P.M.Abubakar vs State Of Karnataka & Ors

3. These cross appeals have been filed by the debtor (Keshva N. Kotian) and auction-purchaser (P.M. Abubakar). As the debtor committed default in repayment of loan to the Bank (Mahalakshmi Co-operative Bank Limited), recovery proceedings were initiated by the Bank. That culminated with an award passed by the Joint Registrar Co-operative Societies, Mysore dated 02.01.2004 against the debtor for recovery of Rs. 13, 65,899.70 with interest at 19% p.a. As the debtor failed to pay the amount in terms of the award, execution petition was filed. The debtor, however, filed an appeal being Appeal No. 419 of 2004 before the Karnataka Appellate Tribunal, Bangalore. On 21.06.2004, the Tribunal passed a conditional order of stay requiring the debtor to deposit 40% of the awarded amount within eight weeks, failing which the stay would stand vacated. The debtor failed to deposit that amount. Therefore, the bank after obtaining valuation report relating to the mortgage property, issued notice on 2.2.2005 in Form No. 6. In spite of notice, no payment was made by the debtor. As a result, the Bank issued notice of attachment in Form No. 7 on 25.02.2005. The notice of attachment was followed by a notice of auction issued on 3.3.2005, fixing the auction date as 11.04.2005. On 7.3.2005, the debtor’s brother (Shri Anand Kotian) filed an objection to the said proceedings. According to him, the property was a joint family property. This objection was enquired into and rejected on 22.3.2005.

4. The debtor submitted letters dated 6.4.2005 and 8.4.2005 requesting to stay the auction in view of the financial difficulties faced by him and paid only Rs. 25,000/- in the execution case filed against him. The auction sale was postponed pursuant to the request made by the debtor. The execution case was then transferred to the Assistant Registrar Co-operative Societies (hereinafter referred to as ‘ARCS’), as per the revised Government notification. A fresh notice was issued on 9.5.2005 for auction sale to be held on 17.6.2005, as no further payment was made by the debtor till that date.

5. The debtor’s brother filed a Writ Petition before the High Court of Karnataka at Bangalore being Writ Petition No. 15737 of 2005, challenging the sale proclamation. The High Court passed an interim order on condition of payment of 25% of the awarded amount within two weeks. In view of the interim order passed by the High Court, the auction sale scheduled on 17.6.2005 stood postponed. The Writ Petition filed by debtor’s brother was, however, disposed of on 29.6.2005 with an observation to consider his objection.

6. In the meantime auction sale was proposed to be held on 18.8.2005, but in view of the aforementioned High Court order the auction sale was postponed. The objection filed by the debtor’s brother was considered on eight dates. He, however, filed a memo before ARCS on 21.12.2006 for withdrawal of his objection. The said objection was finally dismissed on 16th July, 2007.

7. On 30.4.2007, appeal preferred by the debtor challenging the award dated 2.1.2004 was dismissed by the Karnataka Appellate Tribunal, Bangalore. That decision has not been challenged.

8. Once again a notice for auction sale of the mortgage property was issued on 18.7.2007, fixing the date of auction on 28.08.2007. The debtor filed a Writ Petition No. 13204 of 2007 (CS-DAS), challenging the sale proclamation. The High Court by order 27.08.2007 granted interim protection to the debtor on condition of depositing 40% of the awarded amount within two weeks, failing which the protection would stand vacated. The debtor had deposited Rs.1,00,000/- on 21.8.2007. He deposited further amount of Rs. 50,000/- on 27.8.2007 and assured to pay Rs. 50,000/- on 30.8.2007. On his request the auction sale fixed on 28.8.2007 was postponed.

9. As the debtor failed to pay the balance awarded amount as directed by the High Court, again a notice was issued on 9.10.2007 fixing the auction sale on 12.11.2007. The debtor filed memo before the High Court in Writ Petition No. 13204 of 2007 (CS-DAS), on the basis of which the said Writ Petition was dismissed as withdrawn having become infructuous.

10. As the balance awarded amount was not forthcoming, a fresh notice for auction was issued on 30.11.2007, fixing the date of auction sale as 27.2.2008. The debtor then filed a fresh Writ Petition No. 3098 of 2008 (CS-DAS) challenging the auction sale. The High Court vide order dated 25.2.2008 showed indulgence to him and stayed the auction sale scheduled for 27.2.2008 subject to the debtor depositing Rs. 10,00,000/- (Rs. Ten Lakhs only) within six weeks. It was made clear that if the debtor failed to pay the amount as directed, the protection as given shall stand vacated and then it would be open to the bank to proceed with the sale of mortgage property.

11. The debtor once again failed to pay the amount as directed by the High Court vide order dated 25.2.2008. As a result, a fresh notice for auction sale was issued on 28.7.2008 fixing the date for auction as 10.9.2008. The Respondent-Bank had obtained valuation report which estimated the value of the mortgage property at Rs. 44,80,000/-. The debtor was served with the notice of the auction sale. That notice was also published in the local Newspaper and by proclamation and tom tom. The debtor did not file any objection to the sale. The auction sale was accordingly, held on 10.9.2008, in which the appellant - auction purchaser was the highest bidder for Rs.51,50,000/- . The debtor then filed objections before the ARCS for setting aside the sale. That objection after due enquiry was rejected by the ARCS on 14.10.2008. That order has not been challenged.

