Gorai v. Sudhir Chandra Ghosh, (1964) 6 SCR 1001 : AIR 1964
SC 1300] , Jaswantlal Natvarlal Thakkar v. Sushilaben Manilal
Dangarwala [Jaswantlal Natvarlal Thakkar v. Sushilaben
Manilal Dangarwala, 1991 Supp (2) SCC 691] and Kadiyala
Rama Rao v. Gutala Kahna Rao [Kadiyala Rama Rao v. Gutala
Kahna Rao, (2000) 3 SCC 87] .)
14. A charge of fraud or material irregularity under Order 21
Rule 90 must be specifically made with sufficient particulars.
Bald allegations would not do. The facts must be established
which could reasonably sustain such a charge. In the case
before us, no such particulars have been given by the
respondent of the alleged collusion between the other
respondents and the auction-purchaser. There is also no
material irregularity in publishing or conducting the sale. There
was sufficient compliance with Order 21 Rule 67(1) read with
Order 21 Rule 54(2). No doubt, the trial court has said that the
sale should be given wide publicity but that does not necessarily
mean by publication in the newspapers. The provisions of Order
21 Rule 67 clearly provide if the sale is to be advertised in the
local newspaper, there must be specific direction of the court to
that effect. In the absence of such direction, the proclamation of
sale has to be made under Order 21 Rule 67(1) “as nearly as
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 30 of 58
may be, in the manner prescribed by Rule 54 sub-rule (2)”. Rule
54 sub-rule (2) provides for the method of publication of notice
and reads as follows:
‘54. (2) The order shall be proclaimed at some place on or
adjacent to such property by beat of drum or other customary
mode, and a copy of the order shall be affixed on a
conspicuous part of the property and then upon a
conspicuous part of the courthouse, and also, where the
property is land paying revenue to the Government, in the
office of the Collector of the district in which the land is situate
and, where the property is land situate in a village, also in the
office of the Gram Panchayat, if any, having jurisdiction over
that village.’”
15. After examining the facts of this case in the light of the law laid
down in Saheb Khan [Saheb Khan v. Mohd. Yousufuddin, (2006) 4
SCC 476], we are of the considered opinion that the reasoning and
the conclusion arrived at by the executing court deserves to be
restored as against that of the High Court in the impugned order. In
other words, no case was made out by the judgment-debtor for
setting aside of the sale of the property in question on the ground of
committing any material irregularity or fraud in publishing or in
conducting the sale so as to enable the Court to invoke its powers
under Order 21 Rule 90(2) of the Code.
16. It is noticed that Respondent 1, in her application for setting aside
the sale, had mainly raised four objections. Firstly, clear 15 days'
notice was not given for sale of the properties as required under the
Rules. Secondly, the valuation of the property was not properly
mentioned in the documents concerned so as to enable the parties
to know its proper valuation prevailing on the date of sale. Thirdly, the
market value of the property on the date of auction was more than
the price actually fetched in the auction, and fourthly, no proper
publication including beating of drum was made before the date of
auction due to which there was less participation of the bidders in the
auction-sale.
17. The executing court dealt with all the four objections with
reference to the record of the proceedings and found as a fact that
none of the objections had any merit. The High Court, however, found
fault in the same though not in all but essentially in the matter relating
to giving of clear 15 days' notice and the manner in which it was
issued and finding merit in the objection, set aside the sale on
imposing certain conditions enumerated above.
18. In our considered opinion, as mentioned above, the executing
court was justified in overruling the objections and we concur with the
reasoning and the conclusion of the executing court.
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 31 of 58
xxx xxx xxx
24. The law on the question involved herein is clear. It is not the
material irregularity that alone is sufficient for setting aside of the
sale. The judgment-debtor has to go further and establish to the
satisfaction of the Court that the material irregularity or fraud, as the
case may be, has resulted in causing substantial injury to the
judgment-debtor in conducting the sale. It is only then the sale so
conducted could be set aside under Order 21 Rule 90(2) of the Code.
Such is not the case here.”
32. Thus, the dictum as laid by this Court in Chilamkurti (supra) relying upon
Saheb Khan (supra) is that a charge of fraud or material irregularity in Order
XXI Rule 90 CPC must be specifically made with sufficient particulars. Mere
bald allegation would not be sufficient. The fact must be established which
could reasonably sustain such charge. The dictum as further laid is that the
sale conducted by the court in the execution proceedings should not ordinarily
be set aside merely on the basis of some material irregularity or fraud. The
party concerned must go further and establish to the satisfaction of the court
that the material irregularity or fraud has resulted in substantial injury to such
party.
33. Order XXI Rule 90 of the CPC reads as under: -
"90. Application to set aside sale on ground of irregularity or
fraud. (1) Where any immovable property has been sold in
execution of a decree, the decree-holder, or the purchaser, or any
person entitled to share in a rateable distribution of assets, or
whose interests are affected by the sale, may apply to the Court
to set aside the sale on the ground of a material irregularity or fraud
in publishing or conducting it.
(2) No sale shall be set aside on the ground of irregularity or fraud
in publishing or conducting it unless, upon the facts proved, the
Court is satisfied that the applicant has sustained substantial injury
by reason of such irregularity or fraud.
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 32 of 58
(3) No application to set aside a sale under this rule shall be
entertained upon any ground which could have been taken on or
before the date on which the proclamation of sale was drawn up.
Explanation.-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.”
34. Legislative changes: By the Code of Civil Procedure (Amendment) Act,
1976, the following changes have been effected in Rule 90:
(i) In sub-rule (1), the words “or the purchaser” and “other” were
inserted after the words “the decree-holder” and “or any”
respectively;
(ii) The proviso to old sub-rule has been renumbered as sub-rule (2)
with necessary changes in phraseology and with addition of the
words “in publishing or conducting it” after the words “irregularity
or fraud”;
(iii) Sub-rule (3) has been inserted;
(iv) Explanation to the rule has been added.
