(Per : HONOURABLE MR.JUSTICE A.J. DESAI) 1 This intra-court appeal is arising from the Order dated 8.9.2010 passed in Special Civil Application No.6360 of 2010 by which the petition filed by the present appellant challenging the action of the respondent No.2-Bank of selling the properties in auction without following the procedure prescribed under the Gujarat Cooperative Societies Rules, 1965 (hereinafter referred to as "the Rules" for short) was dismissed by the learned Single Judge.
2 Brief facts arising from the record of the case are as under:
2.1 That the respondent No.2 i.e. Panchmahal District Central Cooperative Bank Limited which is a cooperative bank, registered under the provisions of the Gujarat Cooperative Societies Act, 1961 (hereinafter referred to as "The Act" for short) and it is a district level financial institution. The appellant-petitioner is also a society registered under the said Act and is functioning for the member primary societies/farmer members thereof. The object of the society is to provide fertilizer and aid to the farmers for agricultural purposes.
2.2 That Respondent No.2 Bank had provided Letter of Credit of Rs. 3 lacs for fertilizer loan and Rs. 2 lacs for the stock. The society could not be able to repay the amount and, therefore, the respondent No.2 Bank filed a Lavad Suit (Arbitration Case No.614 of 2003) before the learned Board of Nominees, Godhra, under the provisions of the said Act. The Board of Nominees, by its Award dated 16.8.2005 decreed the suit in favour of the respondent No.2 Bank. Pursuant to the decree, an advertisement was published at the instance of the respondent No.2 Bank inviting offers for three different properties including the property of the present appellant which were to be put for auction due to the decree passed against the judgment debtor and due to recovery proceedings undertaken by the Recovery Officer. Having came to know about this advertisement, the Administrator of the appellant immediately filed an application, being Revision Application No.184 of 2008, before the Agricultural and Cooperation Department, Gandhinagar, challenging the advertisement on the ground that the respondent No.2-Bank while issuing the public advertisement has not followed the procedure prescribed under the Rules. The Revision came to be dismissed on 5.1.2009 observing that the property was already transferred to the person who has offered the highest price of the disputed property. In the present case, the purchasers of the said property are joined as respondents No. 3 to 7. While disposing of the Revision Application, the Appellate Authority observed that the revisionist has not challenged the judgment and award rendered by the Board of Nominees before the Cooperative Tribunal by filing an appeal as provided under the Act. In view of this observation made by the appellate authority, the appellant-petitioner thought it fit to file an appeal before the Cooperative Tribunal and, therefore, he submitted an appeal challenging the decision rendered by the Board of Nominees along with an application for condonation of delay as the appeal was time barred. The Cooperative Tribunal dismissed the application for condonation of delay being Misc. Application No.24 of 2009 and, therefore, the present appellant challenged the said decision by way of filing a writ petition, being Special Civil Application No.7360 of 2009, before this Court. The learned Single Judge by judgment and order dated 4.12.2009 allowed the said writ petition and quashed the order of the Tribunal rejecting the delay condonation application in preferring the appeal and condoned the delay and further directed the Tribunal to hear the appeal on merits.
2.3 The learned Single Judge while disposing of the Special Civil Application No. 7360 of 2009, had an occasion to deal with the contention raised by the petitioner about the price of the properties fetched in the auction proceedings but did not decide the issue and observed that the said dispute can be challenged before the appropriate forum.
2.4 In these facts and circumstances of the case, the petitioner challenged the Order dated 5.1.2009 passed by the Agricultural and Cooperation Department, in Revision Application No.184 of 2008 by way of captioned writ petition. After hearing the parties, the learned Single Judge dismissed the petition on the ground that the auction which was held on 26.9.2008 was carried out in accordance with the provisions of the Rules in the presence of the representatives of the District Registrar. Hence, this appeal.
3 We have heard Mr. Pushpadatta Vyas for the appellant, Mr.N.J. Shah, learned AGP for respondent No.1, Mr. Dilip Rana, learned Advocate for respondent No.2 - Bank and Mr. Bharat B. Naik, learned Senior Counsel assisted by Mr. Tejas P.Satta for respondents No. 3 to 7 - the auction purchasers.
