TaxTMI 
TaxTMI 
2026 (3) TMI 87
X X X X Extracts X X X X
X X X X Extracts X X X X
....iruddha Pande, AOR. JUDGMENT PER MANOJ MISRA, J. 1. Leave granted. 2. These six appeals are directed against common judgment and order dated 26.03.2018 passed by the High Court of Judicature at Bombay [High Court.] whereby four writ petitions i.e., W.P. No. 1543 of 2009; W.P. No. 6544 of 2009; W.P. No. 393 of 2010; and W.P. No. 1779 of 2010 were disposed of. Facts 3. A plot of land bearing No. 21, admeasuring 810 Sq. mtr., pertaining to Survey No. 14, Village Chembur, Tehsil Kurla, Bombay Suburban District [described as property in dispute.] was subjected to auction sale to recover dues of Mahanagar Co-operative Bank [described as the Bank.] payable by a partnership firm i.e., M/s. Borse Brothers [the firm.]. The firm had availed cash credit facility of Rs. 10,00,000/- from the Bank. As it failed to repay the amount, proceedings were initiated by the Bank under Section 91 of Maharashtra Co-operative Societies Act, 1960 [the 1960 Act.]. In the said proceedings, on 04.04.1994 the Co-operative Court passed an ex-parte award of Rs. 24,19,904.92 plus interest @ 17.5% per annum against the firm, which was represented through its partners including Panditrao Borse.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs and legal representatives of Panditrao Borse against the auction sale and, later vide order dated 29.12.2009, the Joint Registrar set aside the auction including its confirmation and consequential sale dated 18.03.2005 while exercising power under Section 154 of the 1960 Act, read with Rule 107 of the 1961 Rules. 7. Aggrieved by the order of condonation of delay and allowing of revision, Writ Petition No. 393 of 2010 was filed by Adishakti Developers and Writ Petition No.1779 of 2010 was filed by the Bank. All the aforesaid four writ petitions were tagged and decided by the impugned order. 8. Writ Petition Nos. 393 of 2010 and 1779 of 2010 were taken as leading petitions because they questioned the order cancelling the auction sale. As far as other two petitions were concerned, their fate depended on whether the auction sale is affirmed or cancelled. In that sequence we shall narrate the facts and the issues which arise for our consideration. 9. Condonation of delay in filing revision against the auction sale was sought, inter alia, on the ground that the legal representatives of Panditrao Borse became aware of confirmation of sale / conveyance when proceeding for mutat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....its view, it relied on decisions of this Court in Manilal Mohanlal Shah and others vs. Sardar Sayed Ahmed Sayed Mahmad and another AIR 1954 SC 349: (1954) 1 SCC 724; Sardara Singh (Dead) By L.Rs. and another vs. Sardara Singh (Dead) and others (1990) 4 SCC 90; Rao Mahmood Ahmad Khan Through L.R. vs. Ranbir Singh and others 1995 Supp. (4) SCC 275; Gangabai Gopaldas Mohata vs. Fulchandand others (1997) 10 SCC 387; and Shilpa Shares & Securities and others vs. National Co-operative Bank Ltd. and others (2007) 12 SCC 165. High Court found that it is an admitted position that only 15% of the auction amount was paid on the date of auction and balance was not paid within 15 days; rather, paid in four installments, spanning over next three months. Therefore, it held, the sale was a nullity. 12. On the issue of waiver, High Court held that there was no waiver on part of the owner (including the borrower or legal heirs of one of the partners of the borrower) of its right to challenge the auction on the ground of non-deposit of auction price within the stipulated period therefore, even if the Bank had accepted the money beyond the stipulated period, there could be a valid challenge to the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erving that remedy lay under Rule 107 of 1961 Rules. Instead of taking recourse to the remedy available under 1961 Rules, a revision was filed, that too, with a delay of about 04 years. Such delay ought not to have been condoned. Moreover, under Section 154, revision lies where any decision or order is passed by a Subordinate Officer against which no appeal lies. Certificate of confirmation of auction sale is based on an order of a Subordinate Officer therefore, remedy was available under Rule 107 of 1961 Rules and to avail it, the owner of the property had to deposit the amount as prescribed under Rule 107(13) of 1961 Rules. Hence, revision should not have been entertained. (ii) Even if there is violation of the procedure prescribed by Rule 107 (11) (g) (h) of 1961 Rules, borrower may waive the violation thereof by its conduct as it is for the benefit of the creditor and, therefore, in absence of any objection by the creditor, the auction sale is not rendered void. In this regard reliance was placed on decision of this Court in General Manager, Sri Siddheshwara Co-operative Bank Ltd. And another vs. Ikbal and Ors. (2013) 10 SCC 83. (iii) While considering applica....