35. Object of Amendment: Rule 90, as originally enacted, reads thus:
“90.(1) Where any immovable property has been sold in
execution of a decree, the decree-holder, or any other person
entitled to share in a rateable distribution of assets, or whose
interests are affected by the sale; may apply to the Court to set
aside the sale on the ground of a material irregularity or fraud in
publishing or conducting it.
Provided that no sale shall be set aside on the ground of
irregularity or fraud unless upon the facts proved the Court is
satisfied that the applicant has sustained substantial injury by
reason of such irregularity or fraud.”
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 33 of 58
The Law Commission in its Fourteenth Report, Vol. 1, pp. 454-55
considered the provision and recommended change by stating: -
“51. Under Rule 90 a sale of immovable property in execution
of a decree can be set aside on the ground of material
irregularity or fraud in publishing or conducting the sale. The
right to apply under this rule is given to the decree-holder or to
any person entitled to a share in a rateable distribution of assets
or whose interests are affected by the sale. It is generally
accepted that a large percentage of application made by the
judgment-debtors to set aside sales under this Rule are
frivolous and are filed with the object of delaying the delivery of
possession. It is therefore necessary to make an amendment
to Rule 90 by providing that no sale shall be set aside on the
ground of delay in the proclamation of sale at the instance of
any person who did not attend though given notice to appear at
the drawing up of the proclamation or of any person, in whose
presence the proclamation was drawn up, unless an objection
was taken by him before the sale was held.”
(Emphasis supplied)
The Law Commission again considered the question as to irregularity in
attachment and in its Twenty-seventh Report stated:-
“The question whether absence of, or irregularity in attachment is,
a defect in the “publication or conduct of the sale” has been
discussed in several decisions. At one extreme is the view that
attachment is not necessary at all before sale. At the other extreme
stands the view that sale without attachment is void. A third view
is, that attachment is an irregularity, but not in publishing or
conducting the sale. According to the fourth view, a sale is not a
nullity because of a defect in the attachment or want thereof, but if
it causes “substantial injury”, it can be set aside under Rule 90.
The last view seems to be the correct one. The object of
attachment is to bring the property under the control of the court,
and in the case of immovable property one of the requirements is
that the order of attachment should be publicly proclaimed. The
main object of the proclamation is to give publicity to the fact that
the sale of the proclaimed property is in contemplation. The
publication of the attachment is thus a step leading up to the
proclamation of the sale.
The question whether it is necessary to insert a provision to clarify
the position on the subject, has been considered. In the draft
Report which had been circulated, an Explanation had been
proposed to Rule 90 to the effect that absence of or defect in
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 34 of 58
attachment shall be regarded as an irregularity under this rule.
After some consideration, it has been decided that no such
provision need be inserted.”
In its Fifty-fourth Report, the Law Commission ordered:
“The Commission noted that the question whether the absence
of, or irregularity in, attachment is, a defect in the “publication or
conduct of the sale” within Order 21, Rule 90 had been discussed
in several decisions. At one extreme was the view that
attachment is not necessary at all before sale. At the other
extreme stood the view that sale without attachment is void. A
third view was that want of attachment is an “irregularity” but it is
not an illegality in publishing or conducting the sale.”
In the Notes on Clauses, Gazette of India dated 8.4.1974, Pt. II S.2, Extra, p.
325, the State of Objects and Reasons, it was stated:
“Clause 75, sub-clause (xxxi).-There is a conflict of decisions as to
whether an auction-purchaser can apply to set aside a sale under
Rule 90. The words “or the purchaser” have been inserted in the
rule to make it clear that the auction-purchaser can also apply to set
aside the sale.
The rule is also being amended to provide that a sale shall not
be set aside on the ground of an irregularity or fraud unless the
applicant has sustained a substantial injury by reason of such
irregularity or fraud.
It is further being provided that no application to set aside the
sale shall be entertained on any ground which the applicant could
have taken on or before the date on which the proclamation of sale
was drawn up.
In view of the divergence of opinion as to whether absence of, or
irregularity in, attachment is a defect in the publication or the
conduct of sale, an Explanation is being added to the effect that
mere absence of or defect in the attachment of the property sold
shall not, by itself, be a ground for setting the sale.”
36. Nature and Scope: Rule 90 of Order XXI deals with cases of setting aside
auction-sale on the ground of material irregularity or fraud in publishing or
conducting such sale. Sub-rule (1) states that where any immovable
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 35 of 58
property has been sold in execution of a decree, any person adversely
affected may apply to the court for setting aside sale on the ground of
material irregularity or fraud in publishing or conducting the sale. Sub-rule
(2) is in the nature of proviso to sub-rule (1) and declares that no sale shall
be set aside unless the applicant proves substantial injury by reason of
such irregularity or fraud. Sub-rule (3) bars the court from entertaining an
application for setting aside sale on any ground which the applicant could
have taken on or before the date of proclamation of sale. The Explanation
to Rule 90 clarifies that mere absence of or defect in, attachment of
property sold would be no ground for setting aside sale.
37. Order XXI of the CPC is exhaustive and in the nature of a complete code as
to how the execution proceedings should take place. This is the second
stage after the success of the party in the civil proceedings. This Court in
many of its decisions has said that this is the second stage after the success
of the party in the civil proceedings. It is often said in our country that another
legal battle, more prolonged, starts in execution proceedings defeating the
right of the party which has succeeded in establishing its claim in civil
proceedings. This is the reason why Order XXI Rule 90 provides that both
the conditions enumerated therein should be fulfilled. (See: M/s Jagan
Singh & Co. v. Ludhiana Improvement Trust & Ors. reported in (2024) 3
SCC 308)
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 36 of 58
a. Difference between the auction sale conducted by the court in the
execution proceedings initiated by the decree holder and the auction
proceedings conducted by the State through its revenue authorities
like Tahsildar, etc.
