Rights of an auction-purchaser in the property


Court :
Supreme Court of India

Brief :
Rights of an auction-purchaser in the property purchased by him cannot be extinguished. Exceptions: In cases where the said purchase can be assailed on the following grounds: 1. Collusion 2. Fraud

Citation :
Ashwin S. Mehta & Anr. vs. Custodian & Ors., (2006) 2 SCC 385); Nawab Zain-ul-Abdin Khan v. Mohd. Asghar Ali Khan (1887) 15 IA 12); Gurjoginder Singh v. Jaswant Kaur (1994) 2 SCC 368); Janatha Textiles & Ors. vs. Tax Recovery Officer & Anr., (2008) 12 SCC 582; Nawab Zain-Ul-Abdin Khan v. Mohd. Asghar Ali Khan, (1887-88) 15 IA 12; Janak Raj vs. Gurdial Singh, AIR 1967 SC 608; Gurjoginder Singh vs. Jaswant Kaur, (1994) 2 SCC 368; Padanathil Ruqmini Amma vs. P.K. Abdulla, (1996) 7 SCC 668; Velji Khimji and Company vs. Official Liquidator of Hindustan Nitro Product (Gujarat) Limited & Ors., (2008) 9 SCC 299

 

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                       CIVIL APPEAL NO.  161  OF 2014

                  (Arising out of SLP (C) No.23000 of 2010)

 

Sadashiv Prasad Singh                                    … Appellant

 

                                   Versus

 

Harendar Singh & Ors.                                    … Respondents

 

                                    WITH

 

                      CIVIL APPEAL NO.   162   OF 2014

                  (Arising out of SLP (C) No.26550 of 2010)

 

                               J U D G M E N T

 

Jagdish Singh Khehar, J.

 

1.    On 11.9.1989, The Allahabad Bank  (hereinafter  referred  to  as  ‘the

Bank’) sanctioned a loan of Rs.12.70  lac  to  M/s.  Amar  Timber  Works,  a

partnership firm having three partners, Jagmohan  Singh,  Payam  Shoghi  and

Dev Kumar Sinha.  The above loan was sanctioned to M/s. Amar  Timber  Works,

after its partners had mortgaged  certain  properties  to  secure  the  loan

amount.  Since the loan  amount  was  not  repaid  in  compliance  with  the

commitment made by M/s. Amar Timber Works, nine years later,  in  1998,  the

Bank preferred Original Application No.107 of 1998 before the Debt  Recovery

Tribunal  for  the  recovery  of  the  Bank’s  dues.  The   above   Original

Application was allowed on 21.11.2000.  Accordingly, a direction was  issued

for the recovery of Rs.75,75,564/- from M/s. Amar  Timber  Works.   For  the

execution of the order passed  by  the  Debt  Recovery  Tribunal,  the  Bank

initiated recovery proceedings on 28.11.2000.  During the  pendency  of  the

recovery proceedings, Jagmohan Singh, one  of  the  partners  of  M/s.  Amar

Timber Works, died (on  27.1.2004).   On  16.4.2004,  the  Recovery  Officer

attached plot No.722, located at Exhibition Road, P.S. Gandhi Maidan,  Patna

(hereinafter referred to as ‘the property’) measuring 1298 sq.ft.  It  would

be pertinent to mention that the aforesaid plot  was  in  the  ownership  of

Jagmohan Singh, one of the partners in M/s. Amar Timber Works.