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n going in its favour. (b) Chairman of the Bank, namely, Gulab Rao Shelke, who was an Advocate, had represented the auction purchaser in a proceeding. This issue was specifically raised in the revision application, and a complaint was made to the Bar Council of Maharashtra which initiated disciplinary proceeding against him. (viii) Credit facility taken by the Firm from the Bank was secured by hypothecation of two trucks and fixed deposit receipt, yet instead of proceeding against those assets, the land was put to auction. (ix) Public notice of auction instead of being published in two daily newspapers was published in one newspaper only. (x) The property in dispute was allotted to Panditrao Borse by the Government and one of the conditions of allotment proscribed mortgage without prior consent of the Government. There exists no material on record to show that any such consent was obtained therefore, there was no valid mortgage and as such the property could not have been subjected to auction. Moreover, there is no challenge to Collector's finding in mutation proceedings that mortgage of land was illegal. Based on the aforesaid submissions, on....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y, the bidder deposited Rs. 52,85,000 i.e. 35% of bid amount, which was more than 15%, as required by the Rule. (xi) The legal representatives of Panditrao Borse were throughout aware of the amount due as also about the steps taken by the Bank. (xii) On 18.03.2005, SRO confirmed the sale and physical possession was handed over to the bidder along with possession receipt. (xiii) Ultimately, on 21.03.2005 certificate of confirmation was issued in favour of the bidder. (xiv) On 13.05.2005, SRO issued letters to the legal representatives of Panditrao Borse about the auction sale, and on 13.06.2005 registered sale was executed in favour of the bidder. (xv) Between the date of auction and issuance of certificate of sale, the legal representatives of Panditrao Borse could have applied, within 30 days, under Rule 107(13) of 1961 Rules to set aside the sale, but they took no such step. On the contrary, they filed Writ Petition No. 5401 of 2005 which was dismissed with liberty to avail remedy under Rule 107 of 1961 Rules. However, they did not avail the statutory remedy, as a result, the sale certificate dated 21.03.2005 attained finality in terms....
X X X X Extracts X X X X
X X X X Extracts X X X X
....id, the final order passed by the High Court is justified? If not, what would have been the appropriate order? Issue No.1: 21. Records reveal that Case No. CC/III/1044 of 1993 was filed before the Co-operative Court by the Bank against M/s. Borse Brothers through its partners including Panditrao Borse. On 04.04.1994, an ex-parte award was passed against Borse Brothers including its partners and one Sri Bhagwan Rambhau Thorat in the following terms: "Opponent No. 1 to 3 are jointly and severally liable to pay and to pay Rs. 24,19,905.02 with interest at 17.5% on Rs. 24,19,905.92 from 01.09.1993 till realization of the amount... Attachment before judgment order and ad-interim injunction order dated 22.10.1993 is hereby continued till full realization of the claim amount." 22. Misc. Application No. 44 of 2004 was filed by legal representatives of Panditrao Borse for setting aside the ex-parte award, inter alia, stating (a) that Panditrao Borse expired on 17.04.2001 leaving behind the applicants, namely, Smt. Usha Panditrao Borse; Shri Vivek Panditrao Borse; and Smt. Vaishali Udaysingh Gaikwad as Panditrao Borse's legal heirs; and (b) that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y Powers of State Government and Registrar: (1) The State Government or the Registrar, suo-motu or on an application, may call for and examine the record of any inquiry or proceedings of any matter, other than those referred to in sub-section (9) of section 149, where any decision or order has been passed by any subordinate officer, and no appeal lies against such decision or order, for the purpose of satisfying themselves as to the legality or propriety of any such decision or order, and as to the regularity of such proceedings. If in any case, it appears to the State Government, or the Registrar, that any decision or order so called for should be modified, annulled or reversed, the State Government or the Registrar, as the case may be, may, after giving the person affected thereby an opportunity of being heard, pass such orders thereon as to it or him may seem just. (2) Under this section, the revision shall lie to the State Government if the decision or order is passed by the Registrar, the Additional Registrar or a Joint Registrar, and to the Registrar if passed by any other officer. (2-A) No application for revision shall be entertained against the r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sfy itself as to the legality or propriety of any such decision or order, and as to the regularity of such proceedings and, if it appears to the State Government or the Registrar, as the case may be, that any decision or order so called for should be modified, annulled or reversed, to pass such order as it may seem just. Sub-section (2-A) inserted by way of amendment [Maharashtra Act No. 41 of 2000.] provides that no revision application shall be entertained against recovery certificate issued by the Registrar under Section 101 or Certificate issued by the Liquidator under Section 105 unless the applicant deposits with the concerned society, 50% amount of the total amount of recoverable dues. 26. Sub-section (3) of Section 154 provides that no application for revision shall be entertained if made after two months of the date of communication of the decision or order. However, the revisional authority is empowered to entertain any such application made after such period, if the applicant satisfies the revisional authority that he had sufficient cause for not making the application within such period. 