THE HON'BLE SRI JUSTICE A.V. SESHA SAI WRIT PETITION No.9547 of 2007 Between:
Potru Nageswara Rao PETITIONER AND
1. 1. The Special Cadre Deputy Registrar / Officer on Special Deputy, The District Cooperative Central Bank Limited, Guntur, Guntur District, and others.
RESPONDENTS ORDER:
This writ petition is filed under Article 226 of the Constitution of India, seeking a Writ of Certiorari to call for the records relating to O.A.No.17/2006, dated 20.11.2006 on the file of the A.P. Cooperative Tribunal at Vijayawada, and proceedings in E.P.No.1230/01-02 on the file of the 1st respondent and to quash the same including the sale held on 03.05.2005 and the sale confirmation proceedings dated 04.04.2007 of the 1st respondent.
2. Filtering the unnecessary details, the facts, which are required to be exposited for resolving the controversy in the present writ petition, are as under.
(a) One Sri Kanchakacharla Siva Nageswara Rao availed a loan of Rs.4,60,000/- from the 3rd respondent-Bank for his timber business for which petitioner stood as surety. In view of the failure to repay the said loan amount by the said Siva Nageswara Rao, the 3rd respondent-Bank pressed into service the provisions of the A.P. Cooperative Societies Act, 1964 (for brevity ‘the Act’) and filed an application under Section 71 (1) of the Act. The 1st respondent issued a certificate dated 28.02.2001 for recovery of the said amount with interest and penalties against the said Siva Nageswara Rao, father of respondents 4 and 5 herein. Thereafter, the 3rd respondent-Bank filed E.P.No.1230 of 2001-2002, for recovery of certificate amount and the 1st respondent entrusted the same to the 2nd respondent, who proposed to auction the properties of the petitioner i.e., four shops, by fixing the date of auction initially as 14.04.2005. He further postponed the same from 14.04.2005 to 19.04.2005 and there after from 19.04.2005 to 26.04.2005 and subsequently, to 3.05.2005 at the request of the 3rd respondent-Bank in view of the absence of bidders. Ultimately, in the auction held on 3.05.2005, the 6th respondent herein emerged as the highest bidder for Rs.3,24,000/-.
(b) Pending the above proceedings, the borrower, father of respondents 4 and 5, died on 2.12.2003. Assailing the said sale proceedings, the petitioner filed appeal in O.A.No.17 of 2006 under Section 76 of the Act before the A.P. Cooperative Tribunal, Vijayawada, raising a number of grounds including the failure on the part of the 3rd respondent-Bank in bringing the legal representatives of deceased K. Siva Nageswara Rao on record. The Tribunal by way of an order dated 20.11.2006, dismissed the said O.A.No.17 of 2006.
3. Calling in question the validity and legal acceptability of the order dated 20.11.2006 passed by the A.P. Cooperative Tribunal, dismissing O.A.No.17 of 2006 and thereby confirming the sale of the properties of the petitioner, the present writ petition has been filed.
4. This Court, while ordering Rule Nisi, on 01.05.2007 in W.P.M.P.No.12154 of 2007 granted interim stay taking into consideration the representation made on behalf of the petitioner that he deposited a sum of Rs.4,09,000/- as a condition precedent for granting stay, by the Tribunal.
5. Resisting the averments made in the affidavit filed in support of the writ petition, a counter affidavit is filed by the 6th respondent-auction purchaser.
6. Heard Sri G. Pedda Babu, learned counsel for the petitioner, Sri Nallapati Lakshmi Narayana, learned counsel for respondents1 to 3, Sri G. Rama Sarma, learned counsel for respondents 4 and 5 and Sri S. Subba Reddy, learned counsel for the 6th respondent-auction purchaser, apart from perusing the material available on record.
7. Contentions of Sri G. Pedda Babu, learned counsel for the petitioner –
A) Impugned orders are illegal and suffer from material irregularities and are a result of total non-application of mind to the facts of the case and law.