 

2.    On 10.6.2004, Harender Singh, brother  of  Jagmohan  Singh,  filed  an

objection petition before the Recovery Officer alleging, that  the  attached

property did not belong to the judgment debtors, but had been  purchased  by

him from his brother Jagmohan Singh,  by  executing  an  agreement  of  sale

dated 10.1.1991, which was duly notarized though not registered.   It  would

be relevant to mention, that Harender Singh pursued the  objection  petition

filed by him before the Recovery  Officer  till  26.10.2005,  but  chose  to

abandon the proceedings  thereafter.   The  order  passed  by  the  Recovery

officer when the Objector was represented for the last  time  on  26.10.2005

is being extracted below:

      “Ld. Advocate of Bank and objectors appears.  Objector reiterated  his

      points and invited attention towards Section 53 of TP Act.  Counsel of

      the bank submits that he  had  to  say  nothing  more  than  what  was

      said/submitted earlier.  He also submits  that  D.Drs.  was  guarantor

      also in this case hence his properties attached.  Put up  on  28.12.08

      for further hearing.

 

      Sd/- Illegible

      I/C R.O.”

 

3.    The recovery proceedings referred to  above  remained  pending  for  a

further period of more  than  two  years.   Finally,  the  Recovery  Officer

passed an order dated 5.5.2008, for the sale  of  the  property  by  way  of

public auction on 4.7.2008.  The Recovery Officer  fixed  Rs.12.92  lacs  as

the reserve price, and also fixed 28.8.2008 as the date of its auction.   At

the auction held on  28.8.2008,  Sadashiv  Prasad  Singh,  was  the  highest

bidder.  Accordingly, the Recovery Officer ordered the sale of the  property

in his favour on 28.8.2008.  On 22.9.2008,  the  Recovery  Officer,  in  the

absence of any objections, confirmed the sale of the property in  favour  of

Sadashiv Prasad Singh.  The Recovery Officer also ordered, the handing  over

of physical possession of the property to the auction  purchaser.   Sadashiv

Prasad Singh,  the  auction  purchaser,  took  physical  possession  of  the

property on 11.3.2009.

 

4.    In furtherance of the  proceedings  initiated  through  Mutation  Case

No.295/2/09-10, the land in question was mutated in favour  of  the  auction

purchaser.  It would  be  relevant  to  mention  that  the  application  for

mutation  filed  by  the  auction  purchaser,  Sadashiv  Prasad  Singh,  was

supported by letter dated 14.10.2008 of the Ministry of Finance,  Government

of India, Realization Authority, Patna.  It would be  relevant  to  mention,

that no objections were filed in the mutation  case  preferred  by  Sadashiv

Prasad Singh, by or  on  behalf  of  Harender  Singh,  before  the  Mutation

Officer.

 

5.    On 27.11.2009, CWJC No.16485 of  2009  was  filed  by  Harender  Singh

before the High Court of Judicature at Patna  (hereinafter  referred  to  as

the ‘High Court’).  In the aforesaid writ petition, Harender Singh  assailed

the order of the Recovery Officer dated 5.5.2008, whereby, the property  had

been ordered to be sold by public auction in discharge of the debt  owed  by

M/s Amar  Timber  Works  to  the  Allahabad  Bank.   Vide  its  order  dated

23.3.2010, the High Court  ordered  the  auction  purchaser,  i.e.  Sadashiv

Prasad Singh to be impleaded as  a  party-respondent.   On  27.11.2010,  the

High Court dismissed the above writ petition  by  accepting  the  objections

raised on behalf of the Bank, as well as, the auction purchaser  by  holding

as under :

 

      “The above facts do weigh with the Court in not interfering  with  the

      sale or the proceeding where it has been reached.  The petitioner  has

      no satisfactory explanation for not approaching the Court well  within

      time challenging such a decision  or  the  subsequent  proceedings  or

      orders of the Recovery Officer at an appropriate time.  The conduct of

      the petitioner by itself has precluded and prevented this  Court  from

      passing any order in his favour at this belated stage.

 

      The writ application has not merit.  It is dismissed accordingly.”

