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Debt Recovery Tribunal – Auction Sale – third party purchaser – a bonafide purchaser in public auction No equities to disturb – sale confirmed and possession delivered – mutation of entries completed – Having abandon the claim petition and a Writ petition challenging the auction sale not maintainable due to laches and delays and also due alternative provision of appeal – Non -Application some income tax rules in recovery process -Rule 11- not vitiate the auction proceedings except on ground of fraud or collusion – D.B. of High court wrongly interfered the Recovery proceedings and as such set side – Apex court allowed the appeal = Sadashiv Prasad Singh … Appellant Versus Harendar Singh & Ors. … Respondents = 2014 ( JANUARY – VOL -1) JUDIS.NIC.IN/ S.C./ FILE NAME= 41140

Debt Recovery Tribunal – Auction Sale – third party purchaser – a bonafide purchaser in public auction  No equities to disturb – sale confirmed and possession delivered – mutation of entries completed – Having abandon the claim petition and a Writ petition challenging the auction sale not maintainable due to laches and delays and also due alternative provision of appeal  – Non -Application some income tax rules  in recovery process -Rule 11- not vitiate the auction proceedings except on ground of fraud or collusion – D.B. of High court wrongly interfered the Recovery proceedings and as such set side – Apex court allowed the appeal =

 

“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.”

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. =

 

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.

 2014 ( JANUARY – VOL -1) JUDIS.NIC.IN/ S.C./ FILE NAME= 41140

 “REPORTABLE”

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

 

 

 

 

 

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