38. There is a fine distinction between the auction sale conducted by the
executing court under the provisions of the CPC and the auction sale
conducted by the State under the provisions of different enactments like
Land Revenue Code etc. The whole object behind Order XXI Rule 90 of
the CPC appears to be to discourage the judgment debtors from filing
frivolous application complaining about the irregularity or fraud in the
conduct of the auction sale. A lot of sanctity is attached to the auction sale
conducted by the executing court under the provisions of the CPC
compared to the auction sale conducted by the State through its authorities.
Execution is the enforcement by the process of the court of its orders and
decrees. This is in furtherance of the inherent power of the court to carry
out its orders or decrees. Order XXI CPC deals with the elaborate
procedure pertaining to the execution of orders and decrees. Sale is one of
the methods employed for execution. Rule 89 of Order XXI of the CPC is
the only means by which a judgment-debtor can escape from a sale that
has been validly carried out. The object of the rule is to provide a last
opportunity to put an end to the dispute at the instance of the judgment-
debtor before the sale is confirmed by the court and also to save his
property from dispossession.
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 37 of 58
39. We are of the view that even otherwise the provisions of the CPC do not
apply to writ petitions under Article 226 of the Constitution of India except
some of the principles enshrined therein like res judicata, delay and laches,
addition of parties, matters which have not been specifically dealt with by
the writ rules framed by the respective High Court.
Position Prior to 1976
40. Before the Code of Civil Procedure (Amendment) Act, 1976, Section 141 of
the Code of Civil Procedure, 1908 read as under:
“Miscellaneous proceedings.- The procedure provided in this
Code in regard to suits shall be followed, as far as it can be
made applicable, in all proceedings in any court of civil
jurisdiction.”
41. There was cleavage of opinion on the question whether the provisions of
the Code would apply to writ proceedings under the Constitution. Some
High Court had held that writ petitions could be said to be proceedings in
‘any court of civil jurisdiction’ within the meaning of Section 141 of the CPC.
According to other High Courts, however, writ proceedings, being special in
nature, were not covered by Section 141 and the provisions of the Code
were not applicable to writ petitions.
42. In State of U.P. v. Vijay Anand reported in AIR 1963 SC 946, drawing the
distinction between ordinary civil jurisdiction and extraordinary civil
jurisdiction, a Constitution Bench of this Court stated:-
“It is, therefore, clear from the nature of the power conferred under
Article 226 of the Constitution and the decisions on the subject that
the High Court in exercise of its power under Article 226 of the
Constitution exercises original jurisdiction, though the said
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 38 of 58
jurisdiction shall not be confused with the ordinary civil jurisdiction
of the High Court. This jurisdiction, though original in character as
contrasted with its appellate and revisional jurisdiction, is
exercisable throughout the territories in relation to which it
exercises jurisdiction and may, for convenience, be described as
extraordinary original jurisdiction.”
(Emphasis supplied)
43. Again, in Babubhai Muljibhai Patel v. Nandlal Khodidas Barot reported
in (1974) 2 SCC 706, construing the words ‘as far as it can be made
applicable’ in Section 141 of the CPC (prior to Amendment of 1976), this
Court observed:
“10. It is not necessary for this case to express an opinion on the
point as to whether the various provisions of the Code of Civil
Procedure apply to petitions under Article 226 of the Constitution.
Section 141 of the Code, to which reference has been made,
makes it clear that the provisions of the Code in regard to suits
shall be followed in all proceedings in any court of civil jurisdiction
as far as it can be made applicable. The words “as far as it can be
made applicable” make it clear that, in applying the various
provisions of the Code to proceedings other than those of a suit,
the court must take into account the nature of those proceedings
and the relief sought. The object of Article 226 is to provide a quick
and inexpensive remedy to aggrieved parties. Power has
consequently been vested in the High Courts to issue to any
person or authority, including in appropriate cases any
government, within the jurisdiction of the High Court, orders or
writs, including writs in the nature of habeas corpus, mandamus,
prohibition, quo warranto and certiorari. It is plain that if the
procedure of a suit had also to be adhered to in the case of writ
petitions, the entire purpose of having a quick and inexpensive
remedy would be defeated. A writ petition under Article 226, it
needs to be emphasised, is essentially different from a suit and it
would be incorrect to assimilate and incorporate the procedure of
a suit into the proceedings of a petition under Article 226.”
(Emphasis supplied)
Position After 1976
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 39 of 58
44. By the Code of Civil Procedure (Amendment) Act, 1976, Explanation to
Section 141 came to be inserted. It reads thus:
“Explanation.-In this section, the expression “proceedings” includes
proceedings under Order IX, but does not include any proceeding
under Article 226 of the Constitution.”
45. In the Statement of Objects and Reasons, it has been stated:
“The question of whether an application under Article 226 of the
Constitution is a ‘proceeding in any court of civil jurisdiction’ within
the meaning of Section 141 has been the subject matter of
controversy. While the Andhra Pradesh High Court holds that
Section 141 applies to such proceedings, the Allahabad, Calcutta,
Madras and Punjab High Court have held that Section 141 does not
apply to such proceedings and in the circumstances, it is being
clarified that Section 141 does not apply to proceedings under
Article 226 of the Constitution.”
46. In view of the Explanation to Section 141 of the CPC, now it can no longer
be contended that the provisions of CPC would apply to the proceedings
under Article 226 of the Constitution.