 

 

 

6.    Dissatisfied with the order dated 27.4.2010 whereby the writ  petition

filed by Harender Singh was dismissed by a Single Bench of the  High  Court,

he preferred Letters Patent Appeal  No.844  of  2010.   Before  the  Letters

Patent Bench, Harender Singh, brother of Jagmohan Singh, asserted  that  his

brother Jagmohan Singh had availed a loan of  Rs.14.70  lacks.   As  against

the aforesaid loan amount, the Bank had  initiated  proceedings  before  the

Debt Recovery Tribunal for the realization of a  sum  of  75,75,564/-.   The

property under reference was sold by  way  of  public  auction  to  Sadashiv

Prasad Singh for a sum of Rs.13.20 lacs.   As  against  the  aforesaid  sale

consideration paid by the auction purchaser, Harender Singh, offered  a  sum

of Rs.39 lacs before the Letters Patent Bench.  In the order passed  by  the

Letters Patent Bench disposing of Letters Patent Appeal No.844 of  2010,  it

stands noticed that the Bank had accepted to finally settle  the  matter  on

being paid a sum of Rs.45 lacs, subject to the condition that  the  Harender

Singh pays a sum of Rs.15 lacs immediately, and the balance amount of  Rs.30

lacs within a period of two years in  a  phased  manner.   Even  though  the

learned counsel representing the appellant, Harender Singh was agreeable  to

proposal of the Bank, the  rival  parties  could  not  amicably  settle  the

matter.  It is,  therefore,  that  the  letters  patent  Bench  went  on  to

adjudicate the matter on its merits.  The above factual  position  has  been

noticed for the reason that it has a nexus to  the  final  order  which  was

eventually passed by the Letters Patent Bench disposing  of  LPA  No.844  of

2010.  In fact, it would be in the fitness of matters to  extract  paragraph

8 from the impugned judgment rendered in LPA No.844  of  2010  in  order  to

appreciate  the  niceties  of  the  matter.   The  aforesaid  paragraph  is,

accordingly, being extracted herein :

 

      “8. At this juncture, we may state that the brother of  the  appellant

      had availed a loan of Rs.14.70 lacs.  The said aspect is not  disputed

      by Mr. Ajay Kumar Sinha, learned counsel for the Bank.  The  Bank  had

      initiated  a  proceeding  before  the  Tribunal  for  realization   of

      approximately a sum of Rs.75.75 lacs.  The property has been sold  for

      Rs.13.20 lacs.  It is submitted by Mr. Ojha that the prices have  gone

      up and he is being offered more than 39 lacs for the same.  It is  not

      in dispute that the price,  the  auction-purchaser  has  tendered,  is

      Rs.13.20 lacs.  On  the  earlier  occasion,  a  suggestion  was  given

      whether the Bank would  accept  Rs.45  lacs  in  toto  to  settle  the

      dispute.  Mr.  Sinha,  learned  counsel  for  the  Bank  has  obtained

      instructions that the Bank has no objection to settle the same, if the

      appellant pays Rs.15 lacs immediately so that the same can be paid  to

      the auction-purchaser and Rs.30 lacks should be paid within  a  period

      of two years in a phased manner.  Mr. Choubey, learned counsel for the

      appellant submitted that the appellant is agreeable to pay  the  same.

      Mr. Ojha  submitted  that  he  has  instructions  not  to  accept  the

      suggestion.”

 

 

 

7.    During the course of appellate proceedings, the  High  Court  referred

to  Chapter  V  of  the  Recovery  of  Debts  Due  to  Banks  and  Financial

Institutions Act, 1993 (hereinafter referred to as the Debt Recoveries  Act)

and particularly to Section 29 which is being extracted hereunder:

 

      “29.  Application  of  certain  provisions  of   Income-tax   Act.—The

      provisions of the Second and Third Schedules to  the  Income-tax  Act,

      1961 (43 of 1961) and the Income-tax (Certificate Proceedings)  Rules,

      1962, as in force from time to time shall, as far as  possible,  apply

      with necessary modifications as if the said provisions and  the  rules

      referred to the amount of debt due under this Act instead  of  to  the

      Income-tax :

 

           Provided that any reference under the said  provisions  and  the

      rules to the “assessee” shall be  construed  as  a  reference  to  the

      defendant under this Act.”

