*THE HON’BLE SMT. JUSTICE T.MEENA KUMARI AND THE HON’BLE SRI JUSTICE SANJAY KUMAR +WRIT APPEAL NO.657 OF 2005 %12-04-2010 # M/s.Shyam Trading Company, Rep. by its Prop: Shyam Chandak, S/o Laxminarayana Chandak, R/o 60, Asbestos Colony, Karkhana Road, Secunderabad, Presently staying in R.No.31, Hotel Talmahal, S.D. Road, Secunderabad. … Petitioner Vs. $ Sri M.Krishna S/o M.Ramesham, R/o 1-4-181, Balajinagar, Jagityal, Karimnagar District. And Others. … Respondents <GIST: >HEAD NOTE: ! Counsel for appellant : Sri M.S.Prasad ^ Counsel for respondents : Sri Vedula Venkataramana for R-1 and R-2, G.P. for Co-operation for R-4 and R-7, Sri M.Damodar Reddy for for R-5 & Sri P.S.Rajasekhar for R-6. ? CASES REFERRED: 1) AIR 1954 SC 349 2) AIR 1962 AP 271 3) AIR 1996 SC 2781 4) AIR 2007 SC 1874 5) AIR 1971 SC 2337 6) AIR 1984 AP 159 7) AIR 2003 SC 3789 THE HON’BLE SMT. JUSTICE T.MEENA KUMARI AND THE HON’BLE SRI JUSTICE SANJAY KUMAR WRIT APPEAL NO.657 OF 2005 DATED 12TH APRIL, 2010 BETWEEN M/s.Shyam Trading Company, Rep. by its Prop: Shyam Chandak, S/o Laxminarayana Chandak, R/o 60, Asbestos Colony, Karkhana Road, Secunderabad, Presently staying in R.No.31, Hotel Talmahal, S.D. Road, Secunderabad. … Petitioner And Sri M.Krishna S/o M.Ramesham, R/o 1-4-181, Balajinagar, Jagityal, Karimnagar District. And Others. … Respondents THE HON’BLE SMT. JUSTICE T.MEENA KUMARI AND THE HON’BLE SRI JUSTICE SANJAY KUMAR WRIT APPEAL NO.657 OF 2005 JUDGMENT: (Per SK,J) An auction sale of immovable property under the Andhra Pradesh Co-operative Societies Act, 1964 and the Rules framed thereunder is called in question. By order dated 07.02.2005 in Writ Petition No.1303 of 2005, a learned Judge reversed the Judgment of the Andhra Pradesh Co- operative Tribunal, Hyderabad and upheld the said auction sale. Hence, this appeal by the erstwhile owner of the property. The appellant, a proprietary concern, suffered the Award dated 06.05.2000 in ARC No.81/2000-OSD under Section 61 of the Andhra Pradesh Co-operative Societies Act, 1964 (hereinafter, ‘the Act of 1964’), whereby it was directed to pay the Charminar Co-operative Urban Bank Limited, Hyderabad, the sixth respondent herein, a sum of Rs.27,24,810/- with interest at 21% per annum within two weeks. In the event of default, the sixth respondent Bank was held entitled to recover the entire dues jointly and severally from the Proprietor, Shyam Prasad, and the guarantors, personally or from their properties, movable and/or immovable or both. Aggrieved thereby, the appellant filed CTA (SR) No.6370 of 2001, which was thereafter numbered as CTA No.239 of 2003, before the Andhra Pradesh Co-operative Tribunal, Hyderabad (hereinafter, ‘the Tribunal’). The Tribunal granted interim stay of the operation of the Award subject to the appellant depositing a sum of Rs.7.50 lakhs within one month. As the appellant failed to comply with the said condition, the sixth respondent Bank sought execution of the Award in E.P. No.21 of 2001. Under Section 70 of the Act of 1964, the Registrar of Co-operative Societies is empowered to recover the amount due under the decision of an Arbitrator by sale of the property of the person against whom such decision has been passed. As the Proprietor, Shyam Prasad, had mortgaged his properties with the sixth respondent Bank while availing the loan facility, recovery was sought to be effected in execution by bringing to sale the Proprietor’s house and site admeasuring 300 square yards in Plot No.60, Survey No.160, Thokatta Village, Secunderabad Cantonment, Secunderabad. The proclamation of sale under Rule 52(11)(e) of the Andhra Pradesh Co-operative Societies Rules, 1964 (hereinafter, ‘the Rules of 1964’) was issued by the Deputy Registrar of Co-operative Societies on 07.07.2001 fixing the date of auction sale as 13.08.2001, a clear 30 days after the date of the proclamation as required by the Rule. However, it appears that the auction sale did not take place on the stipulated date and a second sale proclamation was issued by the Deputy Registrar of Co-operative Societies on 20.12.2001 fixing the date of the auction sale as 23.01.2002. The gap of a clear 30 days between the dates of the proclamation and the auction sale was again maintained. However, once again, the sale did not take place on 23.01.2002 leading to the issuance of a third sale notice on 11.04.2002 whereby the auction sale was proposed to be held on 24.04.2002. Yet again, the sale was not conducted on the said date leading to the issuance of the fourth sale notice dated 01.08.2002 fixing the date of the auction sale as 24.08.2002. Relevant to note, neither the sale notice dated 11.04.2002 nor the sale notice dated 01.08.2002 provided a 30 days gap before the date of the auction. The sale