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2022 DIGILAW 1759 (BOM)

Likhan S/o Urkudji Meshram (d) thr. LRs. v. Assistant Registrar, Co-operative Societies

2022-07-22

AMIT BORKAR

body2022
JUDGMENT : 1. For the reasons stated in the Application, the Application is allowed. WRIT PETITION NO. 1262/2010 2. This is a Writ Petition under Articles 226 & 227 of the Constitution of India challenging the Certificate issued under Section 101 of the Maharashtra Co-operative Societies Act, 1960 (hereinafter referred to as "the said Act") dated 03/05/2002. The present Writ Petition was filed on 15/03/2010. In the interregnum, the Special Recovery Officer conducted the Auction Proceedings under Rule 101 of the Maharashtra Co-operative Societies Rules, 1961 (hereinafter referred to as “the said Rules”). The auction is complete. The Sale Certificate had been issued in favour of the Auction Purchaser. Petitioners challenge the validity of the Sale Certificate by the amendment on 11/06/2010. 3. According to the learned Advocate for the Petitioners, the Certificate under Section 101 of the said Act had been issued without giving him an opportunity to hear. The Certificate contains no reasons. The mandatory procedure required while conducting the auction under Section 107 has not been followed. The proclamation is not in the newspaper having wide circulation. The auction had been conducted after six months from the date of fixing the upset price. If the order of issuance of Certificate under Section 101 is set aside, consequential Proceedings under Rule 107 are a nullity. Therefore, the Sale Certificate along with the Certificate under Section 101 of the said Act, deserves to be set aside. According to him, the delay/laches in filing the present Writ Petition was on the ground of wrong advice given by the Advocate. The Petitioner, the laymen, acted per the earlier Advocate's directions. 4. Learned Advocate for the Respondent – Society and the Auction Purchaser submitted that the only remedy available with Petitioners was to challenge the certificate by way of Revision under Section 154 of the said Act after compliance with Section 154(2A) of the said Act. Compliance with Section 154(2A) has been held to be mandatory by the Hon’ble Apex Court in the case of Arun B. Khanjire vs. The Ichalkaranji Urban Coop. Bank reported in 2009(2) SCC 187 and by this Court in the case of Greater Bombay Co-Operative Bank Ltd. v. Dhillon P. Shah, : (2004) 1 Mah LJ 996. Compliance with Section 154(2A) has been held to be mandatory by the Hon’ble Apex Court in the case of Arun B. Khanjire vs. The Ichalkaranji Urban Coop. Bank reported in 2009(2) SCC 187 and by this Court in the case of Greater Bombay Co-Operative Bank Ltd. v. Dhillon P. Shah, : (2004) 1 Mah LJ 996. The Writ Petition is also objected on the ground that the Petitioners had the opportunity to deposit the entire amount of dues as per the Certificate issued under Section 101 during the auction process; within 30 days from the date of the auction, which the Petitioners failed to avail. Therefore, according to them, the remedy to challenge the Auction Proceedings was to file an objection before the Special Recovery Officer, and such an order passed by the Special Recovery Officer is subject to Revision under Section 154 of the said Act. Additionally, the Petitioners have the right to institute the Civil Suit as per Rule 107(19)(C) of the said Rules. In that view of the matter, it is submitted that there is no merit in the Writ Petition. 5. Having reflected on the contentions raised by the Petitioners, in my opinion, there is no merit in the Writ Petition, and it deserves to be dismissed. The first ground for dismissal of the Writ Petition is laches in filing the Writ Petition. The impugned order had been passed on 03/05/2002. The Writ Petition was filed on 15/03/2010, almost a lapse of 8 years. The only explanation furnished in the Writ Petition is wrong advise by the Advocate, and the Petitioner is a layman. In my opinion, the said explanation to entertain the Writ Petition after almost eight years is unacceptable. In the interregnum, the Auction Proceedings are complete, and the Sale Certificate is issued in favour of the Auction Purchaser. 6. There is no substance in the learned Advocate for the Petitioners submission that in case the Certificate under Section 101 is set aside, the Auction Proceedings being consequential is rendered illegal. In my opinion, the challenge to the Certificate under Section 101 operates in different fields. The rights acquired by the Third Party Auction Purchaser are in no way affected by the modification of the Certificate. Suppose the Certificate under Section 101 is set aside. In my opinion, the challenge to the Certificate under Section 101 operates in different fields. The rights acquired by the Third Party Auction Purchaser are in no way affected by the modification of the Certificate. Suppose the Certificate under Section 101 is set aside. In that case, the Borrower is entitled to get back the amount recovered under the Certificate, but the validity of the Auction Proceedings cannot be assailed on that ground. Considering the scheme under Section 101 read with Section 156 of the said Act and Rule 107 of the said Rules, the conduct of the Auction Proceedings and the acquisition of the rights by Third Party Auction Purchaser are not consequential. The Proceedings under Rule 107 are in the nature of execution as contemplated by Section 156 of the said Act. 7. It is well settled that Courts need to protect the rights of the bonafide Auction Purchaser. The Apex Court, in the case of Ashwin Mehta Vs. Custodian [ (2006) 2 SCC 385 ] in Paragraph 70 has held as under:- “70. In that view of the matter, evidently, creation of any third party interest is no longer in dispute nor the same is subject to any order of this Court. In any event, ordinarily, a bona fide purchaser for value in an action-sale is treated differently than a decree holder purchasing such properties. In the former event, even if such a decree is set aside, the interest of the bona fide purchaser in an auction-sale is saved. [See Nawab Zain-ul-Abdin Khan v. Muhammad Asghar Ali Khan – (1887) 15 IA 12]. The said decision has been affirmed by this Court in Gurjoginder Singh v. Jaswant Kaur [ (1994) 2 SCC 368 ].” 