 

 

 

The High Court while interpreting  Section  29  extracted  above,  concluded

that certain provisions of the Income Tax Act and  Income  Tax  (Certificate

Proceedings) Rules would be applicable mutatis mutandis  in  the  matter  of

recovery of debts under the  Debt  Recoveries  Act.   The  High  Court  then

referred to Rule 11 of the Income Tax (Certificate  Proceedings)  Rules  and

arrived at the conclusion that  sub-rule  (2)  of  Rule  11,  had  not  been

complied with by the Recovery Officer, inasmuch as, the objection raised  by

Harender Singh had not been adjudicated  upon.   As  such,  the  High  Court

finally concluded that the proceedings before the Recovery Officer  were  in

flagrant violation of the  provisions  of  Rule  11(2)  of  the  Income  Tax

(Certificate Proceedings) Rules.  Having so concluded, the  High  Court  set

aside the proceedings conducted by the Recovery Officer, including the  sale

of the property by public auction.  In order to appreciate the basis of  the

order passed by the High Court, Rule  11  of  the  Second  Schedule  of  the

Income Tax Act, 1961, is being extracted herein:

 

      “Investigation by Tax Recovery Officer.

 

      11. (1)     Where any claim is preferred to, or any objection is  made

      to the  attachment  or  sale  of,  any  property  in  execution  of  a

      certificate, on the ground that such property is not  liable  to  such

      attachment  or  sale,  the  Tax  Recovery  Officer  shall  proceed  to

      investigate the claim or objection:

 

           Provided that no such investigation shall be made where the  Tax

      Recovery Officer considers that the claim or objection was  designedly

      or unnecessarily delayed.

 

      (2)   Where the property to which the claim or objection  applies  has

      been advertised for sale, the Tax Recovery Officer ordering  the  sale

      may postpone it pending the investigation of the claim  or  objection,

      upon such terms as to  security  or  otherwise  as  the  Tax  Recovery

      Officer shall deem fit.

 

      (3)   The claimant or objector must adduce evidence to show that-

 

           (a)   (in the case of immovable property) at  the  date  of  the

           service of the notice issued under  this  Schedule  to  pay  the

           arrears, or

 

           (b)   (in the case of movable  property)  at  the  date  of  the

           attachment,

 

           he had some interest in, or was possessed of,  the  property  in

           question.

 

      (4)   Where, upon the said investigation, the Tax Recovery Officer  is

      satisfied that, for the reason stated in the claim or objection,  such

      property was not, at the said date, in the possession of the defaulter

      or of some person in truest for him or in the occupancy of a tenant or

      other person paying rent to him, or that, being in the  possession  of

      the defaulter at the said date, it was so in his  possession,  not  on

      his own account or as his own property, but on account of or in  trust

      for some other person, or partly on his  own  account  and  partly  on

      account of some other person, the Tax Recovery Officer shall  make  an

      order releasing the property, wholly or to such extent  as  he  thinks

      fit, from attachment or sale.

 

      (5)   Where the Tax Recovery Officer is satisfied  that  the  property

      was, at the said date, in the possession of the defaulter as  his  own

      property and not on account  of  any  other  person,  or  was  in  the

      possession of some other person in trust for him, or in the  occupancy

      of a tenant or other person paying  rent  to  him,  the  Tax  Recovery

      Officer shall disallow the claim.

 

      (6)   Where a claim or an objection is preferred,  the  party  against

      whom an order is made may  institute  a  suit  in  a  civil  court  to

      establish the right which he claims to the property in  dispute;  but,

      subject to the result of such suit (if any),  the  order  of  the  Tax

      Recovery Officer shall be conclusive.”