B) Execution Proceedings were laid against late Sri K. Siva Nageswara Rao for which the petitioner stood as surety. Pending the E.P. proceedings the borrower Sri Siva Nageswara Rao died on 2.12.2003. The proceedings went on without bringing the legal representatives of deceased Siva Nageswara Rao on record in spite of the fact that the same being brought to the notice of the authority, as such the entire proceedings are vitiated and are void in the eye of law and the observations of the Tribunal contra are not tenable.
C) Proviso to Rule 52 (5) (k) of A.P. Cooperative Societies Rules, 1964 (for short ‘the Rules’) stipulates that where a sale is adjourned for a longer period than seven days, a fresh proclamation shall have to be made unless defaulter consents to waive it, and in the present case the sale was adjourned from 14.04.2005 to 3.05.2005 at the request of the 3rd respondent-Bank and the petitioner did not give any consent for the same, as such the sale is illegal and liable to be set aside, and the observations of the Tribunal contra are not tenable.
D) Property was sold for Rs.3,24,000/- and the petitioner deposited Rs.4,09,000/- before the Tribunal, which is more than the bid amount and as such the sale ought to have been set aside by applying Rule 52 (13) of the Rules in the interest of justice.
E) The Tribunal went wrong on the aspect of proceeding against the petitioner’s mortgaged property without impleading the legal representatives of the deceased Principal borrower.
In support of his submissions and contentions learned counsel for the petitioner places reliance on the judgments reported in Arya
[1]
Peddakka and ors. V. Jangiti Bala Thimmaiah and anr., Mahakal Automobiles & anr. V. Kishan Swaroop Sharma and M/s.
[2]
.
8. The contentions of Sri S. Subba Reddy, learned counsel for the 6th respondent-auction purchaser.
A) Since the liability is joint and several, non-impleadment of legal representatives of the deceased principal borrower is neither fatal nor would take away, nor absolve the liability of the petitioner, who is admittedly a surety and who mortgaged the subject property.
B) Since the respondent scrupulously adhered to all the mandatory provisions of the Act and the Rules framed thereunder, the sale held and confirmed in favour of the 6th respondent, as confirmed by the Tribunal does not warrant any interference of this Court under Article 226 of the Constitution of India.
C) The deposit of amount, if any, made by the petitioner in pursuance of the orders of the Tribunal, pending appeal, would not ennure to the benefit of the petitioner to have the sale set aside.
D) The contention of the petitioner on sale proclamation is also not sustainable in view of the law laid down by this Court.
To bolster his submissions and contentions the learned counsel for the 6th respondent-auction purchaser places reliance on M.
Krishna and another v. A.P. Cooperative Tribunal, Hyderabad and
[3]
ors. ; Industrial Investment Bank of India Limited v. Biswanath
[4]
Jhunjhunwala ; State Bank of India v. M/s. Indexpot
[5] [6]
Registered ; Bank of Bihar v. Damodar Prasad ; T. Rambabu
[7]
v. V Ramavathi and ors.
[8]
and anr.
and S.V. Ramakrishna v. R. Subbamma
9. In the light of the above pleadings, submissions and contentions, now the issues which this Court is called upon to answer in this writ petition are as follows.
1. Whether failure on the part of the 3rd respondent-Bank in bringing the legal representatives of the deceased principal borrower on record would vitiate the entire proceedings?
2. Whether the deposit of amount by the petitioner in terms of the orders of the Tribunal, pending appeal, would ennure to the benefit of the petitioner to have the sale set aside?
3. Whether the proclamation made is in accordance with the provisions of Rule 52 of the Rules? and
4. Whether the petitioner is entitled for any relief from this Court?
10. In the instant case, the certificate under Section 71 (2) of the Act was issued on 28.01.2001, and for recovery of the amount covered by the said certificate, E.P.No.1230 of 01-02 was filed on 18.02.2002 and pending the E.P., on 16.06.2003 the principal borrower paid an amount of Rs.25,000/- and he died on 2.12.2003. It is also a fact that without adding the legal representatives of the principal borrower, the authorities proceeded with the execution and conducted auction on 3.05.2005.
11. The provision of law which is germane and relevant for answering Point No.1 is Rule 52 (2) of the Rules, which reads as under.
