Ashok Kumar Singh v. State of U. P — 1978 DIGILAW 681 (ALL)

JUDGMENT M.M. Gupta, J. - This writ petition has been filed by Sri Ashok Kumar Singh and others for quashing the recovery proceedings in pursuance of the recovery certificates dated 24th March, 1973 and for quashing the auction sale dated 10th December, 1976 and its confirmation dated 22nd January, 1977. 2. The petitioners Nos. 1 and 2 claim that they are the partners of Chandra Sugar Factory. This partnership came into existence in 1960. One of the partners of this firm was Smt. Chandra Devi who died and after her death the partnership continued with partners Sri Ashok Kumar Singh and Sri Prakash Kumar Singh. The firm in 1960 had applied for a loan of one lakh rupees from U. P. Financial Corporation, Kanpur. This loan was sanctioned in 1962. The firm, however, in all took a loan of Rupees 90.000/-. The loan was to be repaid, according to the terms of the agreement in ten equal instalments. The first payable instalment was to commence after two years from the date on which the loan was drawn. It was claimed that the Firm on various dates had made payments and in total the sum repaid was Rs. 1,17,467-08 paise. The Firm owing to financial difficulty could not repay the loan on the dates as and when the payments became due. The result was that the U. P. Financial Corporation (hereinafter referred to as corporation) issued a recovery certificate on 24-3-1973 for realisation of sum of Rupees on 711 96 paise. The petitioners wrote to the Managing Director of the Corporation on 27-7-1973 stating the Firms difficulties. They were also intimated that the Firm had already paid a sum of Rs. 55,701-60 paise and the balance due was Rs. 50,731-96 paise out of which the Firm had sent a Bank Draft for Rs. 5,000/- of the same date and mentioned that the balance would be sent by August 1973. It was requested that the recovery proceedings may be withdrawn. (Vide Annexure I). Subsequently, after the letter dated 27th July, 1973 the petitioners also made payments from time to time. In spite of it the recovery certificate was not withdrawn. By 16th July, 1974 a sum of Rs. 14,500/- was also paid. In February, 1975 the petitioners received a copy of letter from the Corporation addressed to the Collector, Varanasi, for realising Rupees 44,622.71 paise from the petitioners. In spite of it the recovery certificate was not withdrawn. By 16th July, 1974 a sum of Rs. 14,500/- was also paid. In February, 1975 the petitioners received a copy of letter from the Corporation addressed to the Collector, Varanasi, for realising Rupees 44,622.71 paise from the petitioners. This was in modification of the earlier recovery certificate dated 24th March, 1973. On 20th February, 1975 the Firm further paid a sum of Rs. 10,000/- under a Bank Draft drawn on the State Bank of India, Kanpur. The Corporation thereupon sent a letter to the Collector Varanasi to realise the balance after adjusting the payment of Rs. 10,000/-. (Vide Annexures II and III). On 28th April, 1975 a further sum of Rs. 10,000/- was deposited with Tehsildar, Varanasi. In January, 1975 one of the petitioners received a notice dated 14-1-1975 from the Additional District Magistrate. Varanasi, informing him of the attachment of House No. D-48/132 Ramapura, Varanasi, in lieu of the aforementioned recovery proceedings (Annexure IV). It is claimed that no order of attachment was required under the law nor notice of attachment contemplated under the law. In September, 1975 a notice was received by the petitioners for payment of interest of Rs. 1,265.03 paise as half yearly interest due on September 30, 1975. The Firm was also required to pay towards interest a sum of Rs. 1,361.32 paise upto 30th September, 1975 and the principal amount Rs. 34,683.71 paise. Thus the petitioners were required to pay a total stun of Rs. 37,310.86 paise. (Vide Annexure V). In the meantime the petitioners had been approaching the Tehsildar for ascertaining the actual amount due which the firm was required to pay. The Tehsildar in his turn wrote to the Accounts Officer of the Corporation for the details of the amount to be realised after adjusting the payments made but no reply was received. On 10th December, 1976 House No. 48/132 Misir Pokhara, Varanasi, of which the partners of the Firm are co-sharers along with petitioner No. 3 was auctioned for a sum of Rs. 56,000/-. No notice of the auction was served on the firm. The auction was also not published in the local news- papers or in the official gazette. The order of attachment was made under O. 21, R. 54, Civil P. C. No proclamation of sale was drawn by the Collector, Varanasi. 