27. The argument on behalf of the auction purchaser is that the revision was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urt impugning an order of the Joint Registrar dismissing a revision under Section 154 of the 1960 Act against auction proceeding and a sale certificate. As the borrower had not availed its remedy under Rule 107 of the 1961 Rules, the High Court held that the revision under Section 154 was not maintainable; yet it set aside the auction sale and cancelled the sale certificate on the ground that auction sale/ sale was in breach of Rules 107 (11) (e), (f) (g) and (h) of 1961 Rules. This Court set aside the order passed by the High Court, inter alia, on the ground that once the High Court found revision not maintainable under Section 154, it ought not to have entered the merits particularly when the borrower had not applied to the Recovery Officer to set aside the sale on the grounds of material irregularity, mistake or fraud in publishing or conducting it. In that context, it was held that once the borrower had failed to apply to the recovery officer to set aside the auction sale on the grounds of material irregularity, mistake or fraud in publishing or conducting the auction sale within a period of 30 days from the date of sale of immovable property, it was not open for him to challen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r for the sale of property of Shivsrushti Plot No. 21, Survey No. 14 (Part) C.T.C. No. 114, Chembur Village, Taluka Kurla, Mumbai-400024 Total area 810 sq. mt. belonging to 1 Shri Vinayakrao Shankarrao Borse and 1. Smt. Usha Panditrao Borse 2. Shri Vivek Panditrao Borse 3. Smt. Vaishali Udaysingrao Gaikwad heirs and legal representatives of Late Shri Panditrao Borse within the limit of Municipal Ward bearing No. "L" Ward, Kurla, Nehru Nagar, Kurla EUR, Mumbai 400071 within the registration District and Sub-District of Mumbai City and Kurla Suburban and the sale.....confirmed under Section 156 of Rule 107(14)(v) of Maharashtra Co-operative Societies Rule. Mumbai Dated: 18.03.2005 Sd/- R.Y. Kulkarni Special Recovery Sale Officer (Grade I) Co-Op. Department Under Section 156 Rule 107 MCS Act The Mahanagar Co-Op. Bank Ltd. Lalbaug, Mumbai 400012." 33. Pursuant to the sale confirmation order, possession was handed over to M/s. Adishakti Developers on 18.03.2005. 34. Aggrieved by the sale confirmation order and delivery of possession, the legal representatives of Panditrao Borse filed Writ Petition No. 5401 of 2005 before the High Cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lication under this sub-rule. (14) (i) At any time within thirty days from the date of the sale of immovable property, the applicant or any person entitled to share in a rateable distribution of the assets or whose interests are affected by the sale, may apply to the Recovery Officer to set aside the sale on the ground of a material irregularity or mistake or fraud in publishing or conducing it: Provided that no sale shall be set aside on the ground of irregularity or fraud unless the Recovery Officer is satisfied that the applicant has sustained substantial injury by reason of such irregularity, mistake or fraud. (ii) If the application be allowed, the Recovery Officer shall set aside the sale and may direct a fresh one. (iii) On the expiration of thirty days from the date of sale, if no application to have the sale set aside is made or if such application has been made and rejected, the Recovery Officer shall make an order confirming the sale: Provided that if he shall have reason to believe that the sale ought to be set aside notwithstanding that no such application has been made or on grounds other than those alleged in any applicati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....available. No doubt, the High Court cited Rule 107 as an alternative remedy, but it did not rule out remedy, if any, available under Section 154 of the 1960 Act. The legal representatives of the defaulter chose to file a revision under Section 154 which confers wide powers on the State Government or the Registrar to call for and examine the record of any inquiry or proceeding of any matter, other than those referred to in sub-section (9) of section 149, where any decision or order has been passed, and against which no appeal lies, for the purpose of satisfying itself as to the legality or propriety of any such decision or order, and as to the regularity of such proceeding. Importantly, revisional powers conferred by the Statute are not subject to any Rules made under the Statute. Further, remedies available under sub-rules (13) and (14) of Rule 107 are not in the nature of an appeal to set aside any decision or order rather it is an application to set aside sale on grounds specified therein. In our view, therefore, the revisional power conferred by Section 154 is extremely wide which would include examining the legality and propriety of a proceeding qua confirmation of sale. Mor....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., superintendence and control of the Registrar. They shall be subordinate to the Registrar, and subordination of such persons amongst themselves shall be such as may be determined by the State Government. 