Rule 52 (2) where a defaulter dies before the decree has been fully satisfied, an application under sub-rule (1) may be made against the legal representative of the deceased and thereupon all the provisions of this rule, shall, save as otherwise provided in this sub-rule, apply as if such legal representative were the defaulter. Where the decree is executed against such legal representative he shall be liable only to the extent of the property of the deceased devolved on him and has not been duly disposed of; and for the purpose of ascertaining such liability, the Registrar, executing the decree may of his own motion or on the application of the decree-holder compel the legal representative to produce such accounts as it thinks fit.
12. As per the above Rule the decree-holder is conferred with the option and power to proceed against the legal representatives of the defaulter in the event of the death of the defaulter before the complete satisfaction of the decree. In the present case, as on the date of filing of E.P. the principal borrower was alive and after filing of E.P., he paid certain amount also. Admittedly, in the E.P., both the principal borrower and surety were shown as parties but the 3rd respondent- Bank sought to proceed against the mortgaged property of the petitioner, who stood as surety. As per the provisions of Section 128 of the Contract Act, the liability of the surety is coextensive and immediate and the decree-holder need not wait to proceed against the surety till he exhausts all his remedies against the principal borrower, as laid down in the judgments in Bank of Bihar v. Damodar Prasad (6 supra); State Bank of India v. M/s. Indexpot Registered, (5 supra); a n d Industrial Investment Bank of India Limited v. Biswanath Jhunjhunwala (4 supra).
12. In the case of Bank of Bihar v. Damodar Prasad (6 supra) the Hon’ble Apex Court at paragraphs 4 and 5 held as under.
“Before payment the surety has no right to dictate terms to the creditor and ask him to pursue his remedies against the principal in the first instance. As Lord Eldon observed in Wright V. Simpson(1). "But the surety is a guarantee; and it is his business to see whether the principal pays, and not that of the creditor." In the absence of some special equity the surety has no fight to restrain an action against him by the creditor on the ground that the principal is solvent or that the creditor may have relief against the principal in some other proceedings.
Likewise where the creditor has obtained a decree against the surety and the principal, the surety has no right to restrain execution against him until the creditor has exhausted his remedies against the principal. In Lachhman Joharirmal V. Bapu Khandu and Surety Tukaram Khandoji(1) the judge of the Court of Small Causes, Ahmedabad, solicited the opinion of the 13Bombay High Court on the subject of the liability of sureties. The creditors having obtained decrees in two suits in the Court of Small Causes against the principals and sureties presented applications for the, imprisonment of the sureties before levying execution against the principals. The judge stated that the practice of his court had been to restrain a judgment creditor from recovering from a surety until he had exhausted his remedy against the principal but in his view the surety should be liable to imprisonment while the principal was at large. Couch, C.J. and Melvell, J. agreed with this opinion and observed:-
"The court is of opinion that a creditor is not bound to exhaust his remedy against the principal debtor before suing the surety and that when a decree is obtained against a surety, it may be enforced in the same manner as a decree for any other debt."
13. In the case of State Bank of India v. M/s. Indexpot Registered, (5 supra) the Hon’ble Apex Court at paragraph No.13 held as under.
“In the present case before us the decree does not postpone the execution. The decree is simultaneous and it is jointly and severally against all the defendants including the guarantor. It is the right of the decree- holder to proceed with it in a way he likes. Section 128 of the Indian Contract Act itself provides that "the liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract".”
14. In the case of Industrial Investment Bank of India Limited v. Biswanath Jhunjhunwala (4 supra) the Hon’ble Apex Court at paragraph Nos.16 & 27 held as under.
“16. In SBI v. Indexport Registered this Court held that the decree-holder bank can execute the decree against the guarantor without proceeding against the principal borrower. The guarantor’s liability is coextensive with that of the principal debtor.
27. The legal position as crystallised by a series of cases of this Court is clear that the liability of the guarantor and principal debtors is coextensive and not in alternative. When we examine the impugned judgment in the light of the consistent position of law, then the obvious conclusion has to be that the High Court under its power of superintendence under Article 227 of the Constitution of India was not justified to stay further proceedings in O.A.No.156 of 1997. Consequently, the appeal is allowed and the impugned judgment of the High court of Calcutta is set aside. The appellant shall be entitled to costs of Rs.50,000/-
15. From a reading of the law laid down by the Hon’ble Apex Court in the above referred judgments, it would be manifestly evident that failure to implead the legal representatives of the deceased borrower would not be fatal to the case of the respondents nor would frustrate the proceedings. Therefore, the point No.1 is answered against the petitioner herein.