56,000/-. No notice of the auction was served on the firm. The auction was also not published in the local news- papers or in the official gazette. The order of attachment was made under O. 21, R. 54, Civil P. C. No proclamation of sale was drawn by the Collector, Varanasi. No copy of such proclamation was served on the petitioners. The sale was conducted without giving any publicity as required by law. The petitioner No. 3 is not the partner of the firm. His interest could not be sold in lieu of any recovery that was due against the firm of which the petitioners Nos. 1 and 2 are the partners. An objection was raised against the auction sale by the petitioners on 17th January, 1976. A further detailed objection was filed on 21 January, 1976. 3. The main objections that were raised against the auction sale were that the recovery certificate was not granted according to law and the Collector did not properly take into account the payments made. Another objection raised was that the Corporation could only proceed against the mortgaged property. The house sold in auction sale was not the mortgaged property under the agreement with the Corporation. Since the amount sought to be recovered was much higher than what was actually due a telegram was sent to the Chief Accounts Officer of the Corporation enquiring whether the adjustment of Rs. 10,000/- paid on 28-4-1975 was made. The Chief Accounts Officer of the Corporation replied that the amount of Rs. 10,000/- was not received in the book of the Corporation at Kanpur. On 30th December, 1976 an application was submitted to the Corporation stating that the payment of Rs. 10,000 was made on 28-4-1975 and a further sum of Rs. 2,500/- was paid on 16-7-1974. Adjustments of these amounts were not made. The fact of filing of objections was also mentioned. The request was made that the District authorities be informed about the actual balance outstanding against the petitioners and for issuing a modified recovery certificate. On 31st December, 1976 the Managing Director of the Corporation enquired from the Collector, Varanasi, whether the sums of Rs. 2,500/- and Rs. 10,000/- were deposited on 16-7-1974 and 28-4-1975 respectively and were adjusted or not. The District Magistrate entrusted the matter to the Additional District Magistrate, Varanasi, who also directed the Tehsildar to give the report immediately. On 31st December, 1976 the Managing Director of the Corporation enquired from the Collector, Varanasi, whether the sums of Rs. 2,500/- and Rs. 10,000/- were deposited on 16-7-1974 and 28-4-1975 respectively and were adjusted or not. The District Magistrate entrusted the matter to the Additional District Magistrate, Varanasi, who also directed the Tehsildar to give the report immediately. On 7th January, 1977 the Additional District Magistrate (E), Varanasi, wrote a letter to the Managing Director of the Corporation stating the reasons therein why the amounts were not sent earlier and a draft was prepared on the same date. Regarding the stay of the recovery proceedings he informed that the question of stay did not arise as the house was sold on 10th December, 1976 but he requested them to inform the debtors the actual amount due and to deposit the same by 10th of January, 1977 in the office of the Collector and not with the Corporation (Vide Annexure XIII)- On 10th January, 1977 the partners of the firm moved an application before the Collector, Varanasi, that Sri Ashok Kumar Singh, one of the partners in the firm, had left for Kanpur for settlement of the accounts with the Corporation. Since the accounts with the Corporation were unfinalised, the question for depositing any money did not arise and wanted one months time for it. The aforementioned application was rejected by the Additional District Magistrate (E) on 10th January, 1977. The Collector, Varanasi, received a telegram from the Corporation requesting him not to confirm the sale held on December 10, 1976 (Vide Annexure XV). No notice of the hearing of the objections filed on the 17th and 21st December, 1976 was ever given nor any opportunity was given. The objections of the petitioners were decided and the sale was also confirmed without any intimation to the petitioners. The petitioners came to know of it about the 22nd of January, 1977. The loan was taken on security of the properties mentioned in Sch. A of the Agreement. Petitioner No. 3 was not the partner of the firm, and had also not taken the loan Recovery had to be made against the mortgaged property first as arrears of land revenue. The auction sale of the house without complying with the provisions of Section 4 (2) (b) of the U. P. Public Moneys (Recovery of Dues) Act 1972 is invalid. The auction sale of the house without complying with the provisions of Section 4 (2) (b) of the U. P. Public Moneys (Recovery of Dues) Act 1972 is invalid. The property was auctioned for the recovery of a sum much in excess of the amount due. The sale of the property was, therefore, illegal, invalid and without any jurisdiction. The sale took place without effecting any attachment as required by O. 21, R. 54, C. P. C. No notice for drawing up the proclamation of sale was given to the petitioners. The sale proclamation purported to have been issued mentioning the property as D48/132 Misir Pokhara, Varanasi, whereas the actual property sold is D/48/132 Misir Pokhara, Varanasi. The value of the property has not been mentioned in the sale proclamation. The auction sale is, therefore, illegal. On these grounds the writ petition has been filed for quashing the sale dated 10th December, 1976 and its confirmation dated 22-1-1977. 4. On behalf of the auction purchaser, Smt. Dr. Priyamavada Tiwari, her father has filed a counter affidavit. In that counter affidavit it is claimed that in the notice sent to the Petitioner No. 1, Ashok Kumar Singh, it was specifically mentioned that the disputed house was attached for the recovery of the outstanding debt against the partners of the firm being realised as arrears of land revenue by the Collector, Varanasi. The attachment was made in accordance with the R. 273-A of the U. P. Zamindari Abolition and Land Reform Rules read with O. 21, R. 54, C. P. C. The order of attachment was made perfectly according to law. The proclamation of the sale was duly made on 23rd November, 1976 and the sale took place on the spot on 10th December, 1976. The petitioners are the sons of Smt. Chandraj Kunwar and they are, therefore, bound by the proceedings although the sale took place on 10th December, 1976 no objection was filed against it on either 17th January, 1977 or 17th December, 1976 for setting aside the sale. It was also open to the petitioners to file objections before the Commissioner against the sale on the ground of material irregularities or mistake in publishing or conducting the sale. It was claimed that the challenge to the sale was barred by R. 285-K of the Zamindari Abolition and Land Reforms Rules. It was also open to the petitioners to file objections before the Commissioner against the sale on the ground of material irregularities or mistake in publishing or conducting the sale. It was claimed that the challenge to the sale was barred by R. 285-K of the Zamindari Abolition and Land Reforms Rules. Petitioner No. 3 is also liable for it as he is the son and heir of late Smt. Chanderaj Kunwar who was a debtor. His name was mutated in the papers in her place along with that of other petitioners. The letter of the Corporation for not confirming the sale was despatched after the sale had taken place. After receiving the recovery certificate the Collector was bound to take the proceedings of the recovery of the amount in question as arrears of land revenue. Moreover, the sale could not be stayed on account of statutory prohibition under Section 3 (5) of the U. P. Public Moneys (Recovery of Dues) Act 1972. It is also claimed that since the auction purchaser has also come into the picture, the sale cannot be set aside. The objection against the sale was entertainable only by the Commissioner within 30 days of the sale but no such objections were filed. The Collector was perfectly justified in not proceeding against the mortgaged property as it was affected by the U. P. Imposition of Ceiling on Land Holdings Act These properties were not available for sale. 5. On behalf of the Corporation an affidavit has been filed in which it is stated that in January 1977 the petitioner had paid Rs. 10,000/- and Rs. 2,500/-. The position was that the principal outstanding against the petitioners was Rs. 22,683.71 and the interest due thereon was Rs. 6,652.16. The total sum due was Rs. 29,335.87. It also submitted that the alternative remedy was available to the petitioners for rasing objections before the Tehsildar and the Collector, Varanasi, which have not been availed of and as such the petition is not maintainable. 6. A preliminary objection has been raised about the maintainability of the petition. 6,652.16. The total sum due was Rs. 29,335.87. It also submitted that the alternative remedy was available to the petitioners for rasing objections before the Tehsildar and the Collector, Varanasi, which have not been availed of and as such the petition is not maintainable. 