notice dated 01.08.2002 was served upon the appellant, which moved an application in the pending CTA (SR) No.6370 of 2001 seeking stay of the sale proceedings on 24.08.2002. This I.A. was filed on 21.08.2002 but immediately thereafter, on 22.08.2002 the appellant approached this Court by way of Writ Petition No.15814 of 2002. The appellant sought a writ of certiorari to quash the notice dated 01.08.2002 and to hold that the proposed auction of the appellant’s property was illegal, arbitrary and contrary to statutory provisions. Notice in the said writ petition was served on the sixth respondent Bank on 23.08.2002. The writ petition was disposed of by a learned Judge of this Court on 06.09.2002, without adjudication of the matter on merits. The learned Judge took note of the fact that the appellant had deposited an amount of Rs.6.50 lakhs to establish its bona fides and accordingly granted time till 07.01.2003 to the appellant to pay the balance amount due to the sixth respondent Bank. Relevant to note, the sixth respondent Bank, through its counsel, agreed to the said disposal and also agreed not to proceed with the sale of the property. The learned Judge also added a default clause that if the appellant failed to make the payment as agreed, the sixth respondent would be at liberty to proceed with the sale. It appears that the auction sale of the property fixed on 24.08.2002 was conducted, though the same was not disclosed during the proceedings in W.P.No.15814 of 2002. Thereby, respondents 1 and 2 herein came into the picture. M.Krishna, respondent 1, along with his father, M.Ramesham, participated in the auction sale and emerged as the highest bidders. However, the name of M.Virupakshi, respondent 2 herein, the mother of M.Krishna, was introduced in the sale certificate as per the request of her son. As stated supra, the auction purchasers remained undisclosed at the time of the disposal of W.P.No.15814 of 2002. In the meanwhile, the appellant filed an application in WPMP No.2747 of 2003 in W.P.No.15814 of 2002 seeking extension of time for making the payment of the balance amount. This application was allowed by the learned Judge on 10.02.2003 granting the appellant time till 25.03.2003 to comply with the undertaking given by it with regard to the payment of the balance amount. Pertinent to note, the learned Judge took note of the amounts already paid by the appellant towards its loan liability and the fact that the appellant claimed the balance amount due to be Rs.3.85 lakhs only. The learned Judge also adverted to the fact that the sixth respondent Bank, through its counsel, did not dispute the factum of the appellant having paid Rs.16.15 lakhs by 28.08.2002. Further, the sixth respondent Bank, through its counsel, undertook not to proceed with the sale of the property which was the subject matter of the writ petition till 25.03.2003. It is stated that on 11.02.2003, the counsel for the sixth respondent Bank filed an application in W.P.No.15814 of 2002 seeking modification of the order passed a day earlier. However, no orders seem to have been passed on the same. It appears that the sixth respondent Bank, for the first time, disclosed therein that the sale had already been conducted and confirmed; and that the sale certificate dated 10.02.2003 had been issued in favour of M.Virupakshi, respondent 2. The appellant, claiming knowledge of the sale only from this date, approached the Tribunal challenging the sale certificate dated 10.02.2003 in CTA No.61 of 2003. By Judgment dated 22.11.2004, the Tribunal set aside the impugned sale certificate on the ground that several irregularities were committed by the sale officer, impleaded eo nomine as the fifth respondent herein, during the auction sale. Aggrieved thereby, respondents 1 and 2, the auction sale purchasers, filed Writ Petition No.1303 of 2005, which was allowed by the learned Judge by order dated 07.02.2005, whereby the Judgment of the Tribunal in CTA No.61 of 2003 was reversed, and the auction sale and consequently the sale certificate were upheld. Heard Sri M.S.Prasad, learned counsel for the appellant; Sri Vedula Venkataramana, learned senior counsel for respondents 1 and 2; the learned Government Pleader for Co-operation for respondents 4 and 7; Sri P.S.Rajasekhar, learned counsel for the sixth respondent Bank and Sri M.Damodar Reddy, learned counsel for the sale officer- respondent 5. Sri M.S.Prasad, learned counsel for the appellant, contended that the auction sale was conducted in flagrant violation of the statutory procedural norms prescribed under Rule 52 of the Rules of 1964. He asserted that the violation of these binding provisions vitiated the entire transaction, thereby invalidating the impugned sale and consequential