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2013 DIGILAW 113 (PNJ)

Makhan Singh v. State of Punjab

2013-02-04

RANJIT SINGH

body2013
JUDGMENT Mr. Ranjit Singh, J.: - This petition is reflection of a sorry state of affairs in the working of the Cooperative Banks and Societies. Instead of being any help or assistance to a farmer, these Banks and employees of Agriculture Development Banks are seen conniving with their known persons to take away the landed property of innocent farmers, managing auction etc. in violation of the requisite procedure. Innocent agriculturists are at receiving ends. 2. In the present case, area of one acre of land pledged by the petitioner to avail and secure a loan of Rs.80,000/- has been auctioned for a sum of Rs.1,13,500/- whereas the conservative market value of this land would be more than Rs.10 lacs at the relevant time. Was it not for consideration of the management of the Bank to see in case the approach adopted by them was fair, just and reasonable. This is besides the grounds that such a course may not be otherwise permissible as per the provisions of the Punjab Cooperative Agriculture Development Bank Act, 1957 (for short, “the Act”) for auctioning the land. 3. Balkar Singh, son of the petitioner, had availed a loan facility of Rs.80,000/- from Primary Cooperative Agriculture Development Bank, Ferozepur Cantt. (respondent No.4) in the year 1996 for cycle repair shop. The petitioner states that his son kept on returning the aforesaid loan in instalments. At the time of affording loan facility, the Bank had got the thumb impressions of son of the petitioner on various blank forms and that of the petitioner as well, who had accompanied his son while availing facility of loan. The petitioner is illiterate person and he really did not know that his land had been mortgaged to secure the loan by his son, Balkar Singh. The respondent-Bank also did not apprise him of the same. The petitioner was only made to understand that these were the bank formalities for sanction of the loan. 4. It is alleged that the Bank had not maintained a proper account for the instalments paid by the son of the petitioners, which were deposited from time to time. This led to major difference in the outstanding amount. When some sort of dispute arose, son of the petitioner requested respondent-Bank to furnish the statement of his loan account for him to verify. This led to major difference in the outstanding amount. When some sort of dispute arose, son of the petitioner requested respondent-Bank to furnish the statement of his loan account for him to verify. The Bank allegedly never supplied any statement of accounts and always pressed for payment of the outstanding amount. 5. In Ist week of March, 2011, the petitioner received summons from the Court of SDM-cum-Collector, Ferozepur, with the copy of the application moved by respondent No.5 to appear before the Court on 11.3.2011. The petitioner contacted an Advocate at Ferozepur, when he was apprised that respondent No.5 has moved an application for issuing a warrant of possession of land measuring 8 kanals situated in the area of Village Hazara Singh Wala, Tehsil and District Ferozepur. It then transpired that respondent No.5 had allegedly purchased this land in an open auction on 28.11.2006. The petitioner naturally was shocked on hearing the same and immediately contacted the Bank-respondent No.4. He, at that stage, was apprised that the petitioner had mortgaged this land at the time of availing the loan facility and the said land was auctioned on 28.11.2006. The petitioner, however, claims that he had never mortgaged his land in question and accordingly requested respondent No.4 to supply the documents relating to auction of this land. Respondent No.4 only supplied sale certificate issued in favour of respondent No.5 dated 11.10.2007. The petitioner accordingly has approached this Court with a grievance that all the auction proceedings and all subsequent proceedings are illegal, arbitrary and liable to be set-aside. The petitioner would plead that he had never received any notice for recovery of amount from respondent No.4 and was never informed about the said auction proceedings. As per the petitioner, no notice was ever received by him regarding the same. The petitioner would plead collusion between the auction purchaser and the Bank, which is done at his back and would, therefore, urge that the same would not bind him in any manner. 6. The record reveals that the land was auctioned on 28.11.2006. The sale certificate was issued on 11.10.2007 and the petitioner received a notice regarding warrant of possession filed by respondent No.5 in the month of March 2011. The petitioner has, therefore, filed this present petition alleging that the auction proceedings were conducted without any publication and without putting the petitioner to any notice in this regard. 7. The sale certificate was issued on 11.10.2007 and the petitioner received a notice regarding warrant of possession filed by respondent No.5 in the month of March 2011. The petitioner has, therefore, filed this present petition alleging that the auction proceedings were conducted without any publication and without putting the petitioner to any notice in this regard. 