6. A preliminary objection has been raised about the maintainability of the petition. It is contended that after the sale it was open to the petitioners under Section 172, Land Revenue Act to apply for the sale to be set aside on depositing in Collectors Office for payment to the purchaser a sum equal to 5% of the purchase money and for payment on account of the arrear, the amount specified in the proclamation of sale and the costs of the sale within 30 days of the date of the sale. In case the amount was not deposited as required under Section 172 it was open to the petitioners to have filed an objection within 30 days on the ground of some material irregularity or mistakes in publishing or conducting the sale. If no such action is taken under Section 172 or Section 173 as stated above, the Commissioner shall pass an order confirming the sale on the expiry of 30 days. Section 175 of the Land Revenue Act bars all claims on the ground of irregularity or mistake in publishing or conducting the sale if no application under Section 173 is made within 30 days. Under Section 177 of the Land Revenue Act the Collector shall put the person declared to be purchaser into possession of such property, and shall grant him a certificate of sale. The contention is that since no action has been taken under any of the above provisions and the sale has been confirmed it is not open to the petitioners to get such a sale set aside in appeal. Section 173 of the Land Revenue Act provides: - "Application to set aside sale for irregularity, etc. The contention is that since no action has been taken under any of the above provisions and the sale has been confirmed it is not open to the petitioners to get such a sale set aside in appeal. Section 173 of the Land Revenue Act provides: - "Application to set aside sale for irregularity, etc. - At any time within thirty days from the date of the sale, application may be made to the Commissioner to set aside the sale on the ground of some material irregularity or mistake in publishing or conducting it; but no sale shall be set aside on such ground unless the applicant proves to the satisfaction of the Commissioner that he has sustained substantial injury by reason of such irregularity or mistake." From the above section it would be clear that any objection under this section is confined to "material irregularity or mistake in publishing or in conducting the sale, "but it does not appear from the above section that the validity of the sale or illegality of the sale can also be challenged. Thus, we do not think that the preliminary objection can succeed on this ground. 7. We shall now deal with the next objection raised on behalf of the auction purchaser. Under Section 4 (2) (b) of the U. P. Public Moneys (Recovery of Dues) Act, it is provided: "Where the property of any person referred to in Section 3 is subject to any mortgage, charge, pledge or other encumbrance in favour of the State Government, the corporation, a Government company or banking company then: - (a) x x x x (b) in every case of a mortgage, charge or other encumbrance or immovable property, such property or, as the case may be, the interest of the defaulter therein, shall first be sold in proceedings for recovery of the sum due from that person as if it were an arrear of land revenue, and any other proceeding may be taken thereafter only if the Collector certifies that there is no prospect of realisation of the entire sum due through the first mentioned process within a reasonable time." 8. It is contended that the objection that the property outside the mortgage property has been sold could not be raked over the certificate of the Collector that there were no prospects of realisation of the sum due by the sale of the mortgage property. It is contended that the objection that the property outside the mortgage property has been sold could not be raked over the certificate of the Collector that there were no prospects of realisation of the sum due by the sale of the mortgage property. It was open to the petitioners to have raised this objection before the Collector within 30 days of the sale but since no such objection was raised the petitioners are estopped from challenging the sale on that ground and the objection would be barred by the constructive res judicata. The reliance is placed on Mohanlal Goenka v. Benoy Kishna Mukherjee ( AIR 1963 SC 65 ). It was held that where neither at the time when the execution application was made and a notice served upon the judgment-debtor, nor in the applications for setting aside the two sales made by him did the judgment-debtor raise any objection to execution being proceeded with on the ground that the execution court had no jurisdiction to execute the decree, the failure to raise such an objection which went to the root of the matter precludes him from raising the pleas of jurisdiction on the principle of constructive res judicata after the property has been sold to the auction-purchaser who has entered into possession. However, in Kiran Singh v. Chaman Paswan ( AIR 1954 SC 340 ) at p. 342: (1954 All LJ 551 at p. 553) the Supreme Court observed that, "It is a fundamental principle well-established that a decree passed by a Court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree, and such a defect cannot be cured even by consent of parties." 