42. Section 156 deals with the Registrar's power to recover certain sums by attachment and sale of property. Sub-section (1) of section 156 provides that the Registrar or any officer subordinate to him and empowered by him in this behalf or an officer of such society, as may be notified by the State Government, who is empowered by the Registrar in this behalf, subject to such rules as may be made by the State Government, but without prejudice to any other mode of recovery provided by or under this Act, recover (a) any amount due under decree or order of a Civil Court, obtained by a society; (b) any amount due under a decision, award or order of the Registrar, Co-operative Court or Liquidator or Co-operative Appellate Court; (c) any sum awarded by way of costs under this Act; (d) any sum ordered to be paid under this Act, as a contribution to the assets of the Society; (e) any amount due under a certificate granted by the Registrar, u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t was not discussed by the High Court, we do not wish to address the aforesaid issue and decide whether he was an officer subordinate to the Registrar. Moreover, if we conclude that sale confirmation was void rendering the sale a nullity, nothing much turns on the said issue. Issue Nos. 3 & 4 45. As issues 3 and 4 are interrelated we shall deal with them together. While deciding issue no.2 (supra), we have taken note of Clause (lxviii) of sub-section (2) of Section 165 of the 1960 Act empowering framing of rules, inter alia, prescribing the procedure for a resale, if, an attempted sale is abandoned, or the purchase money is not deposited within the prescribed time. We shall now consider the Rules framed in that behalf. 46. Rule 107 (11) (g) (h) (i) (j) and (k) of 1961 Rules provides as under: (i) Rule 107 (11) (g) provides that a sum of money equal to 15 per cent of the price of the immovable property shall be deposited by the purchaser in the hands of the Sale Officer (with effect from 30.08.2014, it is 'Recovery Officer') at the time of the purchase, and in default of such deposit, the property shall forthwith be re-sold; provided that where the applicant is the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Recovery Officer to extend the time for payment of the cost of the stamp, for good and sufficient reasons, up to 30 days from the date of sale. However, no such discretion is vested in the Recovery Officer to extend the time for making payment of remainder of the purchase money. Rather, clause (i) provides for consequences of non-payment. Clause (i) of sub-rule (11) of Rule 107 states that if the payment is not made within the period mentioned in the preceding clause, the deposit may be forfeited to the State Government and the defaulting purchaser shall forfeit all claims to the property or to any part of the sum for which it may subsequently be sold. Clause (j) further clarifies that every resale of immovable property in default of payment of the amounts mentioned in clause (h) within the period allowed for such payment, shall be made after the issue of a fresh proclamation in the manner and for the period herein before prescribed for the sale. In our view, therefore, there is no discretion vested in the Recovery Officer to extend the period for deposit of remainder of the purchase money. Not only that, if the remainder of the purchase money is not deposited, the amount already d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction purchaser of Rs. 8,50,000 was accepted, being the highest bid. The auction purchaser thereafter paid Rs. 1,45,000 towards 25% of the sale consideration. However, the auction purchaser did not make payment of remaining 75% within 15 days of the confirmation of sale in his favour. Rather, he paid the balance sale price in installments spread over a period extending up to 13.11.2006. On 16.11.2006, the Bank issued the sale certificate in favour of the auction purchaser. As sale proceeds fell short of the total outstanding amount against the borrower, the Bank moved the Joint Registrar of Co-operative Societies for recovery of the outstanding amount. In those proceedings, an ex-parte award for a sum of Rs. 2,37,038 was passed. The Bank applied for execution of the award somewhere in 2011. At that stage, the borrower challenged the sale certificate through writ petition(s). The Single Judge Bench as well as Division Bench of the High Court quashed the sale certificate and the demand notice, inter alia, on the ground that mandatory requirement of Rule 9 was not followed. The matter came to this Court. The issue which arose for consideration there was as to what would be the consequ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... indicate otherwise. Obviously, the question whether there is waiver or not depends on facts of each case and no hard and fast rule can be laid down in this regard." 54. In our view, the aforesaid judgment is of no help to the auction purchaser because in the case on hand the judgment-debtor(s), including the legal heirs, by their conduct, or otherwise, had not given up their right to challenge the validity of the auction. Besides, there is no provision pari materia Rule 9(4) of Enforcement Rules in Rule 107 of 1961 Rules, enabling extension of time to deposit the balance amount. 55. Further, the decision of this Court in Shilpa Shares & Securities (supra) still holds the field. In such circumstances, the view taken by the High Court that confirmation of the auction sale was void as the remainder payment was not made within the period prescribed by the 1961 Rules cannot be faulted. Moreover, provisions of the nature as incorporated in Rule 107(11)(h) are not only for the benefit of the creditor but they serve a public purpose to maintain the sanctity of public auctions else non-serious bidders would participate to manipulate the price to be discovered in a public auction, whi....