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2024 DIGILAW 1145 (ALL)

Ganga @ Ganga Ram v. State of U. P.

2024-04-27

ALOK MATHUR

body2024
JUDGMENT : ALOK MATHUR, J. 1. Heard Shri Vivek Kumar Singh, learned counsel for the petitioners, learned Standing Counsel for the State, learned counsel for respondent-Bank and perused the material available on record. 2. By means of the present writ petition, the petitioners have challenged the auction proceedings conducted at the behest of the Collector/District Magistrate, District Hardoi whereby the agricultural land of the petitioners situated at Village Janwar, Pargana-Godwa, Tehsil-Sandila, District Hardoi in Gata (Khasra) Nos/area (in Hectare), 1411/4-18-5-0, 1378/0-7-0-0, 1427/0-10-0-0 and 1422/3-12-11-0 have been auctioned and purchased by the State in lieu of the outstanding amount due to respondent no. 4 i.e. State Bank of India. 3. It has been submitted by learned counsel for petitioners that the petitioners had taken an agricultural loan of Rs.8,500/- on 08.01.1983 from the State Bank of India, Branch Sandila, District Hardoi. It is stated that against the said loan, the petitioners had deposited the loan amount of Rs.11,000/- till 28.05.1992 and also an amount of Rs.14,000/- on 22.12.2008 as demanded by the respondent-Bank. It has been stated that some government officials went to the petitioners’ land and started measuring the same and it is then the petitioners came to know that the land of the petitioners has been sold by the State Government in an auction and even subsequently, they were able to obtain the records pertaining to the said auction. The petitioners stated that the auction was held by the State Government where no bids were made and no one had participated in the said auction. It seems that the State had purchased the land for Rs.1/- and name of the State Government had also mutated in the revenue record on 03.04.1993. It has been stated that after depositing the full and final amount of the said loan, the Branch Manager of the State Bank of India has given ‘No Dues Certificate’ to the petitioners on 16.07.2009 and recovery proceedings were initiated and land of the petitioners were auctioned in Rs.1/-. 4. In support of his submissions, learned counsel for the petitioners has relied upon the judgment of Supreme Court in the case of Surendra Pal Singh Vs. Vijaya Bank passed in Civil Appeal No. 6843 of 2023 as well as Narandas Karsondas Vs. 4. In support of his submissions, learned counsel for the petitioners has relied upon the judgment of Supreme Court in the case of Surendra Pal Singh Vs. Vijaya Bank passed in Civil Appeal No. 6843 of 2023 as well as Narandas Karsondas Vs. S.A. Kamtam, 1976 CJ (SC) 287 to canvass his plea that his right to redemption of the mortgaged property existed even subsequent to confirmation of the auction and consequently he may be permitted to deposit the outstanding amount of loan and the impugned orders may be set aside directing the respondents to hand over the property back to the petitioner. 5. In the counter affidavit filed by the State, it has been stated that the petitioners did not repay the said amount and subsequently the loan was put for auction but the auction proceedings could not take place and consequently, it is stated that the land vested in the State Government and mutation in this respect was also undertaken by the order dated 30.03.1993. It has further been stated in the counter affidavit that on failure in auction, the land was vested in the State Government. In the aforesaid circumstances, the question which falls for consideration is as to whether where either no one has participated in the said auction or auction has not been conducted by the State, can the land, which is mortgaged with the Bank as security towards the loan taken by the farmers, vest in the State Government. 6. Before dealing with rival contentions of parties, it would be useful to refer some decisions of the Apex Court, having material bearing on the question in controversy involved in the case, hereinafter. 7. In the case of Union Bank of India Vs. Official Liquidator, 2000 (5) SCC 274 , the Apex Court has observed as under: “In auction-sale of the property of the company which is ordered to be wound up, the Company Court acts as a custodian for the interest of the Company and its creditors. It is the duty of the Company Court to satisfy itself as to reasonableness of price by disclosing valuation report to secured creditors of the company and other interested persons. It was further held that the Court should exercise judicial discretion to ensure that sale of property should fetch adequate price. For deciding what would be reasonable price, valuation report of an expert is essential. It was further held that the Court should exercise judicial discretion to ensure that sale of property should fetch adequate price. For deciding what would be reasonable price, valuation report of an expert is essential. The Company Judge himself must apply his mind to the valuation report. The Court observed that the High Court did not interfere with the auction-sale on the ground of sympathy for the workers which was not proper. The auction-sale was, therefore, set aside by this Court and the Official Liquidator was directed to resell the property after obtaining fresh valuation report and after furnishing copy of such report to secured creditors.” 8. In Divya Manufacturing Company (P) Ltd. and another Vs. Union of India and others, AIR 2000 SC 2346 , the Apex Court held that in appropriate cases, even the confirmed sale can be set aside. 9. In Gajraj Jain v. State of Bihar and others, (2004) 7 SCC 151 , the Apex Court held that in absence of valuation report and reserve price, the auction sale becomes only a pretence and if there is no proper mechanism and if the intending purchasers are not able to know the details of the assets or 10 intemised valuation, the auction-sale cannot be said to be in accordance with law. If publicity and maximum participation is to be attained, all bidders must know the details of the assets and the valuation thereof. 