9. In this view of the matter taken by the Supreme Court in Kiran Singhs case (supra), if the sale has not been held validly as required by law, the petitioners could not be deprived of the right to challenge it. Thus, we find that the preliminary objections are untenable and they are hereby overruled and the, petition is held to be maintainable. Thus, we find that the preliminary objections are untenable and they are hereby overruled and the, petition is held to be maintainable. 10. It is not disputed in this case that while conducting the sale of the property under the recovery certificate dated 24th March, 1973 the property that was sold was not the property that was mortgaged as security for the loan but it was a non mortgaged property which was attached and sold. Section 4 (2) (b) which we have quoted above, mandatorily requires that the mortgaged property was first to be sold in the proceedings for the recovery of sum due from that person as if there was an arrears of land revenue and any other proceeding may be taken thereafter only if the Collector certifies that there is no prospect of realisation of the entire sum due through the first mentioned process within a reasonable time. It is conceded that no such certificate was given by the Collector that there was no prospect of realisation of the entire sum due by the sale of the mortgaged property. This requirement of the law has not been satisfied in this case. However, the petitioners had filed an objection before the Collector in this case and the Collector had also decided it. The reason by the Collector for not entertaining the objection on that ground was that the mortgaged property was subject to proceedings under the U. P. Imposition of Ceiling on Land Holdings Act. This could not be a ground for rejecting the objection in the absence of a certificate by the Collector as required by Section 4 (2) (b) of the U. P. Public Moneys (Recovery of Dues) Act, 1972. This could not be a ground for rejecting the objection in the absence of a certificate by the Collector as required by Section 4 (2) (b) of the U. P. Public Moneys (Recovery of Dues) Act, 1972. A Division Bench of our High Court in Udai Pratap v. U. P. State Financial Corpn., Varanasi, 1978 All WC 5: (1978 All LJ NOC 10) held that, "in a case where the loan has been secured by mortgage, charge or other encumbrance on immovable property, proceedings to recover the same from other property can be taken only if the Collector certifies that there is no prospect of realising the entire loan by sale of the property secured." In Uma Datt Mishra v. Collector, Rae Bareli (1977 All WC 142) a sale held of the non-mortgaged property without a certificate by the Collector under Section 4 (2) (b) of the Public Moneys (Recovery of Dues) Act has been held to be invalid. The auction sale in this case therefore must be held to be invalid. 11. Another ground on which the sale is invalid is that the recovery certificate was issued on 24th March, 1973. The sum due outstanding against the petitioners was Rupees 90,731.96. We have looked into the account and we are satisfied that the recovery certificate was issued for the amount that was actually due along with interest and expenses on .that date. Between the sale and the recovery certificate the petitioners had admittedly, according to the Corporation, deposited the sums on several occasions. On 15-9-1975 the modified certificate was issued showing the balance due as Rs. 36,045.93. The petitioners claim that the amount shown in the modified recovery certificate did not take into account the sums of Rs. 2,500/- deposited on 16-7-1974 and Rs. 10,000/- deposited on 28-4-1975 under Bank Drafts. It is also contended that the amount of interest itself shown in the modified recovery certificate would be much less if these amounts were adjusted on the dates on which the payments were made. It is not disputed on behalf of the respondents that the recovery certificate dated 15-9-1975 showed an amount exceeding by several thousands as against what was actually due after by the adjustments of the payments made. It is not disputed on behalf of the respondents that the recovery certificate dated 15-9-1975 showed an amount exceeding by several thousands as against what was actually due after by the adjustments of the payments made. In Ram Sarup Gupta v. Behari Lal Baldeo Prasad, 95 ITR 339: (1973 All LJ 551) it was held by a Division Bench of our High Court that the proceedings for recovery can be continued only for the amount that finally remains due and not for any amount in excess thereof, the requirement of sending intimation to the Tax Recovery Officer becomes an essential duty of the taxing authority and must be held to be a mandatory condition. Non-compliance of that condition will be an illegality in the procedure and will invalidate the proceedings. A sale held in proceedings initiated and continued for the recovery of an amount in excess of the amount payable by the assessee, after its reduction in appeal will be invalid. 