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Saturday, January 11, 2014

Debt Recovery Tribunal - Auction Sale - third party purchaser - a bonafide purchaser in public auction No equities to disturb - sale confirmed and possession delivered - mutation of entries completed - Having abandon the claim petition and a Writ petition challenging the auction sale not maintainable due to laches and delays and also due alternative provision of appeal - Non -Application some income tax rules in recovery process -Rule 11- not vitiate the auction proceedings except on ground of fraud or collusion - D.B. of High court wrongly interfered the Recovery proceedings and as such set side - Apex court allowed the appeal = Sadashiv Prasad Singh … Appellant Versus Harendar Singh & Ors. … Respondents = 2014 ( JANUARY - VOL -1) JUDIS.NIC.IN/ S.C./ FILE NAME= 41140

 Debt Recovery Tribunal - Auction Sale - third party purchaser - a bonafide purchaser in public auction  No equities to disturb - sale confirmed and possession delivered - mutation of entries completed - Having abandon the claim petition and a Writ petition challenging the auction sale not maintainable due to laches and delays and also due alternative provision of appeal  - Non -Application some income tax rules  in recovery process -Rule 11- not vitiate the auction proceedings except on ground of fraud or collusion - D.B. of High court wrongly interfered the Recovery proceedings and as such set side - Apex court allowed the appeal =

 “20. Law makes a clear distinction between a stranger who  is  a  bona fide purchaser of the property at an auction-sale and a  decree-holder purchaser at a  court  auction.   
The  strangers  to  the  decree  are afforded protection by the court because they are not  connected  with the decree.  
Unless the protection is extended to them the court sales
would not fetch market value or fair price of the property.”
It is, therefore, apparent that the rights of an  auction-purchaser  in  the
property purchased by him cannot be extinguished except in cases  where  the
said purchase can be assailed on grounds of fraud or collusion. =

At the time of hearing, we were thinking of remanding  the  matter  to
the Recovery Officer to investigate into the  objection  of  Harender  Singh
under Rule 11 of the Second Schedule to  the  Income  Tax  Act,  1961.   But
considering the delay such a remand may cause, we  have  ourselves  examined
the objections of Harender Singh and reject the objections for a variety  of
reasons.  Firstly, the contention raised at the  hands  of  the  respondents
before the High Court, that  the  facts  narrated  by  Harender  Singh  (the
appellant in Special Leave Petition (C)  No.26550  of  2010)  were  a  total
sham, as he was  actually  the  brother  of  one  of  the  judgment-debtors,
namely,  Jagmohan  Singh.   And  that  Harender   Singh   had   created   an
unbelievable story with the connivance and help of his  brother,  so  as  to
save the  property  in  question.   The  claim  of  Harender  Singh  in  his
objection petition, was based on an unregistered  agreement  to  sell  dated
10.1.1991. Not only that such an agreement to sell would not vest any  legal
right in his favour; it is apparent that it may not have been difficult  for
him to have had the aforesaid agreement  to  sell  notarized  in  connivance
with his brother, for the purpose sought to be achieved.   Secondly,  it  is
apparent from the factual position  depicted  in  the  foregoing  paragraphs
that  Harender  Singh,  despite  his  having  filed  objections  before  the
Recovery Officer, had abandoned the contest raised by him by  not  appearing
(and  by  not  being  represented)  before  the   Recovery   Officer   after
26.10.2005, whereas, the Recovery Officer had passed the order  of  sale  of
the property by way of public auction more than two years  thereafter,  only
on 5.5.2008.  Having abandoned his claim before  the  Recovery  Officer,  it
was not open to him to have reagitated the same by filing  a  writ  petition
before the High Court.   
Thirdly,  a  remedy  of  appeal  was  available  to
Harender Singh in respect of the order of the Recovery Officer  assailed  by
him before the High Court under Section 30, which is being extracted  herein
to assail the order dated 5.5.2008:

      “30.  Appeal   against   the   order   of   Recovery   Officer.—   (1)
      Notwithstanding anything contained in section 29, any person aggrieved
      by an order of the Recovery Officer made under this  Act  may,  within
      thirty days from the date on which a copy of the order  is  issued  to
      him, prefer an appeal to the Tribunal.

      (2) On receipt of an appeal under sub-section (1), the  Tribunal  may,
      after giving an opportunity to the appellant to be  heard,  and  after
      making such inquiry as it deems fit, confirm, modify or set aside  the
      order made by the Recovery Officer in exercise  of  his  powers  under
      section 25 to 28 (both inclusive).”