sale certificate. The learned counsel pointed out that Rule 52(11)(e) of the Rules of 1964 posits a mandatory gap of 30 days between the date of proclamation and the date of auction sale, which was not maintained in the present case. He pointed out that Rule 52(11)(f) made it amply clear that where the sale was adjourned for a period longer than 7 days, a fresh proclamation under Rule 52(11)(e) had to be made. However, in the present case, notwithstanding the adjournment of the sale beyond a period of 7 days, it is pointed out that neither a sale proclamation under Rule 52(11)(e) was issued nor was the hiatus of 30 days maintained as required by the Rule. The learned counsel also pointed out that the notice dated 01.08.2002 did not stipulate the time and place of the auction as required in the Rule. He further pointed out that the notice dated 01.08.2002 was not issued by the District Registrar of the Co-operative Societies as required under Rule 52(11)(f) but was issued by the Sale Officer himself. The aforestated procedural violations, according to the learned counsel, render the auction sale invalid in law. On facts, the learned counsel submitted that there was any amount of doubt as to whether the auction purchasers had remitted the requisite Earnest Money Deposit (EMD) prior to the commencement of the auction. Further, the presence of 7 bidders is also doubted as there is no record of their participation. It is pointed out that there is no proof of any of these alleged bidders depositing the EMD. The learned counsel stated that the auction purchasers had produced the credit voucher dated 26.08.2002 in evidence of the deposit of the EMD, which was well after the auction sale on 24.08.2002. The learned counsel submitted that the auction purchasers had failed to deposit 15% of the bid amount by way of cash/demand draft on the date of the auction and that a cheque for the same had been accepted which was realized long thereafter on 14.09.2002. This, it is pointed out, is in clear violation of Rule 52(11)(g) of the Rules of 1964. In so far as the balance amount is concerned, the learned counsel adverted to Rule 52(11)(h) of the Rules of 1964 which requires the same to be paid within 15 days from the date of the auction sale. It is pointed out that in the present case, the balance 85% of the purchase money was paid and accepted only on 05.02.2003 in violation of the mandatory requirement of Rules 52(11)(h) and (i). The factual aspects in this regard are stressed upon by the learned counsel to support his contention that the entire transaction was sham and fraudulent. It is pointed out that the payment was also made on the basis of the loan obtained by the auction purchasers from the Central Bank of India which clearly indicates that they did not have the wherewithal to pay the amount within the time frame stipulated by the Rules. The learned counsel further stressed upon the conduct of the sixth respondent Bank during the course of the proceedings before this Court in the earlier round of litigation. He pointed out that the factum of the auction sale held on 24.08.2002 was deliberately suppressed and on the other hand, the sixth respondent Bank undertook before this Court on no less than two occasions that it would not proceed with the sale. The first such undertaking was given on 06.09.2002. Notwithstanding the same, the sale transaction was proceeded with as is evident from the correspondence placed on record and the events that occurred. The learned counsel therefore contended that the Tribunal had rightly held that the auction sale was vitiated by procedural irregularities and that the learned Judge ought not to have reversed the said finding. Sri Vedula Venkataramana, learned senior counsel for respondents 1 and 2, stated that the appellant had failed to apply to the Registrar to set aside the sale under Rule 52(14)(i) of the Rules of 1964 and was therefore estopped from challenging the sale certificate issued upon the confirmation of the sale. The learned senior counsel pointed out that the appellant had committed default in the payment of the loan amount in spite of ample opportunity and time being afforded to it and therefore could not seek any relief from this Court. He further contended that having assailed the sale notice dated 01.08.2002 in W.P.No.15814 of 2002 and having invited the final order dated 06.09.2002 therein, it was not open to the appellant to re-open its challenge to the said sale notice. He urged that in any event, the learned Judge had rightly held that the time gap of 30 days prescribed under the Rules of 1964 was applicable only to the initial notice and not to the notices issued after the adjournment of the sale under the first notice. He argued that