16. For the purpose of dealing with Point No.2, the provisions of Rules 52 (12) and (13) of the Rules are relevant, which read as under.
“Rule 52 (12):- Where prior to the date fixed for a sale, the defaulter or any person acting on his behalf or any person claiming an interest in the property sought to be sold, tenders payment of the full amount due together with interest, batta and other expenses incurred in bringing the property to sale, including the expenses of attachment, if any, the sale officer shall forthwith release the property after cancelling where the property has been attached, the order of attachment.
Rule 52 (13):- (i) Where immovable property has been sold by the sale officer, any person either owning such property or holding an interest therein by virtue of a title acquired before such sale may apply to the Registrar of the district to have the sale set aside on his depositing with him –
a) for payment to the purchaser, a sum equal to five per cent of the purchase money ; and
b) for payment to the decree-holder, the amount of arrears specified in the proclamation of sale as that for the recovery of which the sale was ordered together with interest thereon and the expenses of attachment, if any, and sale and other costs due in respect of such amount less any amount which may since the date of such proclamation have been received by the decree-holder.
(ii) If such application together with the deposit is made within thirty days from the date of sale, the Registrar shall pass an order setting aside the sale and shall repay to the purchase money as far as it has been deposited, together with the five per cent deposited, by the applicant;
Provided that if more persons than one have made the application and deposit under this sub-rule, the application of the first depositor to the officer authorised to set aside the sale shall be accepted.
(iii) A person applying under sub-rule (14) to set aside the sale of immovable property, shall not be entitled to make an application under the sub-rule.
17. From a reading of the above provisions of law, it would be evident that the sale can be avoided by complying with the contingencies stipulated under the said Rules. In the instant case, the petitioner did not avail either of them, as such, the deposit of amount in terms of the orders of the Tribunal, pending appeal, on 17.06.2005 when the fact remains that the sale took place on 3.05.2005, would not, by any stretch of imagination, ennure to the benefit of the petitioner nor it can be a ground to set aside the sale. Therefore, this point is answered against the petitioner.
18. For the purpose of dealing with Point No.3, the relevant provision of law is Rule 52 (11) (f) of the Rules, which reads as infra.
“Rule 52 (11) (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 realisation 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 or 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.”
19. While referring to the above Rule, it is strenuously contended by the learned counsel for the petitioner that the auction was initially scheduled on 14.04.2005 and after undergoing adjournments, ultimately it took place on 3.05.2005, as such fresh proclamation should have been issued, but without any fresh proclamation, the auction was conducted, as such, the sale is hit by Rule 52(11) (f) of the Rules.
20. The material on record reveals that the auction was initially proposed on 14.04.2005 and the same was adjourned to 19.04.2005 and later to 26.04.2005 and in view of the absence of bidders, eventually, the sale was postponed to 3.05.2005 and on which date the auction was held and the 6th respondent became the highest bidder. It is the submission of the learned counsel for the 6th respondent-auction purchaser that in pursuance of the auction held he paid the entire amount.
21. At this juncture, it may be appropriate to refer the judgments of this Court in T. Rambabu v. V Ramavathi and ors. (7 supra); S.V. Ramakrishna v. R. Subbamma and anr. (8 supra); and M. Krishna and another v. A.P. Cooperative Tribunal, Hyderabad and ors., (3 supra).
22. In the case of T. Rambabu v. V Ramavathi and ors. (7 supra) this Court at paragraph Nos.13 & 14 held as under.
“It is true that the sale was initially posted to 21.08.1979 and was subsequently adjourned on account of the various petitions that were being filed by the petitioner. The sale was ultimately held on 15.07.1980. In between, there were several adjournments of the sale but admittedly each adjournment is within 30 days. A reading of the provisions of Order 21, Rule 69(2), C.P.C., will disclose that what is important is the interval between each adjournment of the sale. It is not permissible to take the aggregate of all the adjournments.