4 The first and foremost contention raised by the appellant in the appeal is with regard to non-dealing of the statutory provisions of the Cooperative Societies Rules, 1965 and particularly Rule No.119 of the said Rules. It is the case of the appellant that while issuing the public advertisement on 18.9.2008 inviting the offers for the sale of the disputed property, the respondent No.2-Bank has totally ignored the mandatory provisions of the Rule 119 which deals with the necessities of proclamation with regard to the property before sale. It is the case of the appellant that the authority has not fixed the date of proclamation of the sale of the property in the advertisement. It is further submitted that the advertisement does not disclose the time and place of sale of property and other necessary information which are provided under the said Rule. Rule-119 of the said Rules is reproduced here-in-below:
"119 Proclamation before sale - Proclamation of sale shall be published by affixing a notice in the notice in the office of the Recovery Officer and the Taluka Office at least thirty days before the date fixed for the sale and [the Recovery Officer shall cause the publication of the proclamation regarding the time and place of intended sale to be made by beat of drum in the village on the day prior to a fortnight and on two consecutive day previous to the date fixed for sale and on the date of sale prior to the commencement of the sale.] Such proclamation shall where attachment is required before sale, be made after the attachment has been effected. 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 as 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.
It is further submitted that the Recovery Officer is duty bound to follow the following mandatory directions provided in the said Rule:
proclamation of sale shall be published by affixing a notice in the Office of the Recovery Officer and the Taluka Office at least 30 days before the date fixed for the sale;
the Recovery Officer shall cause the publication of the proclamation regarding the time and place of intended sale to be made by beat of drum in village on the day prior to a fortnight and on two consecutive day previous to the date fixed for sale and on the date of sale prior to the commencement of the sale;
such proclamation shall where attachment is required before sale be made after the attachment has been effected;
notice shall also be given to the decree holder and the defaulter; and the proclamation shall state the time and place of sale and specify as fairly and accurately as possible.
5 Now looking to the advertisement, which is produced on record, does not show the date of sale or public auction of the disputed property on which the sale was to be undertaken. By said advertisement, the Recovery Officer has fixed the last date of submission of the offer along with the deposit of Rs.10,000/-. The said advertisement does not mention the amount, for the recovery of which sale is ordered. It also does not specify the area of the property which is necessary to specify as fairly and accurately as possible as provided under the said Rule.
5.1 Pursuant to the order passed by the Division Bench on 30th March, 2012, the respondent No.2-Bank has submitted xerox copies of the documents with regard to the auction undertaken by the authority on 26.9.2008. The Rojkam dated 26.9.2008 on which the auction took place is produced on record and the property was sold to respondents No. 3 to 7, who were the highest offerers, is also produced on record. It is pertinent to note that none of the documents suggest that the Recovery Officer has published the said notice by affixing the same in his office and the Taluka Office, which is required to be affixed at least prior to 30 days fixed for the sale. In the present case, as stated here-in-above, there is no date fixed by the Recovery Officer of the Bank and there is no panchnama produced by the bank showing that the notices were affixed on the notice board of the office of these two authorities. Even there is no panchnama mentioning about the procedure undertaken by the authorities about beating of drum in the village about the proclamation.
6 It appears that from the Rojkam that on 26.9.2008 itself, which was the last date of accepting the offers, the auction has taken place in the presence of the representatives of the District Registrar, Cooperative Societies, Godhra, the then Director of the respondent No.2-Bank, Manager of the Bank, three representatives from the Recovery Office and one Junior Officer. It appears from the record that 12 persons had made their offers. Out of which, the present respondents No.3 to 7 offered the highest price and, therefore, the disputed properties were sold in their favour. The presence of any of the representatives of the appellant - petitioner is not shown in the Rojkam. Obviously, since the date of sale was not mentioned in the advertisement, the appellant-petitioner was not aware about the same.