12. Another objection has been raised on behalf of the petitioners challenging the validity of the sale. In this case the order of confirmation of the sale had been passed by the Collector after deciding the objections of the petitioners. Under Section 173 of the Land Revenue Act the objections lie to the Commissioner within 30 days of the sale. Under Section 174 of the Land Revenue Act on the expiry of the period of 30 days from the sale, the sale is to be confirmed by the Commissioner. However, in this case the sale has not been confirmed by the Commissioner but by the Collector. The order confirming the sale by the Collector is, therefore, completely without jurisdiction. It may also be mentioned here that the sale in this case was confirmed in spite of the telegram sent by the Corporation dated 11th January, 1977 addressed to the Collector, Varanasi for not confirming the sale held on 10th December. 1976. The sale in question, therefore, has not validly and legally confirmed, as it has been confirmed by an authority which is not authorised under the statute to confirm it. 13. It has also been contended on behalf of the respondent that the sale cannot be set aside as an auction purchaser has also come into the picture. 1976. The sale in question, therefore, has not validly and legally confirmed, as it has been confirmed by an authority which is not authorised under the statute to confirm it. 13. It has also been contended on behalf of the respondent that the sale cannot be set aside as an auction purchaser has also come into the picture. The reliance is placed on Janak Raj v. Gurdial Singh ( AIR 1967 SC 608 ): (1967 All LJ 524) where in execution of an ex parte decree a sale of the judgment-debtors property was held. Subsequent to it the judgment-debtor got the ex parte decree set aside. It was held that, "the sale must be confirmed notwithstanding reversal of the decree after sale as the title of the purchaser related back to the date of sale and not the confirmation of sale". The facts of that case are distinguishable from the facts of the present case. In the case before the Supreme Court the validity of the sale was not challenged and the sale had been held before the ex parte decree has been set aside in these circumstances, the Supreme Court refused to set aside the sale on the application of the Judgment-debtor. In the instant case the sale itself is invalid. The principle enumicated in AIR 1954 SC 340 : (1954 All LJ 551) Kiran Singhs case (supra) would apply. 14. In our opinion the sale held on 10th December, 1976 was invalid on the ground that the sale could not take place in respect of property which was not the subject-matter of the mortgage without a proper certificate from the Collector under Section 4 (2) (b), U. P. Public Moneys (Recovery of Dues) Act. It was further invalid on the ground that the sale was confirmed by the Collector who had no competence to confirm it. It was also invalid on the ground that the sum shown in the sale proclamation was much higher than the sum that was actually due. Moreover the sale itself could not be confirmed when U. P. Financial Corporation had itself asked for not confirming it before the date on which it was actually confirmed. 15. The writ petition, therefore, succeeds and the sale held on 10th December, 1976 must be set aside. 16. The writ petition is allowed. Moreover the sale itself could not be confirmed when U. P. Financial Corporation had itself asked for not confirming it before the date on which it was actually confirmed. 15. The writ petition, therefore, succeeds and the sale held on 10th December, 1976 must be set aside. 16. The writ petition is allowed. A writ of certiorari is issued quashing the recovery proceedings in pursuance of the recovery certificate dated 24th March, 1973 and quashing the sale held on 10th December. 1976. The order dated 22-1-1977 confirming the sale is also quashed. The petitioners would be put back into possession over the property in question. The auction purchaser shall be entitled to refund of the money deposited by her. In the circumstances of the case the parties shall bear their own costs.