 

 

8.    Having dealt with the controversy  in  the  manner  expressed  in  the

foregoing paragraphs, the Division Bench of the High Court was of  the  view

that the matter in hand ought to be settled  by  working  out  the  equities

between the parties.  Accordingly, the High Court disposed of the matter  in

the following manner:

 

      “12.  Though we have held  the  same  could  not  have  been  sold  in

      auction, yet equities are to be worked out.  Regard being had  to  the

      fact that the respondent-purchaser has deposited Rs.13.20 lac  between

      28.8.2008 to 22.9.2009 and thus the amount is with the Bank for almost

      more than one year  and  10  months  and  thereafter  there  had  been

      challenge to the order in the writ petition and after dismissal of the

      writ petition the present L.P.A. has been filed in  quite  promptitude

      and that the amount of the respondent-purchaser was blocked,  it  will

      be  obligatory  on  the  part  of  the  appellant  to  compensate  the

      respondent-purchaser at least by way of payment  of  interest  at  the

      Bank rate.  We are disposed to think that if a sum of  Rs.17  lacs  is

      paid to the auction-purchaser, it would sub-serve the cause of justice

      and house of the appellant shall be  saved  and,  accordingly,  it  is

      directed that the appellant shall deposit a sum of Rs.17 lacks  within

      a period of four weeks from today in the Bank.   After  such  deposit,

      the Bank shall hand it over to the purchaser by way of a  bank  draft.

      The same shall be sent by registered  post  with  acknowledgment  due.

      Thereafter the appellant shall deposit a further  sum  of  Rs.32  lacs

      within a period of two years; sum of Rs.16 lacs by  25th  March,  2011

      and further sum of Rs.16 lacs by 25th March, 2012.   Needless  to  say

      pro-rate interest shall accrue in favour of  the  Bank  for  the  said

      period.

 

      13.   After the amount is paid to the purchaser, it would be the  duty

      of the Recovery Officer to hand over the possession to the appellant.”

 

 

 

9.    Sadashiv  Prasad  Singh,  the  auction  purchaser,  has  assailed  the

impugned order passed by the Division Bench of the High Court in LPA  No.844

of 2010 praying for the setting aside of the order  by  which  he  has  been

deprived of the property purchased by him in  the  public  auction  held  on

28.8.2008, which was subsequently confirmed by the Recovery Officer  of  the

Debt Recovery Tribunal on  23.9.2008.   This  challenge  has  been  made  by

Sadashiv Prasad Singh by filing  Special  Leave  Petition  (C)  No.23000  of

2010.  The impugned order passed by the High Court on  17.5.2010,  has  also

been assailed by Harender Singh by preferring  Special  Leave  Petition  (C)

No.26550 of 2010.  The prayer made by Harender Singh is, that  order  passed

by the Division Bench places him in the shoes of the auction purchaser,  and

as such, he could have  only  been  asked  to  pay  a  sum  of  Rs.17  lacs.

Requiring him to pay a further sum of Rs.32 lacs is  unsustainable  in  law,

and accordingly, deserved to be set aside.

 

10.   Leave granted in both the Special Leave Petitions.

 

11.   For the narration of facts, we have relied upon the pleadings and  the

documents appended to Special Leave Petition (C) No.23000 of 2010.

 

12.    Learned counsel for the auction purchaser Sadashiv Prasad  Singh,  in

the first instance vehemently contended, that in terms of the  law  declared

by this Court, property purchased by a third  party  auction  purchaser,  in

compliance of a court order, cannot be interfered with on the basis  of  the

success or failure of parties to a  proceeding,  if  auction  purchaser  had

bonafidely purchased the property.  In order to substantiate  his  aforesaid

contention,  learned  counsel  representing  Sadashiv  Prasad  Singh  placed

emphatic reliance, firstly, on a judgment rendered by this Court  in  Ashwin

S. Mehta & Anr. vs. Custodian & Ors., (2006) 2 SCC 385).  Our attention  was

drawn to the following observations recorded therein :

 

      “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 auction-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.  Mohd.  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).”