47. This Court in Puran Singh & Ors. v. State of Punjab & Ors. reported in
(1996) 2 SCC 205, in paras 9, 10 and 11 respectively has held as under:-
“9. In the case of Ram Kala v. Asstt. Director, Consolidation of
Holdings [AIR 1977 P&H 87 : 79 Punj LR 100] , a Full Bench of
three Judges held that Article 137 of the Schedule to the
Limitation Act does not apply to an application for adding or
substituting a party to a petition under Article 226 of the
Constitution. It was also held that Section 141 of the Code cannot
be pressed into service for applying the provisions including
Order 22 of the Code in a petition under Article 226 of the
Constitution. Later a Full Bench of five Judges of the same Court
in the case of Teja Singh v. Union Territory of Chandigarh [AIR
1982 P&H 169; (1981) 1 SLR 274 : 84 Punj LR 160] held that in
view of Rule 32 of the Writ Rules framed by the High Court under
Article 225 of the Constitution which provided that in all matters
in which no provision had been made by those Rules, the
provisions of Civil Procedure Code shall apply mutatis mutandis
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 40 of 58
insofar as they were not inconsistent with those Rules the
explanation which had been added to Section 141 of the Code by
the aforesaid Amending Act, did not in any way nullify the effect
of Rule 32 of the Writ Rules. Rule 32 of the Writ Rules is as
follows:
“32. In all matters for which no provision is made in these
rules, the provisions of the Code of Civil Procedure, 1908,
shall apply mutatis mutandis insofar as they are not
inconsistent with these rules.”
10. On a plain reading, Section 141 of the Code provides that
the procedure provided in the said Code in regard to suits shall
be followed “as far as it can be made applicable, in all
proceedings”. In other words, it is open to make the procedure
provided in the said Code in regard to suits applicable to any
other proceeding in any court of civil jurisdiction. The explanation
which was added is more or less in the nature of proviso, saying
that the expression ‘proceedings’ shall not include any
proceeding under Article 226 of the Constitution. The necessary
corollary thereof shall be that it shall be open to make applicable
the procedure provided in the Code to any proceeding in any
court of civil jurisdiction except to proceedings under Article 226
of the Constitution. Once the proceeding under Article 226 of the
Constitution has been excluded from the expression
‘proceedings’ occurring in Section 141 of the Code by the
explanation, how on basis of Section 141 of the Code any
procedure provided in the Code can be made applicable to a
proceeding under Article 226 of the Constitution? In this
background, how merely on basis of Writ Rule 32 the provisions
of the Code shall be applicable to writ proceedings? Apart from
that, Section 141 of the Code even in respect of other
proceedings contemplates that the procedure provided in the
Code in regard to suits shall be followed “as far as it can be made
applicable”. Rule 32 of Writ Rules does not specifically make
provisions of Code applicable to petitions under Articles 226 and
227 of the Constitution. It simply says that in matters for which
no provision has been made by those rules, the provisions of the
Code shall apply mutatis mutandis insofar as they are not
inconsistent with those rules. In the case of Rokyayabi v. Ismail
Khan [AIR 1984 Kant 234 : (1984) 2 Kant LC 114] in view of Rule
39 of the writ proceedings rules as framed by the Karnataka High
Court making the provisions of Code of Civil Procedure
applicable to writ proceedings and writ appeals, it was held that
the provisions of the Code were applicable to writ proceedings
and writ appeals.
11. We have not been able to appreciate the anxiety on the part
of the different courts in judgments referred to above to apply the
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 41 of 58
provisions of the Code to writ proceedings on the basis of
Section 141 of the Code. When the Constitution has vested
extraordinary power in the High Court under Articles 226 and 227
to issue any order, writ or direction and the power of
superintendence over all courts and tribunals throughout the
territories in relation to which such High Court is exercising
jurisdiction, the procedure for exercising such power and
jurisdiction have to be traced and found in Articles 226 and 227
itself. No useful purpose will be served by limiting the power of
the High Court by procedural provisions prescribed in the Code.
Of course, on many questions, the provisions and procedures
prescribed under the Code can be taken up as guide while
exercising the power, for granting relief to persons, who have
invoked the jurisdiction of the High Court. It need not be
impressed that different provisions and procedures under the
Code are based on well-recognised principles for exercise of
discretionary power, and they are reasonable and rational. But
at the same time, it cannot be disputed that many procedures
prescribed in the said Code are responsible for delaying the
delivery of justice and causing delay in securing the remedy
available to a person who pursues such remedies. The High
Court should be left to adopt its own procedure for granting relief
to the persons concerned. The High Court is expected to adopt
a procedure which can be held to be not only reasonable but
also expeditious.”
(Emphasis supplied)
48. As a court of plenary jurisdiction, the writ court while exercising powers
under Article 226 of the Constitution is free to adopt its own procedures and
follow them. It cannot be compelled to follow the procedures prescribed in
the CPC. This is so for the specific provision made in its Section 141.
49. The High Court while exercising jurisdiction under Article 226 of the
Constitution has jurisdiction to pass appropriate orders. Such power can
neither be controlled nor affected by the provisions of Order XXI Rule 90 of
the CPC. It would not be correct to say that the terms of Order XXI Rule 90
should be mandatorily complied with while exercising jurisdiction under
Article 226 of the Constitution. Proceedings under Article 226 of the
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 42 of 58
Constitution stand on a different footing when compared to the proceedings
in suits or appeals arising therefrom.
50. The High Court exercises its writ jurisdiction under Article 226 of the
Constitution of India, whereas the Civil Courts exercise their jurisdiction in
terms of the provisions of the respective State Civil Courts Acts read with
Section 9 of the CPC. The High Court exercises constitutional function, the
Civil Court exercises a statutory function. The High Court exercises a wide
power under Article 226 of the Constitution of India and in a given situation,
it can even mould the reliefs in order to do substantial justice between the
parties.