7 On the other hand, learned Advocate for the respondent No.2-Bank has tried to defend the Bank by submitting that the auction has taken place in the presence of the government officers and the Bank has not committed any illegalities in auctioning the properties. The learned Advocate for the auction purchasers has submitted that they are the bona fide purchasers in the auction which had taken place way back in the year 2008 and therefore the same may not be disturbed.
8 Learned Advocate Mr. Vyas for the appellant has relied upon a judgment of the Apex Court in the case of Lakshmanasami Gounder vs. C.I.T., Selvamani And Ors., reported at (1992) 1 SCC 91. In the aforesaid decision, the Apex Court, while dealing with the similar provisions under the Tamil Nadu Revenue Recovery Act,1864, held that it is the requirements under Section-36 of the said Act that the time and place of auction of an immovable property is required to be mentioned in the notification by the Sale Officer. The Apex Court has held in paragraph 4 of the said judgment as under:
"4. The publication is an invitation to the intending bidders to prepare and participate at the bid. Unless there is a due publication of the date and place of sale, the intending purchasers cannot be expected to run after the Sale Officer to find out the date and place of sale and to participate thereat. The Sale Officer has a statutory duty and a responsibility to have the date and place of sale mentioned in the notice and given due publication in terms of the Act and the Rules. Public auction is one of the modes of sale intending to get highest competitive price for the property. Public auction also ensures fairness in actions of the public authorities or the sale officers who should act fairly, objectively and kindly. Their action should be legitimate. Their dealing should be free from suspicion. Nothing should be suggestive of bias, favouritism, nepotism or best with suspicious features of underbidding detrimental to the legitimate interest of the debtor. The fair and objective public auction would relieve the public authorities or sale officers from above features and accountability. Any infraction in this regard would render the sale invalid."
9 The Apex Court further held in the aforesaid decision that since the property is sold by auction, the object thereby is an invitation to the public at large that the notified property would be brought to sale at that specified time and place and that they are invited to participate, if they so desire. The Apex Court has held in paragraph 50 as under:
"5. It is settled law that the word "shall" be construed in the light of the purpose that the Act or rule seeks to serve. It is not an invariable rule that even though the word shall' is ordinarily mandatory but in the context or if the intention is otherwise, it may be construed to be directory. The construction ultimately depends upon the provisions itself, keeping in view the intendment of the enactment or of the context in which the word `shall' has been used and the mischief it seeks to avoid. Where the consequence of failure to comply with any requirement of a provision is provided by the statute itself, the consequence has to be determined with reference to the nature of the provision, the purpose of enactment and the effect of non-compliance thereof. In its absence the consequence has to be determined with reference to the effect of the non-compliance of the provision of the legislature. Mere use of the word `shall' need not be given that connotation in each and every case that the provision would be invariably interpreted to be mandatory or directory. But given due consideration to the object, design, purpose and scope of the legislation, the word shall be construed and interpreted in that design and given due emphasis. Section 36 obligates the Sale Officer (Tahsildar) that he shall publish the date and place of sale. The object thereby is an invitation to the public at large that the notified property would be brought to sale at that specified time and place and that they are invited to participate, if they so desire. To reiterate for emphasis and continuity that the object of the sale is to secure the maximum price and to avoid arbitrariness in the procedure adopted before sale and to prevent underhand dealings in effecting sale and purchase of the debtor's property. As a responsibility as Sale Office and a duty towards the debtor, the Sale Officer should conduct the sale strictly in conformity with the prescribed procedure under the statute and the rules as the case may be. Such due and wide publicity would relieve the debtor from the maximum liability he owes and payable to the creditor. The responsibility is not only salutary to vouchsafe bona fides in the conduct of the Sale Officer but also to ensure fairness in the procedure adopted in bringing the property of the debtor to sale. Considered from this perspective the non-compliance of Section-36 i.e. omission to mention the place of sale would visit with deprivation of the property to the debtor for an inadequate sale consideration due to absence of competing bidders. Thus, we hold that specification of the date and place of sale shall be mandatory. The Forms either 7 or 7-A are only procedural and they should be in conformity with Section-36. The form cannot prevail over the statute. The omission of specification of the place of sale in the form renders the sale not merely irregular but also invalid."