the lapses, if any, on the part of the authorities in the conduct of the sale could not be permitted to visit any adversity upon his clients as they were bona fide purchasers in an auction sale. He pointed out that his clients had been residing in the subject property since the year 2003 and that equities would invariably weigh in their favour. All the more so, when the appellant admittedly committed default in repayment of the loan to the sixth respondent Bank inviting the consequential coercive action as per law in respect of the mortgaged property. The learned senior counsel urged that the procedural lapses, if any, did not cause any serious prejudice to the appellant warranting the invalidation of the auction sale at this late point of time. He accordingly prayed for dismissal of the appeal upholding the order of the learned Judge. Sri P.S.Rajasekhar, learned counsel representing the sixth respondent Bank, argued that the appellant, having committed default in the repayment of the loan and having suffered the Award under Section 61 of the Act of 1964, failed to deposit the amount payable despite ample opportunity being granted time and again. The learned counsel therefore supported the action taken in bringing to sale the subject house property belonging to the Proprietor of the appellant concern. The learned counsel also pointed out that the Arbitration Award dated 06.05.2000 in ARC No.81 of 2000-OSD had been substantially confirmed by the Tribunal in CTA No.239 of 2003 by Judgment dated 14.07.2004. The only modification of the Award was to the effect that the appellant should pay the reduced interest of 6% instead 21% upon the amount payable from the date of the Award till the date of realization. The learned counsel stated that the Judgment of the Tribunal in CTA No.239 of 2003 was the subject matter of challenge in W.P.No.659 of 2005 which is still pending on the file of this Court. He therefore contended that in the light of the chronic default in repayment, the appellant could not be permitted to assail the coercive action initiated for recovery of the amount due, under Section 70 of the Act of 1964. Though the Sale Officer was impleaded eo nomine in the writ petition also, he did not choose to put in his appearance before the learned Judge. However, in this appeal the Sale Officer, being the fifth respondent herein, filed a counter claiming that he had not committed any irregularities in conducting the auction sale. He asserted that he had held the auction by duly following the procedure laid down by law. He assailed the findings of the Tribunal to the contrary, stating that no notice had been given to him before the Tribunal passed orders in CTA No.61 of 2003. The Sale Officer further contended that the appellant had failed to avail the remedies contemplated under Rule 52 of the Rules of 1964 and it had failed to establish any substantial injury caused to it by reason of any irregularity or mistake in the sale conducted by him. He denied that any irregularity had been committed by him in the receipt of the sale proceeds from the successful bidders in the auction sale. Sri M.Damodar Reddy, learned counsel representing the Sale Officer, reiterated the contents put forth in the said counter. Though multifarious and convoluted arguments were advanced at the bar by the learned counsel representing the contesting parties, we are not inclined to venture into the factual realm. We accordingly deem it unnecessary to decide as to whether respondents 1 and 2 had remitted the required EMD amount prior to the date of auction, whether 7 bidders participated in the said auction and whether respondent 2, being the mother of respondent 1 who allegedly participated in the auction along with his father, could have been introduced as the purchaser of the subject property in the impugned sale certificate. We also eschew from our consideration, the attack on the ground that the sale price procured in the auction was far lesser than the actual value of the property auctioned. We find that the matter is amenable to disposal on admitted facts as per legal principles and therefore, factual conundrums need not detain us. Notwithstanding the consistent attempts on the part of the respondents to stress upon the fact that the appellant was a chronic defaulter in so far as its loan repayment is concerned, we are of the opinion that the same assumes an insignificant role in so far as the validity of the auction sale is concerned. Under Section 70 of the Act of 1964, the Registrar of Co-operative Societies is empowered to recover the amounts due under an Arbitration Award passed under Section 61 by bringing to sale the property of the person who suffered such Award. However, a compendious procedure has