12. Besides the objection filed before ARCS, the debtor also filed a writ petition before the High Court of Karnataka at Bangalore being Writ Petition No. 12901/2008 (CS-DAS), challenging the sale in favour of the auction purchaser. The High Court once again showed indulgence to the debtor by passing conditional interim order on 7.10.2008 directing the debtor to deposit Rs.5,00,000/- within three weeks failing which the interim protection would cease to operate. The debtor deposited Rs. 5,00,000/- on 3.11.2008.

13. Significantly, the Writ Petitions filed by the debtor being Writ Petition No. 3098/2008 and Writ Petition No. 12901/2008 came to be dismissed by the High Court on 3.12.2008. By these Writ Petitions, the debtor had challenged the auction sale with a prayer to set aside the auction in favour of the auction purchaser. With the dismissal of the said Writ Petitions, the challenge to the auction sale of the subject property on 10.09.2008 became final. Indeed, the debtor filed Writ Appeal No. 1914/2009 against the rejection of his writ petitions. That was disposed of on the basis of statement made by the debtor that writ appeal filed by him before the Karnataka Appellate Tribunal against the award dated 2.1.2004 was pending. That statement was incorrect as the said appeal (Appeal No. 419/2004) was already dismissed on 30.4.2007. Because of the said misleading statement made by the debtor, the High Court vide order dated 15.1.2009, whilst disposing the writ appeal observed that it would be in the fitness of things for the Tribunal to take up the appeal on merits expeditiously preferably within six weeks. It also observed that the objections filed by the debtor against the auction sale be considered in accordance with law.

14. The Sales Officer on 17.2.2009, after due consideration of the matter recommended confirmation of the sale in favour of the auction purchaser. On the basis of the said recommendation, ARCS passed a detailed order on 2.3.2009, confirming the sale in favour of the auction purchaser. Thereafter, Sale Deed in Form No. 10 was executed in favour of the auction purchaser on 5.3.2009; and sale certificate was also issued in his favour.

15. The debtor, however, chose to file appeal before the Deputy Registrar of Co-operative Societies, Udupi District (DRCS) against the order of confirmation of sale dated 02.03.2009, being appeal No. 07/08-09. The DRCS entertained the said appeal and by his order dated 18.7.2009 held that the sale was in accordance with the Rules but it was a case of under valuation of the property. On that ground, the confirmation of sale was set aside on condition that the debtor shall deposit Rs. 59,46,965/- with interest at 6% p.a. from 13.2.2009 till payment. The operative order passed by Deputy Registrar Co-operative Societies reads thus:

Deputy Registrar of Co-op. Societies Udupi District, Udupi.” Even this order has not been challenged by the debtor and was allowed to attain finality. At the same time, the debtor did not deposit the amount as directed in the said order.

17. The auction purchaser and the Bank preferred separate Writ appeals, being W.A. No. 1006/2010 (CS-DAS) and W.A. No. 2433/2010 (CS-DAS) respectively. The Division Bench of the High Court vide its common judgment dated 24.8.2011 disposed of both the appeals. The Division Bench noted that the Appropriate Authority concerned was competent to set aside the sale even if there was no application for setting aside the sale or factually such application has already been rejected. It noted that from the orders of DRCS and the learned Single Judge, it was evident that the debtor did not fulfill his obligation in spite of repeated opportunity given to him to pay the awarded amount. Even after noting this fact, the Division Bench opined that as the property in question was under valued at the time of auction sale, no fault could be found with the discretion exercised to set aside the sale under proviso to Sub rule 6(a) of Rule 38. On that finding, the Division Bench rejected the plea of the debtor and the Bank that without a pre deposit of the awarded amount as required under Rule 38 and that too within the time prescribed under the said Rule, the Appropriate Authority could not have set aside the sale. The Division Bench then adverted to the memo of calculation filed by the debtor and proceeded to pass order, which in its opinion was just and proper so as to adjust equities between the parties. The relevant extract of the impugned judgment, reads thus:

18. In spite of the aforementioned order, the debtor did not pay the amount as directed by the High Court. The matter, accordingly, proceeded before the Assistant Registrar of Co-operative Societies (ARCS), who issued a detailed communication to the debtor on 21.12.2011. The ARCS considered the plea taken by the debtor that he was entitled for certain adjustments and was not required to pay any further amount. The ARCS did not accept the said stand taken by the debtor and was of the opinion that the amount as directed by the Division Bench has not been paid. The ARCS in his communication dated 21.12.2011 has noted that a sum of Rs. 80,64,916/- was payable by the debtor out of which he had remitted only a sum of Rs. 41,69,200/- on 6.2.2010 and Rs. 20,19,925/- on 22.9.2011 totaling Rs. 61,89,125/-. There was still shortfall of Rs. 18,75,791.40 payable by the debtor. The communication of the ARCS dated 21.12.2011 was challenged by the debtor, by way of Writ Petition No. 48814/2011(CS-DAS) filed on 29.12.2011 before the High Court of Karnataka at Bangalore.