51. Where a particular mode is prescribed for doing an act and there is no
impediment in adopting the procedure, the deviation to act in a different
manner which does not disclose any discernible principle which is
reasonable itself is liable to be labelled as arbitrary. The State action must
be informed by reason and it follows that the action uninformed by reason
is per se arbitrary. The basic requirement of Article 14 is fairness in action
by the State and non-arbitrariness in essence and substance is the
heartbeat of fair play. These actions are amenable to the judicial review not
only to the extent that the State must act validly for a discernible reason
and not whimsically for any ulterior purpose. The public authorities are
governed by the “rule of law”. Such authorities are constitutionally obliged
in law to maintain absolute fairness and transparency during the conduct
of the auction sale right from the initiation of the same till its completion.
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 43 of 58
Judicial audit and scrutiny play a key role in ensuring that the public
authorities do not act in an unreasonable manner.
52. The dictum as laid by this Court in Tata Cellular v. Union of India reported
in (1994) 6 SCC 651 is that the judicial power of review is exercised to rein
in any unbridled executive functioning. It was observed that the restraint
has two contemporary manifestations viz. one is ambit of judicial
intervention and the other covers the scope of the court’s ability to quash
an administrative decision on its merits. These restraints bear the hallmarks
of judicial control over administrative action. It was held that the principle of
judicial review is concerned with reviewing not the merits of the decision in
support of which the application for judicial review is made, but the
decision-making process itself. It was held that the principle of judicial
review would apply to the exercise of contractual powers by the
Government bodies in order to prevent arbitrariness or favouritism. It was
held that the duty of the court is to confine itself to the question of legality
and its concern should be whether a decision-making authority exceeded
its powers; whether it committed an error of law or committed a breach of
the rules of natural justice or reached a decision which no reasonable
tribunal would have reached or, abused its powers. The grounds upon
which an administrative action can be subjected to judicial review are
classified as illegality, irrationality and procedural impropriety. In that very
decision, while deducing the principles from various cases referred, it was
held that the modern trend points to judicial restraint in administrative
action; that the Court does not sit as a court of appeal but merely reviews
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 44 of 58
the manner in which the decision was made; that the court does not have
the expertise to correct the administrative decision and if a review of the
administrative decision is permitted, it will be substituting its own decision,
without the necessary expertise which itself may be fallible; that the terms
of the invitation to tender cannot be open to judicial scrutiny because the
invitation to tender is in the realm of contract; and, that the government
must have freedom of contract, i.e. a free-play in the joints is a necessary
concomitant for an administrative body functioning in an administrative
sphere or quasi-administrative sphere. However, the decision must not only
be tested by the application of Wednesbury principle of reasonableness,
but must be free from arbitrariness not affected by bias or actuated by mala
fides. Moreover, quashing decisions may impose heavy administrative
burden on the administration and lead to increased and unbudgeted
expenditure.
53. In Jagdish Mandal v. State of Orissa and Others reported in (2007) 14
SCC 517, this Court observed as under:
“22. Judicial review of administrative action is intended to prevent
arbitrariness, irrationality, unreasonableness, bias and mala fides.
Its purpose is to check whether choice or decision is made “lawfully”
and not to check whether choice or decision is “sound”. When the
power of judicial review is invoked in matters relating to tenders or
award of contracts, certain special features should be borne in
mind. A contract is a commercial transaction. Evaluating tenders
and awarding contracts are essentially commercial functions.
Principles of equity and natural justice stay at a distance. If the
decision relating to award of contract is bona fide and is in public
interest, courts will not, in exercise of power of judicial review,
interfere even if a procedural aberration or error in assessment or
prejudice to a tenderer, is made out. The power of judicial review
will not be permitted to be invoked to protect private interest at the
cost of public interest, or to decide contractual disputes. The
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 45 of 58
tenderer or contractor with a grievance can always seek damages
in a civil court. Attempts by unsuccessful tenderers with imaginary
grievances, wounded pride and business rivalry, to make mountains
out of molehills of some technical/procedural violation or some
prejudice to self, and persuade courts to interfere by exercising
power of judicial review, should be resisted. Such interferences,
either interim or final, may hold up public works for years, or delay
relief and succour to thousands and millions and may increase the
project cost manifold.”
(Emphasis supplied)
54. This Court in State of Punjab & Others v. Mehar Din reported in (2022)
5 SCC 648, after referring to both the aforesaid decisions held as under:
“20. The scope of judicial review in the matters of tenders/public
auction has been explored in depth by this Court in a catena of
cases. Plausible decisions need not be overturned and, at the same
time, latitude ought to be granted to the State in exercise of its
executive power. However, allegations of illegality, irrationality and
procedural impropriety would be enough grounds for courts to
assume jurisdiction and remedy such ills.”
(Emphasis supplied)
55. We are of the view that in cases such as the one at hand wherein the
legality, validity and propriety of the auction sale conducted by the State
through its authorities is questioned on the ground of mala fides, undue
favour for extraneous considerations and gross violation of the mandatory
provisions of law, it would be hazardous to apply the principles enshrined
in Order XXI Rule 90 of the CPC. Times have changed. Human values and
ethics in public functionaries have degraded to a considerable extent.