8. The judgment in the case of Ashwin Mehta (supra) is followed in the case of Janatha Textile Vs. Tax Recovery Officer [ (2008) 12 SCC 582 ] to conclude in Paragraphs 18 and 20, which are as under:- "18. It is an established principle of law that in a third-party auction purchaser's interest in the auctioned property continues to be protected, notwithstanding that the underlying decree is subsequently set aside or otherwise. This principle has been stated and reaffirmed in a number of judicial pronouncements by the Privy Council and this court............. 20. It is an established principle of law that in a third-party auction purchaser's interest in the auctioned property continues to be protected, notwithstanding that the underlying decree is subsequently set aside or otherwise. This principle has been stated and reaffirmed in a number of judicial pronouncements by the Privy Council and this court............. 20. Law makes a clear distinction between a stranger who is a bona fide purchaser of the property at an auction sale and a decree-holder purchaser at a court auction. The strangers to the decree are afforded protection by the court because they are not connected with the decree. Unless the protection is extended to them the court sales would not fetch market value or fair price of the property." 9. In the case of Valji Khimji & Co. Vs. Official Liquidator of Hindustan Nitro Product (Gujrat) Ltd. [ (2008) 9 SCC 299 ] wherein in Paragraphs 30 and 31, it was held as under:- “30. In the first case mentioned above, i.e. where the auction is not subject to confirmation by any authority, the auction is complete on the fall of the hammer, and certain rights accrue in favour of the auction-purchaser. However, where the auction is subject to subsequent confirmation by some authority (under a statute or terms of the auction), the auction is not complete, and no rights accrue until the sale is confirmed by the said authority. Once, however, the sale is confirmed by that authority, certain rights accrue in favour of the auction purchaser, and these rights cannot be extinguished except in exceptional cases such as fraud. 31. In the present case, the auction having been confirmed on 30.7.2003 by the Court it cannot be set aside unless some fraud or collusion has been proved. We are satisfied that no fraud or collusion has been established by any one in this case.” 10. It is now well settled that the rights of Third Party Auction Purchaser need to be protected by the Court. The distinction between the Auction Purchaser, who is the party to the Proceedings and the Third Party Auction Purchaser needs to be kept in mind. Therefore, the submission that as a consequence of setting aside of Certificate under Section 101, the Auction Proceedings become illegal cannot be accepted. The distinction between the Auction Purchaser, who is the party to the Proceedings and the Third Party Auction Purchaser needs to be kept in mind. Therefore, the submission that as a consequence of setting aside of Certificate under Section 101, the Auction Proceedings become illegal cannot be accepted. Such a principle is attracted only when the final order is passed based on interim order like the liquidation Proceedings under Sections 106 to 108 of the said Act. 11. Insofar as the submission that the upset price was not properly fixed and the obligation of the proclamation was not in the newspaper having wide circulation, these are the questions which were required to be raised before the Special Recovery Officer by way of an objection as contemplated by Rule 107 in the manner prescribed so that the Creditor and Auction Purchaser shall have the opportunity to place the material in their possession. After conducting the auction sale and sale of the property in favour of the Auction Purchaser, Petitioners never applied to the Recovery Officer to set aside the sale on the grounds of material irregularity, mistake or fraud in publishing or conducting it. No sale can be set aside on the ground of irregularity or fraud unless the Recovery Officer is satisfied that the Borrower had sustained substantial injury by reason of such irregularity, mistake or fraud in the absence of such an objection being raised before the Special Recovery Officer who conducted the auction, such an objection cannot be raised before this Court after eight years. 12. It is undisputed that after the Sale Certificate's execution, Sale-Deed was executed in favour of the Third Party Auction Purchaser. A Sale Certificate is issued to the purchaser only when the sale becomes absolute. The Sale Certificate is merely the evidence of such title. It is well settled that when an Auction Purchaser derives title on confirmation of sale in his favour. A Sale Certificate is issued evidencing such sale and title, no further deed of transfer from the Court is contemplated or required. In this case, the Sale-Deed was registered. A Sale Certificate issued by a Court or an Officer authorised by the Court, does not require registration. A Sale Certificate is issued evidencing such sale and title, no further deed of transfer from the Court is contemplated or required. In this case, the Sale-Deed was registered. A Sale Certificate issued by a Court or an Officer authorised by the Court, does not require registration. Section 17(2)(xii) of the Registration Act, 1908 specifically provides that a Certificate of Sale granted to any purchaser of any property sold by a public auction by a Civil or Revenue Officer does not fall under the category of non-testamentary documents which require registration under sub-sections (b) and (c) of Section 17(1) of the said Act. 13. According to the Petitioners, they deposited the entire amount on 03/01/2008. The auction was conducted on 08/10/2007. Therefore, the Petitioners needed to deposit the entire amount of recoverable dues along with the cost of auction and 5% of recoverable dues with the Special Recovery Officer within 30 days. In the absence of the said compliance and absence of ground of breach or non-compliance of Sections 107(g) and 107(h), the Special Recovery Officer was justified in confirming the same in favour of the Third Party Auction Purchaser. 14. In that view of the matter, there is no merit in the Writ Petition, and the same is therefore dismissed. Pending Application(s), if any, stand(s) disposed of.