                                                          (emphasis is ours)

 

 

On the same subject, and to the same end, learned  counsel  placed  reliance

on another judgment rendered by this Court in Janatha Textiles  &  Ors.  vs.

Tax Recovery Officer & Anr., (2008) 12  SCC  582,  wherein  the  conclusions

drawn in Ashwin S. Mehta’s case (supra)  came  to  be  reiterated.   In  the

above judgment, this Court relied upon the decisions of  the  Privy  Council

and of this Court in Nawab Zain-Ul-Abdin Khan  v.  Mohd.  Asghar  Ali  Khan,

(1887-88) 15  IA  12;  Janak  Raj  vs.  Gurdial  Singh,  AIR  1967  SC  608;

Gurjoginder Singh vs. Jaswant Kaur, (1994) 2  SCC  368;  Padanathil  Ruqmini

Amma vs. P.K. Abdulla, (1996) 7  SCC  668,  as  also,  on  Ashwin  S.  Mehta

(supra) in order to conclude, that it is an established  principle  of  law,

that 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.  It is, therefore, that this  Court  in

its ultimate analysis observed as under:

 

      “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.”

                                                          (emphasis is ours)

 

 

On the issue as has been dealt with in the foregoing paragraph,  this  Court

has carved out one exception.  The aforesaid exception came to  be  recorded

in Velji Khimji and Company  vs.  Official  Liquidator  of  Hindustan  Nitro

Product (Gujarat) Limited & Ors., (2008) 9 SCC 299, wherein 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 anyone in this case.”

                                                          (emphasis is ours)

 

 

It is, therefore, apparent that the rights of an  auction-purchaser  in  the

property purchased by him cannot be extinguished except in cases  where  the

said purchase can be assailed on grounds of fraud or collusion.

 

13.   It is imperative for us, to adjudicate upon the veracity of  the  sale

of the property by way of public auction, made in favour of Sadashiv  Prasad

Singh on 28.8.2008.  It is not a matter of dispute,  that  the  lis  in  the

present controversy was between the Allahabad Bank on the one hand  and  the

partners of M/s. Amar  Timber Works, namely, Jagmohan  Singh,  Payam  Shoghi

and Dev Kumar Sinha on the other.  Sadashiv Prasad Sinha was not a party  to

the proceedings before the Debt Recovery Tribunal  or  before  the  Recovery

Officer.  By an order dated 5.5.2008, the Recovery Officer ordered the  sale

of the property by  way  of  public  auction.   On  4.7.2008,  the  Recovery

Officer fixed Rs.12.92 lacs as the reserve price, and also  fixed  28.8.2008

as the date of auction.  At the public auction held on  28.8.2008,  Sadashiv

Prasad Sinha was the highest bidder, and accordingly, the  Recovery  officer

ordered the sale of the  property  in  his  favour  on  28.8.2008.   In  the

absence of any objections, the Recovery Officer confirmed the  sale  of  the

property in favour  of  Sadashiv  Prasad  Sinha  on  22.9.2008.   Thereafter

possession of the property was also handed over to the auction-purchaser  on

11.3.2009.  Applying the  law  declared  by  this  Court  in  the  judgments

referred in the foregoing paragraphs irrespective of the merits of  the  lis

between the rival parties, namely, the Allahabad Bank and  the  partners  of

M/s. Amar Timber Works, it is not open for anyone to assail the purchase  of

the property made by Sadashiv Prasad Sinha in the  public  auction  held  in

furtherance of the order passed by the Recovery Officer  on  28.8.2008.   In

the above view of the matter, especially in the absence  of  any  allegation

of fraud or collusion, we are of the view that the High Court clearly  erred

while setting aside the auction ordered in favour of the  auction-purchaser,

Sadashiv Prasad Sinha in the impugned order dated 17.5.2010.