10 The intention of the Legislature in using the word `shall' used in Rule-119 of the said Rules is also required to be treated as mandatory in nature and not directory. When the judgment debtor's property is being auctioned, the intention of the statute is that the Officer who has been appointed as Recovery Officer, follow the procedure prescribed, in its stricto senso manner. If the property gets the highest price which is under auction, the judgment debtor would be relieved from the maximum liability, which he owes to the judgment creditor. If any of the conditions is found to be breached by the Recovery Officer provided under Rule 119 of the said Rules, it is not merely an irregularity but the said sale becomes invalid.
11 As stated here-in-above, the advertisement does not show the size and area of the property which is to be auctioned, date of the auction and the amount, for recovery if which sale is ordered. In absence of these important information, the public at large would not be in a position to take part in the said auction.
12 The Bank as well as the auction purchasers could not satisfy us on these mandatory provisions which were not followed by the Bank. We are also not satisfied with the procedure undertaken by the Recovery Officer of the Bank in selling the disputed property.
13 Another objection raised by the auction purchasers is with regard to the delay in filing the writ petition i.e. after about 3 and half years from the date on which the auction was completed. In support of this submission, the learned Advocate for the auction purchasers has relied upon judgments of the Apex Court in the case of FCS Software Solutions Limited vs. La Medical Devices Limited and Others, reported at (2008) 10 SCC 440 and in the case of Valji Khimji And Company vs. Official Liquidator Of Hindustan Nitro Product (Gujarat) Limited And Others., reported at (2009) 9 SCC 299 and submitted that after the confirmation of sale in auction, the court should not disturb the same.
14 The arguments advanced by the learned Advocate for the respondents No. 3 to 7 with regard to delay in approaching this Court by the appellant, we are of the opinion that the appellant approached the Cooperative Tribunal pursuant to the observations made by the Deputy Secretary, Agricultural and Cooperation Department, Gandhinagar, in his Order dated 5.1.2009 and was trying to avail the other remedy which is provided under the Act. It also appears from the record that by letter dated 13.8.2009, the appellant had requested to the Bank to supply details of auction of the properties which was held pursuant to the Advertisement dated 18.9.2008. Since there was no reply to the said letter, a reminder was also sent by the appellant to the Bank on 22.12.2009 and reiterated his requests to supply the entire proceedings of the auction sale. In absence of sufficient material, the appellant has no other alternative except to approach this Court after waiting for some time for the response from the bank. Therefore, in our view, it cannot be said that the appellant - petitioner had slept over his valuable right.
15 We have gone through the above two judgments relied upon by the auction purchasers. The facts of said two cases are in no way comparable with the facts of the present case. In those two cases, the auction took place before the learned Company Judge in open court in which the property was transferred to the highest bidder and subsequent to that some other persons offered more amount than the amount offered by the original purchaser and in this context of the factual aspect, the Apex Court has held that once the sale is confirmed by the authority, certain rights accrue in favour of the auction purchaser, and these rights cannot be extinguished except in exceptional cases such as fraud or collusion.
16 The case on hand, in view of the palpable breach of Rule 119 of the said Rules committed by the respondent No.2 Bank, we have no other alternative but to quash and set aside the auction which took place on 26.9.2008 as the same creates some doubts in the minds of the Court.
17 We have not considered the case of the appellant about legality and validity of the judgment and award passed in Suit/Appeal proceedings but have dealt only with the irregularities/ mistakes committed by the Recovery Officer of the Bank in auctioning the disputed property.
18 In the result, the Appeal is accordingly allowed. The Order dated 6.9.2012 passed by the learned Single Judge in Special Civil Application No.6360 of 2010 is set aside and the order dated 5.1.2009 passed by the respondent No.1 in Revision Application No.184 of 2008 as well as the auction process and respective sale are also quashed and set aside. No order as to costs.
(V.M.
SAHAI, J.) (A.J.
DESAI, J.) pnnair Top