Court dismisses appeal, allows recovery of excess amount with interest.

The court dismissed the appeal, citing no fundamental procedural error and rejecting objections due to delay. The appellants were allowed to seek recovery of any excess amount not paid to them, with interest, within three months from the date of application.

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Issues Involved:
1. Liability of guarantor and co-sureties under the Indian Contract Act, 1872.
2. Recovery of public dues and the conduct of auction sales.
3. Valuation and reserve price in the auction process.
4. Decision to sell whole or part of the secured assets.
5. Setting aside auction sale after confirmation.

Issue-wise Detailed Analysis:

1. Liability of Guarantor and Co-sureties under the Indian Contract Act, 1872:
The court emphasized the settled legal proposition that under Section 128 of the Indian Contract Act, 1872, the liability of the guarantor is co-extensive with that of the debtor. This means the creditor has the right to obtain a decree against both the surety and the principal debtor. The surety cannot dictate terms to the creditor regarding how to recover the debt. The court cited several precedents, including *Bank of Bihar Ltd. v. Dr. Damodar Prasad & Anr.*, *AIR 1969 SC 297*, and *State Bank of India v. Messrs. Indexport Registered & Ors.*, *AIR 1992 SC 1740*, to support this principle. Additionally, Section 146 of the Contract Act provides that co-sureties are liable to contribute equally unless the contract states otherwise.

2. Recovery of Public Dues and the Conduct of Auction Sales:
The court highlighted that public money should be recovered expeditiously, but financial institutions must not behave like property dealers and must comply with statutory provisions. The right to hold property is both a constitutional and human right, and deprivation of property must follow statutory provisions, as established in *Lachhman Dass v. Jagat Ram & Ors.*, *(2007) 10 SCC 448*, and *Narmada Bachao Andolan v. State of Madhya Pradesh & Anr.*, *AIR 2011 SC 1589*. The court also noted the potential for collusion in public auctions, referencing *The State of Orissa & Ors. v. Harinarayan Jaiswal & Ors.*, *AIR 1972 SC 1816*.

3. Valuation and Reserve Price in the Auction Process:
The court discussed the importance of proper valuation and reserve price in auction sales. The valuation must be based on relevant material, and the reserve price should reflect the property's intrinsic worth. The court cited *State of U.P. v. Shiv Charan Sharma & Ors.*, *AIR 1981 SC 1722*, and *Anil Kumar Srivastava v. State of U.P. & Anr.*, *AIR 2004 SC 4299*, to explain these concepts. The court emphasized that failure to conduct proper valuation and fix an appropriate reserve price could result in substantial injury to the borrower/guarantor and vitiate subsequent proceedings.

4. Decision to Sell Whole or Part of the Secured Assets:
The court stressed that only the necessary portion of the property should be sold to satisfy the decree, as established in *Ambati Narasayya v. M. Subba Rao & Anr.*, *AIR 1990 SC 119*. The court observed that in the present case, the appellants' land was sold for Rs. 25,000/-, which was three times the amount to be recovered. Therefore, selling the entire property was a material irregularity.

5. Setting Aside Auction Sale After Confirmation:
The court noted that a confirmed sale can be set aside on grounds of material irregularity or fraud, as established in *Navalkha & Sons v. Sri Ramanya Das & Ors.*, *AIR 1970 SC 2037*, and *Divya Manufacturing Co. (P) Ltd. & Anr. v. Union Bank of India & Ors.*, *AIR 2000 SC 2346*. The court found no fundamental procedural error in the auction process in the present case. However, the appellants' failure to implead the bank or legal heirs of the principal debtor complicated further proceedings.

Conclusion:
The court dismissed the appeal, noting that the appellants' objections were rejected on the ground of delay and no fundamental procedural error was identified. The court allowed the appellants to apply for recovery of any excess amount not paid to them, with interest, within three months from the date of application.

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