7. The land in question has been auctioned for a sum of Rs.1,13,500/-. As per the petitioner, this is too low a rate, even if it is viewed in the background of prevailing Collector’s rate in the area. In the year 2006, the Collector rate in the area was Rs.3,50,000/- per acre. The petitioner would accordingly justifiably submit that his one acre land has been auctioned at a throw away price, even less than the Collector’s rate. The petitioner has raised some other submissions also to challenge this auction. 8. Notice of motion was issued to the respondents on 7.4.2007. 9. Despite repeated opportunities, reply was not filed. Even costs were imposed on the State on one of the dates. On 14.12.2012, counsel appearing for the petitioner expressed willingness of the petitioner to discharge the entire liability. The petitioner was given time to do so. The petitioner thereafter produced a draft for a sum of Rs.1,50,000/-, which was handed over to the counsel for the Bank. The counsel accepted the same on direction from this Court. The draft was ordered to be kept in the accounts of the Bank. In this manner, the case was heard at length on 21.12.2012. The issue in regard to the procedure, which was followed for putting the land to auction was also raised. At that stage, counsel for the private respondent and the Bank submitted that there was no such plea raised in the petition and they both prayed for time to place on record the additional documents to show that they had followed the procedure, as required under the Act. On their request, the case was adjourned to 14.1.2013. 10. Sh. S.K. Arora, Advocate, had appeared for the Bank and Sh. Naresh Kumar Manchanda, Advocate, had represented respondent No.5. On 14.1.2013, Sh. C.M. Munjal, Advocate, had appeared on behalf of respondent No.5 and prayed for time on the ground that he had just been engaged and was handed over the documents. 10. Sh. S.K. Arora, Advocate, had appeared for the Bank and Sh. Naresh Kumar Manchanda, Advocate, had represented respondent No.5. On 14.1.2013, Sh. C.M. Munjal, Advocate, had appeared on behalf of respondent No.5 and prayed for time on the ground that he had just been engaged and was handed over the documents. The Court did not really appreciate the change of counsel at that stage, when the matter had been partly heard but still, on request of new counsel, the case was adjourned to 25.1.2013. On this date, counsel for respondent No.5 made a written request for adjournment and the case was adjourned to 6.2.2013, when after hearing the counsel for the parties, the judgement was reserved. 11. The Bank as well as respondent No.5 have opposed the prayer of the petitioner tooth and nail. The Bank has even raised the plea regarding the maintainability of the writ petition as the Bank is not the State within the meaning of Article 12 of the Constitution of India. It is also pleaded that the petitioner has not availed his remedy under Section 17 of the Act, 1957, vide which the petitioner was required to apply to the Board within 30 days of the date of sale to set-aside the same. The Bank would also allege that the petitioner has not approached the Court with clean hands. It is stated that loan of Rs.80,000/- was advanced by the Bank to the son of the petitioner. To secure this loan, the petitioner stood guarantor and had mortgaged land measuring 8 kanals 1 marla situated in Village Hazara Singh Wala, Tehsil and District Ferozepour, as a security for repayment of loan amount. 12. Balkar Singh son of the petitioner had failed to repay the loan amount and statedly an amount of Rs.30,000/- was standing against him after 13.3.1997 as he failed to pay two consecutive instalments for more than three months. A notice of sale was issued to Balkar Singh. On that day, Rs.20,000/- were due out of the principal amount and Rs.10,000/- were towards interest. The show cause was as to why the recovery be not made under Section 15 of the Act. A notice of sale was issued to Balkar Singh. On that day, Rs.20,000/- were due out of the principal amount and Rs.10,000/- were towards interest. The show cause was as to why the recovery be not made under Section 15 of the Act. It is alleged that second notice was issued, mentioning that Balkar Singh had failed to repay the loan and there was a proposal to recover the entire loan amount due from him by sale of property mortgaged wit the Bank as a security. Balkar Singh was given time to repay the due amount within six months of the receipt of notice, failing which the Bank was to proceed to recover the loan amount by the sale of the property mortgaged with the Bank. Concededly, this notice was received by the wife of the petitioner. Incidentally, the petitioner is father of the person who had taken loan. Neither he was served with this notice nor the petitioner but still it is urged that Balkar Singh did not repay the loan. The Bank had then decided to recover the amount by sale of property mortgaged with it and application was moved to the Sale Officer in this regard. Sale Officer also is alleged to have issued notice to Balkar Singh, which was received by him. The petitioner thereupon had appeared before the Committee and had assured that he would repay the loan upto 5.12.1999, if Balkar Singh did not repay the said loan. This request of the petitioner was accepted and despite assurance, the petitioner and his son did not repay the loan amount. In this manner, sum of Rs.95,139/- became due upto 31.3.2003. Rs.65,000/- was the principal amount due whereas Rs.29,889/- was towards interest. Since the loan was not repaid, the Bank decided to sell the mortgaged property. The date was fixed as 30.5.2003. On this date, Balkar Singh, loanee, was statedly in jail. A notice was again sent