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of <h1>Supreme Court allows appeal, upholds auction sale of mortgaged property despite debtor's default under Section 89A</h1> <h3>P.M. Abubakar Versus State of Karnataka and Ors.</h3> P.M. Abubakar Versus State of Karnataka and Ors. - TMI Issues Involved:1. Delay in repayment of loan and execution of recovery proceedings.2. Validity of auction sale and objections raised by the debtor.3. Jurisdiction of the Deputy Registrar in setting aside the auction sale.4. Compliance with statutory requirements for setting aside the sale.5. Interpretation and application of relevant legal provisions and rules.6. Calculation and payment of the awarded amount and interest.Detailed Analysis:1. Delay in Repayment of Loan and Execution of Recovery Proceedings:The debtor defaulted on a loan repayment to Mahalakshmi Co-operative Bank Limited, resulting in recovery proceedings. An award was passed for recovery of Rs. 13,65,899.70 with interest at 19% per annum. The debtor's failure to comply led to execution proceedings and subsequent auction notices. Despite multiple opportunities and conditional stays granted by the Karnataka Appellate Tribunal and the High Court, the debtor failed to deposit the required amounts, leading to continued execution actions.2. Validity of Auction Sale and Objections Raised by the Debtor:The auction sale of the debtor's mortgaged property was contested by the debtor's brother, claiming it was joint family property. His objections were dismissed. The debtor's repeated attempts to challenge the auction sale through writ petitions were unsuccessful. The High Court provided conditional interim protection, but the debtor consistently failed to meet the conditions, resulting in the auction sale proceeding. The auction purchaser emerged as the highest bidder, and the sale was confirmed by the Assistant Registrar of Co-operative Societies (ARCS).3. Jurisdiction of the Deputy Registrar in Setting Aside the Auction Sale:The debtor filed an appeal with the Deputy Registrar of Co-operative Societies (DRCS), who set aside the sale on grounds of undervaluation, despite the debtor's non-compliance with the payment conditions. The Supreme Court found that the DRCS lacked jurisdiction to entertain the appeal against the order of confirmation of sale, as no appeal provision existed under Section 106 of the Karnataka Cooperative Societies Act against such confirmation.4. Compliance with Statutory Requirements for Setting Aside the Sale:The debtor did not file an application for setting aside the sale as per Rule 38 of the Karnataka Cooperative Societies Rules, which required depositing the awarded amount with interest. The application for setting aside the sale was dismissed by ARCS, and the debtor's appeal to DRCS was deemed without jurisdiction. The Supreme Court emphasized the necessity of complying with statutory provisions for setting aside a sale.5. Interpretation and Application of Relevant Legal Provisions and Rules:The Supreme Court highlighted the legislative intent of Rule 38, which provides a mechanism for setting aside sales, including the requirement of depositing the awarded amount and interest. The Court noted that once the sale is confirmed, the authority cannot set aside the sale under Rule 38(6), emphasizing the finality of the auction process upon confirmation.6. Calculation and Payment of the Awarded Amount and Interest:The High Court's direction for the debtor to deposit Rs. 59,46,965/- with interest was not fulfilled, resulting in a shortfall. The debtor's argument of calculation errors was dismissed by the Supreme Court, which found no merit in the debtor's claims. The Court underscored the importance of fulfilling financial obligations as per judicial orders and statutory requirements.Conclusion:The Supreme Court set aside the orders of the Deputy Registrar and the High Court that had favored the debtor, reinstating the confirmation of the auction sale in favor of the auction purchaser. The debtor's appeals were dismissed, and the Appropriate Authority was directed to proceed with the disbursement of amounts in accordance with the law. The judgment reinforced the necessity of adhering to statutory processes and judicial directions in recovery and auction proceedings.
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