10. The right of redemption which is embodied in section 60 of the Transfer of Property Act is available to the Mortgagor unless it has been extinguished by the Act of parties. The combined effect of section 54 of the Transfer of Property Act and section 17 of the Indian Registration Act is that a contract for sale in respect of immovable property of the value of more than one hundred rupees without registration cannot extinguish the equity of redemption. In India it is only on execution of the conveyance and registration of transfer of the mortgagors interest by registered instrument that the mortgagors right of redemption will be extinguished. The conferment of power to sell without intervention of the Court in a Mortgage Deed by itself will not deprive the mortgagor of his right to redemption. The extinction of the right of redemption has to be subsequent to the deed conferring such power. The conferment of power to sell without intervention of the Court in a Mortgage Deed by itself will not deprive the mortgagor of his right to redemption. The extinction of the right of redemption has to be subsequent to the deed conferring such power. The right of redemption is not extinguished at the expiry of the period. The equity of redemption is not extinguished by mere contract for sale. The mortgagors right to redeem will survive until there has been completion of sale by the mortagee by a registered deed. In England a sale of property takes place by agreement but it is not so in our country. The power to sell shall not be exercised unless and until notice in writing requiring payment of the principal money has been served on the mortgagor. Further section 69(3) of the Transfer of Property Act shows that when a sale has been made in professed exercise of such a power, the title of the purchaser shall not be impeachable on the ground that no case had arisen to authorise the sale. Therefore, until the sale is complete by registration the mortgagor does not lose right of redemption. 11. From the aforesaid judgments, it is clear that whenever a property is put up for auction to realise the outstanding amount of dues, one of the main considerations is to get the maximum value out of the said property. For the said purpose, it is an essential condition that there should be proper valuation of the property, for which purpose provision has been made even in the Zamindari Abolition and Land Reforms Act. Even in a situation where no person appears to participate in the auction and no bidders participate in the auction, Collector has been given the discretion to bid up to the amount of such arrears. Rule 285B of the said Act is quoted here for ready reference: “285B. No officer having any duty to perform in connection with any such sale, and no person employed by, on subordinate to, such officer shall, either directly or indirectly, bid for, acquire or attempt to acquire the property sold or any interest therein: Provided that where at any auction under Section 248 no bid is offered up to the amount of the arrear, for which the sale has been ordered, the Collector may bid upto the amount of such arrear.” 12. In the facts of the present case, according to the State Government no one participated in the said auction and consequently the property was purchased by the State for Re.1/-. Even in a situation where no person has appeared to bid, it was open for the State to purchase the said property, but the reserve price had to be offered and paid. There is no law which permits the State to purchase the mortgaged property Rs.1/- which would be below the reserve price for 1.7 hectares of land anywhere. The said action of the State is clearly illegal and arbitrary and contrary to the statutory provisions of Rule 285B of the Act of 1950. 13. The State is under a mandate to act reasonably and fairly in all spheres of activity. Even the rules providing for sale of immovable property provide for a detailed mechanism where proper notices have to be issued, the property has to be valued before fixing the reserve price, and even the auction has to be fair and transparent. The action of the State in purchasing the property at an auction conducted by themselves for a price of Re.1/- is nothing but confiscation of the property. Such a right cannot be vested in a democratic State, to confiscate the property of the citizen under the garb of a realisation of outstanding amount of loan for a paltry sum of Re.1/-. According to Rule 285B even if no one had participated in the auction, the minimum reserve price should have been paid for purchase of the said property. At this stage, we cannot lose sight of the Constitutional provisions contained in Article 300A. 14. According to Article 300 A of the Constitution of India ‘no person can be deprived of his/her property save by authority of law’ and the State cannot dispossess a citizen of his/her property except in accordance with the procedure provided for in the Zamindari Abolition and Land Reforms Rules, 1952. In the present case, deprivation of the property of the petitioner in purported exercise of the powers to sell mortgaged property to recovery amount of loan by the State Government and to purchase it at Re.1/- is nothing except confiscation of the property. In the present case, deprivation of the property of the petitioner in purported exercise of the powers to sell mortgaged property to recovery amount of loan by the State Government and to purchase it at Re.1/- is nothing except confiscation of the property. The said action cannot be sustained on the anvil of the provisions contained in U.P.Z.A. and L.R. Act, especially Rule 285 B as quoted hereinabove and Article 300 A of the Constitution. It is surprising that when no person appeared during the auction why was not another date fixed after due publicity to ensure maximum participation at the auction but still the State proceeded with the said auction and settled in their own favour at a paltry sum of Re.1/-. On the touchstone In the Constitutional Scheme as well as under the statutory provisions and rules of U.P.Z.A. and L.R. Act, the said exercise is clearly arbitrary and illegal and deserves to be quashed and is hereby quashed. 15. It has been submitted that the petitioners are still in possession of the agricultural land and this fact has not been countered by the respondents accordingly, the respondents are restrained from interfering in the possession of the petitioners while after depositing the full and final amount of the said loan, the Branch Manager of the State Bank of India has given ‘No Dues Certificate’ to the petitioners on 16.07.2006. 16. Further, the petitioners are given liberty to move an appropriate application for mutation before the competent authority for mutating the name of the petitioners in place of State. On petitioners’ moving said application, necessary orders in terms of the directions issued by this Court shall be passed by the competent authority with expedition in accordance with law. 17. Subject to above directions, the writ petition stands allowed.