to him that mortgage property shall be sold on 8.10.2003. Said notice was received by Balkar Singh. The property was then put to auction on 30.10.2003. Nobody came forward to bid for the same and so it was decided to fix the sale of the property on some other date. The property was then put to auction on 1.7.2005, 6.12.2005 and 9.5.2006 but could not be sold. 13. The amount of Rs.1,02,183/-, thus, became due upto 31.3.2006. The property was then put to auction on 30.10.2003. Nobody came forward to bid for the same and so it was decided to fix the sale of the property on some other date. The property was then put to auction on 1.7.2005, 6.12.2005 and 9.5.2006 but could not be sold. 13. The amount of Rs.1,02,183/-, thus, became due upto 31.3.2006. Out of this Rs.66,920/- was towards principal whereas Rs.35,013/- was towards interest. The property was put to auction and notice under Rule 19 was received by wife of the petitioner. At that stage, the petitioner came present at the place of auction and pleaded for six months time to deposit the entire loan amount. The proceedings were recorded on 8.6.2006 but despite this the loan was not discharged. Ultimately, the property was sold on 28.11.2006 to respondent No.5, who was the highest bidder in the open auction. 14. Respondent No.5 would state that he has purchased this property in an open auction and has deposited the amount of auction whereafter sale certificate has already been issued in his favour. He, thus, claims to have become owner. After 5 years, the present petition has statedly been filed to harass him. Respondent No.5 also states that the petitioner has not availed alternative remedy under Section 17 of the Act and accordingly would plead that sale by auction in his favour be maintained. 15. Learned counsel for the petitioner would plead that even if it is accepted that the petitioner had appeared in response to a notice on 28.6.2006, when the auction was fixed in this case and had pleaded six months time to clear the loan, the Bank had not stood by the commitment by putting the property to auction on 28.11.2006. The Bank did not wait for six months to lapse and put the property to auction one month prior to the date of this commitment. This is apart from the submissions about the violation of various statutory and mandatory provisions, which the Bank was required to follow before putting this land to auction. 16. There is another interesting feature in this case. As per the reply filed by the Bank, the outstanding amount standing against son of the petitioner was Rs.20,000/- as principal as on 13.3.1997 and Rs.10,000/- was the interest due. 16. There is another interesting feature in this case. As per the reply filed by the Bank, the outstanding amount standing against son of the petitioner was Rs.20,000/- as principal as on 13.3.1997 and Rs.10,000/- was the interest due. Obviously, the son of the petitioner had discharged substantial liability of nearly Rs.60,000/- out of the principal amount as well as interest that may have been chargeable. How the principal amount of loan increased to Rs.65,000/- would really beyond comprehension. One can understand the increase in the interest amount due in case the instalments of the loan are not repaid but the principal amount due will not increase with the passage of time, if part of it had earlier been repaid. Strangely, this principal amount further increased to Rs.66920/- upto 31.3.2006, which would again defy any explanation. 17. This apart, the recovery of the loan advanced by the Punjab Agriculture Development Bank is regulated by the procedure when the sale of the mortgage property is to be done. The procedure as prescribed under Sections 15 and 16 of the Act would regulate such procedure. Section 15 provides that the Bank can sell mortgage property without the intervention of the Court and for that purpose, Board or any person authorized in this behalf can sell the property in accordance with the provisions of the Act. Sub-Section (2) of Section 15 of the Act contains a rider to the effect that before conducting such sale, objection must be invited from the mortgager or any other person having interest in the mortgaged property. It is further provided that notice in writing requiring payment of such mortgaged money or a part is required to be served amongst the mortgagers or each of the mortgager or any person who has any interest in the mortgage property. In view of Section 41 of this Act, the provisions of Sections 15 and 16 have been applied mutatis mutandis to all PADBs. The provisions of Section 15 are as under:- “SALE OF MORTGAGED PROPERTY POWER OF SALE WHEN TO BE EXERCISED 15. In view of Section 41 of this Act, the provisions of Sections 15 and 16 have been applied mutatis mutandis to all PADBs. The provisions of Section 15 are as under:- “SALE OF MORTGAGED PROPERTY POWER OF SALE WHEN TO BE EXERCISED 15. (1) Notwithstanding anything contained in the Transfer of Property Act, 1882, or any other law for the time being in force, where a power of sale without the intervention of the Court is expressly conferred on the State Bank by the mortgage deed, the Board or any person authorised by such Board in this behalf shall, in case of default of payment of the mortgage money or any part thereof have power, in addition to any other remedy available to the State Bank, to bring the mortgaged property to sale without the intervention of the Court. (2) No such power shall be exercised unless and until- (a) the Board have