been prescribed under Rule 52 of the Rules of 1964 for executing decrees, decisions or orders. These Rules are statutory in nature owing their origin to Section 130 of the Act of 1964. Therefore, the auction sale has to necessarily adhere to the procedural norms prescribed by these Rules, irrespective of the nature and extent of the default committed by the Judgment Debtor. The procedure set out under Rule 52(11) covers minutely the steps to be taken by the authorities at every stage while conducting the sale of the mortgaged property of the Judgment Debtor. “Rule 52 (11): In respect of an attachment and sale, or sale without attachment of immovable property, the following procedure shall be followed: (a) … (b) … (c) … (d) … (e) Proclamation of sale shall be published by affixing a notice at the office of the Registrar of the district and taluk office atleast thirty days before the date fixed for the sale and also beat of drum in the village on two consecutive days previous to the date of sale and on the day of sale. Such proclamation shall, where attachment is required before sale be made after the attachment has been affected. Notice shall also be given to the decree-holder and the defaulter. The proclamation shall state the time and place of sale and specify as fairly and accurately as possible. i) the property to be sold; ii) any encumbrance to which the property is liable; iii) the amount for the recovery of which sale is ordered; and iv) every other matter which the sale officer considers material for a purchaser to know in order to judge the nature and value of the property. (f) When any immovable property is sold under these rules, the sale shall be subject to the prior encumbrances on the property, if any. The decree-holder shall, when the amount for the realization of which the sale is held, exceeds one hundred rupees, furnish to the sale officer within such time as may be fixed by the sale officer or by the Registrar of the district, an encumbrance certificate from the Registration Department for a period of not less than twelve years prior to date of attachment of the property sought to be sold or in a case falling under the proviso to sub-rule (10), prior to the date of the application for execution. The time for production of the encumbrance certificate may be extended at discretion of the sale officer or the Registrar of the district, as the case may be. The sale shall be by public auction to the highest bidder, provided that it shall be open to the sale officer to decline to accept the highest bid where the price offered appears to be unduly low or for other reasons and provided also that the Registrar of the district or the sale officer may, in his discretion adjourn the sale to a specified day and hour, recording his reasons for such adjournment. Where a sale is so adjourned for a longer period than seven days a fresh proclamation under Clause (e) shall be made, unless the judgment-debtor consents to waive it. The sale shall be held after the expiry of not less than thirty days calculated from the date on which notice of the proclamation was affixed at the office of the Registrar of the district. The time and place of sale shall be fixed by the Registrar of the district and the place of sale shall be the village or town where the property to be sold is situated or such adjoining prominent place of public resort as may be fixed by the said Registrar. Provided that in case where an encumbrance certificate is not obtainable owing to the destruction of the connected records, an affidavit from the village karnam in regard to the encumbrances known to him supported by a certificate from the Registration Department, that the encumbrance certificate cannot be granted owing to the destruction of the connected records, shall be accepted in the place of an encumbrance certificate. (g) A sum of money equal to fifteen per cent of the price of the immovable property shall be deposited by the purchaser with the sale officer at the time of the purchase, and in default of such deposit, the property shall forthwith be resold: Provided that where the decree-holder is the purchaser and is entitled to set off the purchase money under Clause (k), the sale officer shall dispense with the requirement of this rule. (h) The remainder of the purchase money and the amount required towards stamp fees for the certificate under Clause (v) of sub-rule (14) shall be paid within fifteen days from the date of sale: Provided that the time for payment of the stamp fees may, for good and sufficient reasons be extended at the discretion of the Registrar of the district upto thirty days from the date of sale: Provided further that in calculating the amounts to be paid under this clause, the purchaser shall