HON'BLE SRI JUSTICE R. SUBHASH REDDY WRIT PETITION No.10599 of 2004 Date : 03.02.2011 Between : Smt. Ravula Mallamma. …..Petitioner And The Sub-Divisional Co-operative Officer/Sale Officer, Huzurabad & others. …..Respondents HON'BLE SRI JUSTICE R. SUBHASH REDDY WRIT PETITION No.10599 of 2004 ORDER : This writ petition is filed, seeking directions by way of Mandamus, declaring the proceedings issued by the 1st respondent in E.P.No.11/2003-E, dated 18.05.2004, as illegal, arbitrary and contrary to Section 104 of the A.P. Co-operative Societies Act, 1964 (hereinafter referred to as ‘the APCS Act’). The 4th respondent was a former Secretary of the 3rd respondent-Society. On the allegation that he has misappropriated an amount of Rs.5,75,475/-, on the application filed by the 3rd respondent-Society, an order of surcharge was passed, as contemplated under Section 60 of the APCS Act. Aggrieved by the same, the 4th respondent preferred an appeal before the A.P. Co- operative Tribunal, in CTA.No.159/1998. When he sought interim orders pending disposal of appeal, the Tribunal has passed a conditional order on 06.10.1998, subject to deposit of 50% of the surcharge order or offer 3rd party or personal security to the tune of the above amount. To furnish security in compliance of the said interim order in CTA.No.159/1998, the petitioner stood as surety to the 4th respondent, by mortgaging her lands covered by Sy.No.565/A, admeasuring Ac.6.20 gts., Sy.No.567/F, admeasuring Ac.2.00 gts., and Sy.No.568/D, admeasuring Ac.1.30 gts., and the mortgage deed was registered. It is stated that subsequently, the appeal filed by the 4th respondent was dismissed. On the ground that the 4th respondent has not paid the amount covered by surcharge order, respondents have taken steps to execute the said order. Upon the application filed by the 3rd respondent, the respondents have issued the impugned notice to auction the immovable property of the petitioner and on the ground that there were no bidders on the notified auction date, it has been recorded that the 3rd respondent-Society has agreed to take the above lands as per Rules. In this writ petition, mainly, it is the case of the petitioner that no notice was issued to her before taking steps under Rule 52 of the APCS Rules, 1964. It is submitted that in view of the provision under Section 104 of the APCS Act and Rule 53(2) of the APCS Rules, it is obligatory on the part of respondents to give notice to the petitioner before taking steps for sale of mortgaged property by invoking Rule 52 of the said Rules. The Deputy Registrar of Co-operative Societies, Karimnagar, has filed counter affidavit on behalf of respondents 1, 2 and 5. In the counter affidavit, while narrating the facts and denying the various allegations made by the petitioner, it is stated that as much as CTA.No.159/1998 preferred by the 4th respondent is dismissed, respondents have proceeded under Rule 52 of the Rules. It is stated that the 1st respondent has passed the set off orders in favour of the 3rd respondent-Society, as much as there were no bidders in the auction conducted on 18.05.2004. With reference to the allegation of petitioner that she is not issued with any notice, it is stated that as the matter relate to misappropriation of funds of the Society by the Ex- Secretary, petitioner is not entitled to any notice under Section 104 of the APCS Act. Heard learned counsel for petitioner and the learned Government Pleader appearing for respondents 1, 2, and 5 and there is no representation on behalf of the 3rd respondent-Society and the 4th respondent. In this case, it is to be noticed that there is no order or any award passed against the petitioner. There is an order of surcharge against the 4th respondent, on the application filed by the 3rd respondent-Society. The lands of the petitioner were mortgaged only during the course of pendency of the appeal preferred by the 4th respondent against the orders of surcharge, in CTA.No.159/1998. Pending the said CTA, when the 4th respondent sought interim orders, the appellate Tribunal has passed a conditional order on deposit of 50% of the amount or giving security for the equivalent amount. On the request of the 4th respondent, who is the son of the petitioner, the petitioner has mortgaged her property for security, in compliance of the interim orders. After dismissal of the appeal, if the respondents want to proceed with the mortgaged property, it can be only under Section 104 of the APCS Act. Section 104 (1) of the APCS Act empowers the Committee of the Financing Bank or any person authorized by the Primary Agricultural Co- operative Society, in case of default of payment of mortgaged money due, to recover the same by permitting the sale of mortgaged property without the intervention of the Court. However, such power under Section 104(1) is restricted by conditions as enumerated under Section 104(2) of the Act. From a reading of the provision under Section 104(2) of the APCS Act, it is clear that before conducting auction of mortgaged property, it obligates issuance of notice to the mortgager, requiring payment of such money due to the Society. In the instant case, it is not in dispute that prior to taking steps for sale of property under Rule 52 of the Rules, the petitioner/mortgager was not put on notice as contemplated under Section 104(2) (b) of the APCS Act. Further, it is to be noticed that Rule 53(2) of the APCS Rules also makes it clear that before taking steps for sale of mortgaged property, the mortgagor is to be given notice. In that view of the matter, as the petitioner was not put on notice before taking steps for sale of the mortgaged property under Rule 52 of the APCS Rules, the impugned order is liable to be set aside. It is also to be noticed that when there are no bidders in the auction conducted for sale of the mortgaged property in execution proceedings under Rule 52 of the Rules, it has to be notified again for sale, but there is no power to set off the mortgaged property in favour of the Society, as recited in the impugned order. In that view of the matter, the order, dated 18.05.2004, passed by the 1st respondent in E.P.No.11/2003-E, is liable to be set aside. Accordingly, the writ petition is allowed and the order, dated 18.05.2004, passed by the 1st respondent in E.P.No.11/2003-E, is set aside. However, it is open for the respondents to take steps for sale of the properties mortgaged by the petitioner, only after issuing notice as contemplated under Section 104 of the APCS Act and under Rule 53(2) of the APCS Rules, to recover the amounts. It is also open to the respondents to take any other steps under the APCS Act, to enforce the surcharge order passed against the 4th respondent. If the petitioner has deposited Rs.1,00,000/- in terms of the interim orders passed by this Court on 28.06.2004 or in the extended time as per the order, dated 15.07.2004, she is entitled for refund of the same without any interest. Subject to the above directions, the writ petition is allowed. No costs. ______________________ R. SUBHASH REDDY, J 3rd February 2011 ajr