previously authorised the exercise of the power conferred by sub section (1), after hearing and deciding the objections, if any, of the mortgagor or any other person having any interest in the mortgaged property. (b) Notice in writing requiring payment of such mortgage money or part has been served upon :- (i) the mortgagor or each of the mortgagors; (ii) any person who has any interest in or charge upon the property mortgaged or in or upon the right to redeem the same; (iii) any surety for the payment of the mortgage debt or any part thereof; and (iv) any creditor of the mortgagor who has in a suit for the administration of his estate obtained a decree for sale of the mortgaged property; (c) Default has been made in payment of such mortgage money or part for six months after such service; and (d) The Registrar, in case where the amount claimed by the State Bank is disputed, has certified that the amount claimed or lesser amount is due from the mortgagor. “ 18. There is nothing on record to indicate if the Bank had followed the procedure as prescribed under Section 15 of the Act. Though the notice obviously was issued to the mortgager i.e. the petitioner but his son, Balkar Singh, had taken this loan and he was also required to be served with a notice before conducting this auction. “ 18. There is nothing on record to indicate if the Bank had followed the procedure as prescribed under Section 15 of the Act. Though the notice obviously was issued to the mortgager i.e. the petitioner but his son, Balkar Singh, had taken this loan and he was also required to be served with a notice before conducting this auction. The mortgager as well as the person having interest in the mortgage property was required to be served a notice in writing, requiring them to pay the mortgage money or part of it, which apparently has not been done. It is this procedure with which the counsel appearing for the Bank was confronted with, when he had sought time to have instructions in this regard. Nothing could be pointed out before me, if this procedure required by the statute was followed. 19. In any case the submission by counsel for respondent No.5 that notice was served on the mortgager, would again indicate that it was a formality which was completed. The mortgager, when served with a notice had prayed for six months time to repay the entire loan amount. In fairness or otherwise in accordance with law, the petitioner-mortgager was required to be afforded an opportunity to repay this amount within a period of six month. Even this period agreed to was not allowed to the petitioner and the property was put to auction one month prior to the expiry of the period of six months. Obviously, this will be in violation of the provisions of Sections 15 and other provisions under the Act. 20. It will also sound totally unfair where one acre of land of the petitioner has been put to auction for Rs.1,13,500/- whereas even the Collector’s rate at the relevant time was 3,50,000/-. The market rate would be much more than the Collector rate as it is generally understood that no registry is done on the basis of actual value paid for the land. The counsel for the petitioner was fully justified in saying that the value of the land would not be less than Rs.10 to 15 lacs, which was sold at the meagre sum of Rs.1,13,000/- and that too the loan amount due in 1999 was just Rs.30,000/- only. It is only due to increase in the interest that ultimately amount outstanding and repayable was 1,21,083/-. 21. It is only due to increase in the interest that ultimately amount outstanding and repayable was 1,21,083/-. 21. The petitioner has already deposited a sum of Rs.1,50,000/- by way of demand draft, which has been deposited in the accounts of the Bank. Let this amount be adjusted towards the liability of the petitioner on account of non-payment of the loan amount, which was only Rs.1,21,083/- as on 31.3.2006. This amount in fact would be enough to settle the equities. Respondent No.5, who is the auction purchaser, would be at liberty to seek refund of his amount with interest at the banking rate, which can be paid from the extra amount now deposited by the petitioner. The auction in favour of respondent No.5 having been held in violation of the statutory provisions can not be allowed to stand. It is otherwise also unconscionable to think that one can buy one acre land for a sum of Rs.one lac whereas the market rate was much more higher. This will be enough to indicate that bank officials had somehow connived with respondent No.5 to hold this auction in his favour. Otherwise the Bank would be interested in getting its money and could not have been seen opposing the prayer of the petitioner tooth and nail and could be expected to take a neutral stance. The Bank has also not been able to justify their action in not following the procedure before putting this land to auction and for this all persons working in the Bank who had conducted the auction in this manner can be held liable and if need be, proceeded against. 22. The impugned auction in favour of respondent No.5, thus, can not be sustained and is set-aside. I also wish to record that I have not appreciated the conduct of the counsel, who has appeared to supersede the earlier counsel representing respondent No.5, when the case was part heart and some observations have been made by the Court. The entry of counsel in this manner is not appreciated. 23. The petition is accordingly allowed. The parties are left to bear their respective costs.