 

14.   A perusal of the impugned order especially paragraphs  8,  12  and  13

extracted hereinabove reveal that the impugned order came to  be  passed  in

order  to  work  out  the  equities  between  the   parties.    The   entire

deliberation at the hands of  the  High  Court  were  based  on  offers  and

counter offers, inter se between the Allahabad Bank on the one hand and  the

objector Harender Singh on the other, whereas the rights of Sadashiv  Prasad

Sinha – the auction-purchaser, were not at  all  taken  into  consideration.

As a matter of fact, it is Sadashiv Prasad Sinha who was to be  deprived  of

the property which came to be vested in him as far  back  as  on  28.8.2008.

It is nobody’s case, that at the time of the auction-purchase, the value  of

the property purchased by Sadashiv Prasad Sinha was in excess  of  his  bid.

In fact, the factual position depicted under paragraph  8  of  the  impugned

judgment reveals, that the escalation of prices had taken place  thereafter,

and the value of  the  property  purchased  by  Sadashiv  Prasad  Sinha  was

presently much higher than the bid amount.  Since it was nobody’s case  that

Sadashiv Prasad Sinha, the  highest  bidder  at  the  auction  conducted  on

28.8.2008, had purchased the property in question at  a  price  lesser  than

the then prevailing market price, there was no justification  whatsoever  to

set aside the auction-purchase made by  him  on  account  of  escalation  of

prices thereafter.  The High Court in  ignoring  the  vested  right  of  the

appellant in the property in question, after his auction  bid  was  accepted

and confirmed,  subjected  him  to  grave  injustice  by  depriving  him  to

property which he had genuinely  and  legitimately  purchased  at  a  public

auction.  In our considered view, not only did the  Division  Bench  of  the

High Court in the matter by ignoring the sound, legal and  clear  principles

laid down by this Court in respect of a third party auction  purchaser,  the

High Court also clearly  overlooked  the  equitable  rights  vested  in  the

auction-purchaser during the  pendency  of  a  lis.   The  High  Court  also

clearly overlooked the equitable rights  vested  in  the  auction  purchaser

while disposing of the matter.

 

15.   At the time of hearing, we were thinking of remanding  the  matter  to

the Recovery Officer to investigate into the  objection  of  Harender  Singh

under Rule 11 of the Second Schedule to  the  Income  Tax  Act,  1961.   But

considering the delay such a remand may cause, we  have  ourselves  examined

the objections of Harender Singh and reject the objections for a variety  of

reasons.  Firstly, the contention raised at the  hands  of  the  respondents

before the High Court, that  the  facts  narrated  by  Harender  Singh  (the

appellant in Special Leave Petition (C)  No.26550  of  2010)  were  a  total

sham, as he was  actually  the  brother  of  one  of  the  judgment-debtors,

namely,  Jagmohan  Singh.   And  that  Harender   Singh   had   created   an

unbelievable story with the connivance and help of his  brother,  so  as  to

save the  property  in  question.   The  claim  of  Harender  Singh  in  his

objection petition, was based on an unregistered  agreement  to  sell  dated

10.1.1991. Not only that such an agreement to sell would not vest any  legal

right in his favour; it is apparent that it may not have been difficult  for

him to have had the aforesaid agreement  to  sell  notarized  in  connivance

with his brother, for the purpose sought to be achieved.   Secondly,  it  is

apparent from the factual position  depicted  in  the  foregoing  paragraphs

that  Harender  Singh,  despite  his  having  filed  objections  before  the

Recovery Officer, had abandoned the contest raised by him by  not  appearing

(and  by  not  being  represented)  before  the   Recovery   Officer   after

26.10.2005, whereas, the Recovery Officer had passed the order  of  sale  of

the property by way of public auction more than two years  thereafter,  only

on 5.5.2008.  Having abandoned his claim before  the  Recovery  Officer,  it

was not open to him to have reagitated the same by filing  a  writ  petition

before the High Court.   Thirdly,  a  remedy  of  appeal  was  available  to

Harender Singh in respect of the order of the Recovery Officer  assailed  by

him before the High Court under Section 30, which is being extracted  herein

to assail the order dated 5.5.2008:

 

      “30.  Appeal   against   the   order   of   Recovery   Officer.—   (1)

      Notwithstanding anything contained in section 29, any person aggrieved

      by an order of the Recovery Officer made under this  Act  may,  within

      thirty days from the date on which a copy of the order  is  issued  to

      him, prefer an appeal to the Tribunal.

 

      (2) On receipt of an appeal under sub-section (1), the  Tribunal  may,

      after giving an opportunity to the appellant to be  heard,  and  after

      making such inquiry as it deems fit, confirm, modify or set aside  the

      order made by the Recovery Officer in exercise  of  his  powers  under

      section 25 to 28 (both inclusive).”

 

 

 

The High Court ought not to have interfered with in the matter  agitated  by

Harender Singh in exercise of its writ jurisdiction.  In fact,  the  learned

Single Judge rightfully  dismissed  the  writ  petition  filed  by  Harender

Singh.  Fourthly, Harender Singh could not be allowed to raise  a  challenge

to the public auction held on  28.8.2008  because  he  had  not  raised  any

objection  to  the  attachment  of  the  property   in   question   or   the

proclamations and notices  issued  in  newspapers  in  connection  with  the

auction thereof.  All these facts cumulatively lead to the  conclusion  that

after 26.10.2005, Harender Singh had lost all interest in  the  property  in

question and had therefore, remained a silent spectator  to  various  orders

which came to be passed from time to time.  He had, therefore, no  equitable

right in his favour to assail the auction-purchase made by  Sadashiv  Prasad

Sinha on 28.8.2008.  Finally, the public auction under  reference  was  held

on 28.8.2008.  Thereafter the same was confirmed on 22.09.2008.   Possession

of the property was handed over to  the  auction-purchaser  Sadashiv  Prasad

Sinha on 11.3.2009.  The auction-purchaser  initiated  mutation  proceedings

in respect of the property in question.  Harender Singh did  not  raise  any

objections in the said mutation proceedings.  The said mutation  proceedings

were also finalized in favour of  Sadashiv  Prasad  Sinha.   Harender  Singh

approached the High Court through CWJC No.16485 of 209 only  on  27.11.2009.

We are of the view that the challenged raised by  Harender  Singh  ought  to

have been rejected on the grounds of delay and latches,  especially  because

third party rights had emerged  in  the  meantime.   More  so,  because  the

auction purchaser was  a  bona  fide  purchaser  for  consideration,  having

purchased the property in furtherance of a duly publicized  public  auction,

interference by the  High  Court  even  on  ground  of  equity  was  clearly

uncalled for.

 

      For the reasons recorded hereinabove, we are  of  the  view  that  the

impugned order dated 17.5.2010 passed by the  High  Court  allowing  Letters

Patent Appeal No.844 of  2010  deserves  to  be  set  aside.   The  same  is

accordingly set aside.  The right of the appellant Sadashiv Prasad Sinha  in

Plot No.2722, Exhibition Road, P.S. Gandhi  Maidan,  Patna,  measuring  1289

sq.ft. is hereby confirmed.  In the above view  of  the  matter,  while  the

appeal preferred by Sadashiv Prasad Sinha stands allowed, the one  filed  by

Harender Singh is hereby dismissed.

 

                                                               ………………………….J.

                                                              (A.K. Patnaik)

 

 

 

                                                               ………………………….J.

                                                      (Jagdish Singh Khehar)

New Delhi;

January 8, 2014

 

 

 

 

 

 

 

 

 

Novice Attorney
on 13 January 2014
Published in Property Law
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