19. When the said Writ Petition No. 48814/2011 (CS-DAS) was pending, the debtor filed an application being IA No. 1/2012 in disposed of writ appeal No. 1006/2010 (CS-DAS) and writ appeal No. 2433/2010 (CS-DAS), for clarification of the order dated 24.8.2011. On 8.6.2012, the Division Bench passed the following order on the said IA No. 1/2012, which reads thus:

17. with these observations, the appeals are disposed of directing the 5th respondent to pay the amount as indicated above within a period of four weeks from the date of receipt of copy of this order, failing which the order of confirmation of sale shall stand.”

Even the Writ Petition was dismissed on 3rd December 2008. In the said writ petition, the debtor had also prayed for setting aside the sale. That prayer was also rejected. Indeed, the debtor resorted to remedy of writ appeal being Writ Appeal No. 1914/2009. That was disposed of by recording an incorrect statement of the debtor that his appeal against the Award was still pending. As a matter of fact, the appeal preferred by the debtor before the Karnataka Appellate Tribunal being Appeal No.419/2004, was already dismissed on 30th April, 2007. As a result of which, the Award passed against him had become final.

26. The fact that Writ Petitions were filed by the auction purchaser and the Bank against the order of Deputy Registrar (CS) dated 18th July 2009, that could not extricate the debtor from complying with the order of Deputy Registrar (CS) which he allowed to attain finality. As a matter of fact, the said order was passed on an appeal preferred by the debtor himself and thus he was bound by the same.

Provided that, if more persons than one have made deposit and application under this sub-rule, the application of the first depositor to the Recovery Officer shall be accepted:

rule (5) is made or if such application has been made and is rejected, the said Recovery Officer shall make an order confirming the sale:

33. We are also of the considered opinion that the writ appeal having been disposed of, in the guise of clarification, the Division Bench could not have passed any order at the instance of the debtor who had failed to challenge the decision of the Deputy Registrar. The writ appeals were filed by the auction purchaser and the Bank assailing the wrongful rejection of their Writ Petitions by the learned Single Judge. As the decision of the Deputy Registrar deserves to be set aside, the debtor cannot succeed on the basis of some observations made in the impugned judgments of the Division Bench or for that matter by the learned Single Judge and including some infirmity in the letter of the Assistant Registrar (CS) dated 21st December 2011.

38). That contention is not relevant to answer the matters in issue, in the present case. Reliance was then placed on the dictum in paragraphs 23 and 25 in the case of Shetty (supra) to contend that inaction or intentional conduct of the debtor does not extricate the Bank from following mandatory conditions including proper valuation of the property. We fail to understand as to how this decision will come to the aid of the debtor who has failed to pursue statutory remedy for setting aside the sale as per Rule 38; and moreso after the sale has already been confirmed in favour of the auction purchaser. Notably, even after the confirmation of sale, the Deputy Registrar showed indulgence to the debtor to deposit Rs.59,46,965/- with interest only at 6% from 13th February 2009 till the date of payment. The debtor, however, remitted the amount firstly on 6th February 2010 a sum of Rs.41,69,200/- and thereafter on 22nd September 2011 Rs.20,19,925/-. It was not in conformity with the order passed by the Deputy Registrar dated 18th July 2009.

36. Taking any view of the matter, therefore, we must hold that the High Court committed manifest error in dismissing the Writ Petitions filed by the appellant - auction purchaser challenging the decision of the Deputy Registrar (CS) dated 18th July 2009. The High Court ought to have allowed the Writ Petition as the Deputy Registrar had no jurisdiction to entertain appeal against the order of confirmation of sale issued under Section 89A read with Rule 38 of the Rules; and also because, admittedly, the debtor failed to pay the awarded amount in spite of repeated opportunities given to him from time to time. Moreover, the debtor cannot succeed in the Writ Petition filed by the auction purchaser and the Bank against the decision of the Deputy Registrar and get higher or further relief in such proceedings. Thus, the Division Bench having finally disposed of the writ appeal ought not to have entertained the application preferred by the debtor in the guise of clarification and to pass any order thereon - which would enure to the benefit of debtor who is in default, having become functus officio.

37. Accordingly, we allow the appeals preferred by the auction purchaser (P.M.Abubakar) being Civil Appeals arising out of SLP(Civil) Nos. 30130- 30131/2012 and SLP(Civil) Nos. 33314-33315/2012 in the above terms. The order passed by the Deputy Registrar (dated 18.7.2009); and of the High Court (dated 11.01.2010; 24.8.2011, 8.6.2012 and 29.6.2012) confirming the order of the Deputy Registrar of setting aside the sale of the subject mortgage property in favour of the auction purchaser, are hereby set aside. The Civil Appeals arising out of SLP(Civil) Nos. 25613-25614/2013 filed by the debtor (Keshava N. Kotian) are dismissed with observation that the Appropriate Authority shall proceed to disburse the amount already deposited by the debtor and including the amount of sale proceeds, in accordance with law forthwith. No order as to costs.