In any event, as pointed out by a Division Bench of the Madras High court in Subbamma v.
[9]
Satyanarayana Murthy even if the sum total of the adjournments exceeds 30 days the sale cannot be treated as illegal or as a nullity. It would, at the most, amount to a mere irregularity. It is necessary for the applicant to show substantial injury and that too that the said injury flowed from the material irregularity.”
23. In the case of S.V. Ramakrishna v. R. Subbamma & another (8 supra) this Court at paragraph No.28 held as under.
“The contention of the appellant that the sale was adjourned on a number of occasions and so far each and every time of sale, a notification has to be issued cannot be accepted. Even according to the evidence of the appellant himself, the sale was adjourned from time to time and on all the adjourned dates of sale, the same was adjourned at his request. The evidence on record further discloses that the interval between one adjournment and the other is of less than thirty days’ duration. As per the provisions of Order 21 Rule 69(2) CPC if the sale is adjourned by more than thirty days, then only a fresh sale publication has to be made, and if the adjournment of sale is of less than thirty days’ duration, no such fresh publication is necessary.
In the event as pointed out by a Division Bench o f Madras High Court in Subbamma v. Satyanarayanamurthy (AIR 1943 Mad. 739), even if the sum total of the adjournments exceed thirty days the sale cannot be treated as illegal or as a nullity.”
24. In the case of M. Krishna and another v. A.P. Cooperative Tribunal, Hyderad and ors., (3 supra) this Court at paragraph No.17 held as under.
“Firstly, whenever the statute prescribes a time limit in relation to issuing notices for convening meetings, conducting sales etc., the object is to provide requisite time to the affected parties to deal with the situation. Such a purpose can be said to have been served, once it is complied with. It is rather difficult to expect compliance with the same rigor in relation to the subsequent and deferred steps also. Such a course would hamper the very implementation of the provisions of the Act. If the time gap is maintained in the initial notice, it is not necessary or mandatory that the same time gap be maintained at subsequent stages. While in some statutes such a facility is expressly provided, in other cases it is implied. Reference may be made in this context, to the postponed elections, deferred meetings etc.”
25. In view of the law laid down by this Court in the above referred judgments, the contention of the petitioner with regard to sale proclamation also falls to the ground. Therefore, this point is also answered against the petitioner.
26. The judgment reported in Arya Peddakka and ors. V. Jangiti Bala Thimmaiah and anr., (1 supra) cited on behalf of the petitioner would not render any assistance to the petitioner in view of the law laid down by the Hon’ble Apex Court on the liability of the surety in the above referred judgments. The judgment reported in M/s. Mahakal Automobiles & anr. V. Kishan Swaroop Sharma (2 supra) cited on behalf of the petitioner also would not render any help to him since he had the notice on all crucial dates of adjournments and the sale was conducted in accordance with the provisions of the A.P. Cooperative Societies Rules.
27. This Court is also of the opinion that the A.P. Cooperative Tribunal, Vijayawada, meticulously and thoroughly considered all the aspects and passed the impugned order, rejecting the claim of the petitioner by assigning cogent and convincing reasons. Therefore, this Court does not find any justification to interfere with the said well reasoned order passed by the Tribunal.
28. For the aforesaid reasons and having regard to the principles laid down in the above referred judgments and having regard to the reasons recorded by the A.P. Cooperative Tribunal in the impugned order, this court is of the opinion that there are no merits in the present writ petition and the same is liable to be dismissed.
29. Accordingly, the writ petition is dismissed. No order as to costs. As a sequel, miscellaneous petitions, if any, shall stand closed.
JUSTICE A.V. SESHA SAI.
26th June, 2014 Js.
[1] 1996 (4) ALT 71
[2] AIR 2008 SC 2061
[3] 2005 (2) ALD 563
[4] (2009) 9 SCC 478
[5] AIR 1992 SC 1740
[6] AIR 1969 SC 297
[7] 1988 (1) ALT 987
[8] 2001 (5) ALT 657
[9] AIR 1943 Mad. 739