Corruption is on a rampage. Having regard to the same and in order to
protect and uphold the rule of law, the courts have a duty to ensure that the
State authorities have conducted public auctions in a fair and transparent
manner and have not done anything by which public exchequer has
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 46 of 58
suffered. It would be too much to say that although the writ court may find
an auction sale conducted by a public functionary to be in gross violation
of the mandatory provisions of law and the action of such public functionary
to be arbitrary, yet the aggrieved party complaining about the same should
be told to establish the dual conditions stipulated in Order XXI Rule 90 of
the CPC. Once the action of the State is found to be unfair and arbitrary,
then that is the end of the matter so far as a writ court is concerned. The
first and the foremost aspect that the writ court should look into is fairness
and transparency on the part of the State in conducting the auction sale so
as to be in conformity with Article 14 of the Constitution.
56. The litigation at hand is one of gross violation of the mandatory provisions
of the Revenue Code in so far as conduct of the auction sale is concerned.
In terms of Section 194 of the Revenue Code, no sale shall take place until
after the expiration of at least 30 days from the latest date on which any of
the notice shall have been affixed as required by Section 193 of the
Revenue Code. The materials on record reveal that the auction of the
property was conducted before the expiry of 30 days’ time as prescribed
under Section 194 of the Revenue Code. At the cost of repetition, Section
194 of the Revenue Code is reproduced hereunder:-
“Section 194: (1) Sale shall be made by auction by such persons as
the Collector may direct.
(2) No such sale shall take place on a Sunday or other general
holiday recognised by the State Government¸ nor until after the
expiration of at least thirty days in the case of immovable property,
or seven days in the case of movable property, from the latest date
on which any of the said notices shall have been affixed as required
by section 193.”
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 47 of 58
57. Further, in terms of Section 195 of the Revenue Code, a fresh notice is
required to be issued if the sale is postponed for any reason beyond 30 days
and a fresh proclamation and notice has to be issued unless the defaulter
consents to waive it. In this regard, it is relevant to note that a fresh
proclamation was made on 23.11.2008 in furtherance of Section 195 of the
Revenue Code. At the cost of repetition, Section 195 of the Revenue Code
is reproduced hereunder:-
“Section 195. Postponement of sale.─The sale may from time
to time be postponed for any sufficient reason:
Provided that, when the sale is postponed for a period longer
than thirty days a fresh proclamation and notice shall be issued
unless the defaulter consents to waive it.”
58. Various illegalities were committed even in confirming the sale. In a process
of sale, first the sale is to be conducted, then the proceeds are required to
be received. It is only after the receipt of the proceeds that sale confirmation
is required to be made by the collector and thereafter sale certificate and
possession is to be handed over. In the present case, the sale was
conducted and concluded on the same day i.e., 03.12.2008. The sale
certificate was issued on the same day and that too without the confirmation
from the collector and the possession was also handed over on the very
next day.
59. From a bare perusal of Section 212 of the Revenue Code, it is evident that
the purchaser can be put into possession only after confirmation of sale and
the sale certificate being handed over to the purchaser. However, in the
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 48 of 58
present case, the appellant was put in possession on 04.12.2008 and the
sale of property was confirmed on 15.01.2009 by the Additional Collector,
which is per se illegal in nature. Again at the cost of repetition, Section 212
of the Revenue Code is reproduced hereunder:-
“Section 212. On confirmation of sale, purchaser to be put in
possession. Certificate of purchase.— After a sale of any
occupancy or alienated holding has been confirmed in the manner
aforesaid, the Collector shall put the person declared to be the
purchaser into possession of the land and shall cause his name to
be entered in the land records as occupant or holder in lieu of that
of the defaulter and shall grant him a certificate to the effect that
he has purchased the land to which the certificate refers.”
60. Indisputably, although a specific objection was raised by the IFCI on
10.12.2008, as recorded by the Tahsildar in its letter dated 19.12.2008, yet the
objection was suppressed from the Additional Collector.
61. On 07.01.2009, the Additional Collector, Head Office Jawar directed the
respondent no. 4 to submit a detailed report on whether it had fulfilled all the
conditions as stipulated under Section 208 of the Revenue Code. At the cost
of repetition, Section 208 of the Revenue Code is reproduced hereunder:-
“Section 208: Order confirming or setting aside sale.—On the
expiration of thirty days or, as the case may be, one hundred and
eighty days from the date of the sale, if no such application as is
mentioned in section 207 has been made, or if such application has
been made and rejected, the Collector shall make an order
confirming the sale:”
62. However, respondent no. 4, vide its letter dated 12.01.2009 addressed to the
Additional Collector, Head Office Jawar, misinformed that except for the writ
petition pending before the High Court of Bombay, no other objection was
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 49 of 58
received and thereby all requirements under Section 208 of the Revenue Code
had been fulfilled, despite IFCI raising its objections.
63. From the aforesaid, the following inescapable conclusions are discernible:
a. The sale of the Property took place before the expiry of the mandatory
30 days’ notice. This clearly shows that the sale was conducted in
breach of the provisions of Section 194 of the Revenue Code. The notice
was issued on 19.11.2008 and the auction came to be conducted on
03.12.2008.
b. The sale certificate was issued on the same day, i.e., on the date of the
auction itself, much before the confirmation of sale by the Additional
Collector. This clearly shows that the sale was conducted in breach of
the provisions of Section 212 of the Revenue Code.
c. The purchaser, that is, the appellant was put in possession of the
property much before the sale came to be confirmed i.e. on 15.01.2009
and that too prior to the cheque being realised. This clearly shows
that the sale was conducted in breach of the provisions of Sections 212
and 208 respectively of the Revenue Code.
d. The undue haste exhibited by the Tahsildar in completing the sale in
favour of the appellant speaks for itself. Why did the Tahsildar supress
an important fact before the Additional Collector as regards the
objections received by him from IFCI? This itself indicates that there was
some collusion between the Tahsildar and the appellant.
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 50 of 58
64. The aforesaid lapses, in our opinion, cannot be termed as irregularity. Once
it is evident that the mandatory provisions as stipulated under the rules and
regulations are not followed or abridged, any action pursuant to the same
could be termed as gross illegality. There is a fine distinction between
illegality and irregularity. Whereas the former goes to the root of the matter
and renders the action null and void, of no effect whatsoever, the latter does
not ipso facto invalidate the action, unless prejudice is caused to the person
making a complaint, even if, for the purposes of Order XXI Rule 90 of the
CPC the lapses we have taken note of could be termed as material
irregularities going to the root of the matter.
65. Almost a century back, in Ashutosh v. Behari Lal (1908) 35 Cal 61, drawing
the distinction between ‘nullity’ and ‘irregularity’, Mookerjee, J. stated;
“No hard and fast line can be drawn before a nullity and
irregularity; but this much is clear, that an irregularity is a deviation
from a rule of law which does not take away the foundation of
authority for the proceeding, or apply to its whole operation,
whereas a nullity is a proceeding that is taken without any
foundation for it or is so essentially defective as to be of no avail
or effect whatever, or is void and incapable of being validated”.
66. Whether a provision falls under one category or other is not of easy
discernment, and in the ultimate analysis it depends upon the nature, scope
and object of a particular provision. A workable test, however, has been laid
down in Holmes v. Russel (1841) 9 Dowl 487, wherein it was held thus:
“It is difficult sometimes to distinguish between an irregularity
and a nullity, but the safest rule to determine what is an
irregularity and what is a nullity is to see whether the party can
waive the objection; if he can waive it, it amounts to an
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 51 of 58
irregularity; if he cannot, it is a nullity.” [see Dhirendra Nath v.
Sudhir Chandra]
(Emphasis supplied)
67. If we were to condone or overlook all the illegalities we have taken note of
in para 63 of this judgment, applying the provisions of Order XXI Rule 90 of
the CPC, the same would result in nothing but gross travesty of justice.
Bureaucracy feels that accountability is an impediment to efficient
discharge of the duty. Accountability is no more and no less than, the
concept of accountability of a private concern to their shareholders. There
is a distinction between prying into details of day-to-day administration and
of the legitimate actions or resultant consequences thereof. To enthuse
efficiency into administration, a balance between accountability and
autonomy of action should be carefully maintained. Over-emphasis on
either would impinge upon public efficiency. But undermining the
accountability would give immunity or carte blanche power to deal with the
public property or of the debtor at whim or vagary. Whether the public
authority acted bona fide would be gauged from the impugned action and
attending circumstances. The authority should justify the action assailed on
the touchstone of justness, fairness, reasonableness and as a reasonable
prudent owner. Test of reasonableness is stricter. The public functionaries
should be duty conscious rather than power charged. Its actions and
decisions which touch the common man have to be tested on the
touchstone of fairness and justice. That which is not fair and just is
unreasonable. And what is unreasonable is arbitrary. An arbitrary action is
ultra vires. It does not become bona fide and in good faith merely because
no personal gain or benefit to the person exercising discretion has been
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 52 of 58
established. An action is mala fide if it is contrary to the purpose for which
it was authorised to be exercised. Dishonesty in discharge of duty vitiates
the action without anything more. An action is bad even without proof of
motive of dishonesty, if the authority is found to have acted contrary to
reason. [See: Mahesh Chandra v. Regional Manager, U.P. Financial
Corporation & Ors : (1993) 2 SCC 279]
ii. Whether the Additional Commissioner, Konkan Division, Maharashtra
had the jurisdiction to decide the two appeals filed by the respondent
nos. 1 and 6 respectively under Section 247 of the Maharashtra Land
Revenue Code, 1966?
68. We shall now proceed to deal with the contention canvassed on behalf of
the appellant that the Additional Commissioner, Konkan Division, State of
Maharashtra had no jurisdiction to adjudicate the two appeals filed by the
respondent no. 1 and respondent no. 6 herein respectively. It was argued
that the appeals filed before the Additional Commissioner under Section
247 of the Revenue Code were not maintainable as there was a remedy
available under Section 210 of the same code.
69. Application before the Collector to get the Sale set aside has to be made
within a period of 30 days. It is after considering the objections that the sale
is to be confirmed. Section 210 of the Revenue Code reads:
“Section 210. Application to set aside sale by person
owning to holding interest in property.— (1) Where
immovable property has been sold under this Code, any person
either owning such property or holding an interest therein by
virtue of a title acquired before such sale may, at any time within
thirty days from the date of sale, apply to the Collector to have
the sale set aside on his holding depositing-
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 53 of 58
(a) For payment to the purchaser a sum equal to five per cent
of the purchase money
(b) For payment on account of the arrear, the amounts
specified in the proclamation of sale as that for the recovery
of which the sale was ordered, less any amount which may
have been paid since the date of sale on that account; and
(c) The cost of the sale:
Provided that, such application may be made by such person
belonging to a Schedule Tribe within one hundred and eighty
days from the date of sale.
(2) If such deposit is made within thirty days or, as the case
may be, one hundred and eighty days from the date of sale,
the Collector shall pass an order setting aside the sale.”
70. As rightly argued by Mr. Dave, the said remedy was rendered illusory as
the sale was finalised by the Tahsildar much before the confirmation by
the Collector. In fact, the sale certificate was issued & the possession
was also handed over to the appellant. The confirmation was done by the
Tahsildar much before the expiry of 30 days. There was nothing left for
the Collector to consider and decide under Section 210 of the Revenue
Code. It is further pertinent to note that the provision may be applicable
in case of owner of the property but not to a lender who has valid
subsisting mortgage. The argument that lender is not required to make
deposit before challenging the sale is not something which is borne on
plain reading of the language of Section 210.
71. Section 210(1) of the Revenue Code provides that an application can be
made where an immovable property has been sold under the Revenue
Code by i) owner of the property; and ii) holding interest therein by virtue
of a title acquired before such sale. It would be relevant to state that the
respondent No. 6 does not fall within the category as provided under
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 54 of 58
Section 210(1) of the Revenue Code nor has the respondent No. 6
claimed to be the owner of the property or has an interest in the property
by virtue of the “title acquired”.
72. The confirmation of the sale had no bearing after the issuance of sale
certificate. Therefore, the remedy under Section 210 was rendered
illusory and not a remedy actually available as the certificate of sale was
already issued. Further, once the sale certificate is issued, then the
remedy falls under Section 247 instead of Section 210 of the Revenue
Code. At the cost of repetition, Section 247 of the Revenue Code is
reproduced hereunder:
“Section 247: Appeal and appellate authorities.—(1) In the
absence of any express provisions of the Code, or of any law for
the time being in force to the contrary, an appeal shall lie from any
decision or order passed by a revenue or survey officer specified in
column 1 of the Schedule E under this Code or any other law for
the time being in force to the officer specified in column 2 of that
Schedule whether or not such decision or order may itself have
been passed on appeal from the decision or order of the officer
specified in column 1 of the said Schedule:
Provided that, in no case the number of appeals shall exceed two.
(2) When on account of promotion or change of designation an
appeal against any decision or order lies under this section to the
same officer who has passed the decision or order appealed
against, the appeal shall lie to such other officer competent to
decide the appeal to whom it may be transferred under the
provisions of this Code.”
73. Assuming for the moment that the Additional Commissioner had no
jurisdiction to adjudicate and decide the two appeals filed by the
respondent No. 1 and respondent No. 6 respectively, yet the common
order passed by the Additional Commissioner allowing the appeals and
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 55 of 58
remanding the matter back to the authority concerned could not have
been disturbed and the High Court rightly did not disturb the same. Had
the High Court taken the view that the Additional Commissioner had no
jurisdiction and the order passed by it was a nullity, the result would have
been the revival of the illegal order passed by the Additional Collector
confirming the sale.
74. It is well settled principle in law that issuance of a writ or quashing/setting
aside of an order if revives another pernicious or wrong or illegal order
then in that eventuality the writ court should not interfere in the matter
and should refuse to exercise its discretionary power conferred upon it
under Article 226 of the Constitution of India. The writ court should not
quash the order if it revives a wrong or illegal order. Vide : Gadde
Venkateswara Rao v. Government of Andhra Pradesh, AIR 1966 SC
828; Maharaja Chintamani Saran Nath Shahdeo v. State of Bihar,
(1999) 8 SCC 16: AIR 1999 SC 3609: 1999 AIR SCW 3623; M.C. Mehta
v. Union of India, (1999) 6 SCC 237: AIR 1999 SC 2583; Mallikarjuna
Mudhagal Nagappa v. State of Karnataka, (2000) 7 SCC 238: AIR 2000
SC 2976: 2000 AIR SCW 3289; and Chandra Singh v. State of
Rajasthan, (2003) 6 SCC 545: AIR 2003 SC 2889: 2003 AIR SCW 3518
and Raj Kumar Soni v. State of U.P., (2007) 10 SCC 635.
G. CONCLUSION
75. In view of the foregoing discussion, we are of the view that no interference
is warranted with the impugned judgment of the High Court. However, the
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 56 of 58
facts and circumstances of this case have left us with an uphill task to
mould the final order necessary to be passed in order to do substantial
justice with the parties to this litigation.
76. Having taken the view that the High Court committed no error, much less
any error of law, we could have dismissed both the appeals and closed
this litigation. However, doing the same will put the appellant in immense
difficulties. As noted in the earlier part of this judgment, the appellant has
set up an oxygen cylinder manufacturing plant on the suit property. It has
invested a huge amount in setting up this plant and has been running this
plant for almost 15 years. Approximately 200 employees are working in
the said plant. If the possession of the suit property is taken over, then
the plant will have to be dismantled unless in any fresh auction
proceedings some person is interested in taking over the entire plant with
the land. In such circumstances, we deem fit to give one opportunity to
the appellant to save its industrial unit set up on the subject land. If the
appellant wants to save the industrial unit and the land, it must deposit a
sum of Rs. 4,00,00,000/- (Rupees Four Crore Only) with the respondent
no. 6-ARCIL towards full and final settlement of all liabilities. No other
lender or financial institution shall thereafter put forward any further claim,
even if any. It is for the respondent no. 6-ARCIL to deal with such a
situation.
77. In view of the aforesaid, both the appeals are allowed in part. While
affirming the impugned judgment and order passed by the High Court,
Civil Appeals @ SLP (C) No. 29334-35 of 2016 Page 57 of 58
we direct the appellant to deposit a sum of Rs. 4,00,00,000/- (Rupees
Four Crore Only) with the respondent no. 6-ARCIL within a period of six
months from today, failing which we shall proceed to pass further orders.
78. Let this matter be notified once again before this Bench to report whether
the appellant has deposited the amount of Rs. 4,00,00,000/- (Rupees
Four Crore Only) with ARCIL or not. We clarify that if the appellant fails
to deposit the amount, we shall direct the competent authorities to take
over the possession of the entire unit with the land in question and put
the same once again for sale by way of fresh auction process.
79. We may further clarify that if the appellant deposits the requisite amount
within the stipulated period, then the contempt proceedings pending
before the High Court of Bombay shall also stand terminated.
80. There shall be no order as to costs.
81. Pending applications if any shall stand disposed of.
………………… .……..J.
(J. B. PARDIWALA)
..………..……….……..J.
(MANOJ MISRA)
New Delhi
9
th
July, 2024
Login with google
Legal Notes
Add a Note....