The High Court ought not to have interfered with in the matter  agitated  by
Harender Singh in exercise of its writ jurisdiction.  
In fact,  the  learned
Single Judge rightfully  dismissed  the  writ  petition  filed  by  Harender
Singh.  
Fourthly, Harender Singh could not be allowed to raise  a  challenge
to the public auction held on  28.8.2008  because  he  had  not  raised  any
objection  to  the  attachment  of  the  property   in   question   or   the
proclamations and notices  issued  in  newspapers  in  connection  with  the
auction thereof.  
All these facts cumulatively lead to the  conclusion  that
after 26.10.2005, Harender Singh had lost all interest in  the  property  in
question and had therefore, remained a silent spectator  to  various  orders
which came to be passed from time to time.  
He had, therefore, no  equitable
right in his favour to assail the auction-purchase made by  Sadashiv  Prasad
Sinha on 28.8.2008.  
Finally, the public auction under  reference  was  held
on 28.8.2008.  Thereafter the same was confirmed on 22.09.2008.   Possession
of the property was handed over to  the  auction-purchaser  Sadashiv  Prasad
Sinha on 11.3.2009.  The auction-purchaser  initiated  mutation  proceedings
in respect of the property in question.  Harender Singh did  not  raise  any
objections in the said mutation proceedings.  
The said mutation  proceedings
were also finalized in favour of  Sadashiv  Prasad  Sinha.   Harender  Singh
approached the High Court through CWJC No.16485 of 209 only  on  27.11.2009.
We are of the view that the challenged raised by  Harender  Singh  ought  to
have been rejected on the grounds of delay and latches,  especially  because
third party rights had emerged  in  the  meantime.   More  so,  because  the
auction purchaser was  a  bona  fide  purchaser  for  consideration,  having
purchased the property in furtherance of a duly publicized  public  auction,
interference by the  High  Court  even  on  ground  of  equity  was  clearly
uncalled for.

      For the reasons recorded hereinabove, we are  of  the  view  that  the
impugned order dated 17.5.2010 passed by the  High  Court  allowing  Letters
Patent Appeal No.844 of  2010  deserves  to  be  set  aside.   The  same  is
accordingly set aside.  The right of the appellant Sadashiv Prasad Sinha  in
Plot No.2722, Exhibition Road, P.S. Gandhi  Maidan,  Patna,  measuring  1289
sq.ft. is hereby confirmed.  In the above view  of  the  matter,  while  the
appeal preferred by Sadashiv Prasad Sinha stands allowed, the one  filed  by
Harender Singh is hereby dismissed.

2014 ( JANUARY - VOL -1) JUDIS.NIC.IN/ S.C./ FILE NAME= 41140


                                                                “REPORTABLE”

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                       CIVIL APPEAL NO.  161  OF 2014
                  (Arising out of SLP (C) No.23000 of 2010)

Sadashiv Prasad Singh                                    … Appellant

                                   Versus

Harendar Singh & Ors.                                    … Respondents

                                    WITH

                      CIVIL APPEAL NO.   162   OF 2014
                  (Arising out of SLP (C) No.26550 of 2010)

                               J U D G M E N T

Jagdish Singh Khehar, J.

1.    On 11.9.1989, The Allahabad Bank  (hereinafter  referred  to  as  ‘the
Bank’) sanctioned a loan of Rs.12.70  lac  to  M/s.  Amar  Timber  Works,  a
partnership firm having three partners, Jagmohan  Singh,  Payam  Shoghi  and
Dev Kumar Sinha.
The above loan was sanctioned to M/s. Amar  Timber  Works,
after its partners had mortgaged  certain  properties  to  secure  the  loan
amount.
Since the loan  amount  was  not  repaid  in  compliance  with  the
commitment made by M/s. Amar Timber Works, nine years later,  in  1998,  the
Bank preferred Original Application No.107 of 1998 before the Debt  Recovery
Tribunal  for  the  recovery  of  the  Bank’s  dues.
The   above   Original
Application was allowed on 21.11.2000.  Accordingly, a direction was  issued
for the recovery of Rs.75,75,564/- from M/s. Amar  Timber  Works.   For  the
execution of the order passed  by  the  Debt  Recovery  Tribunal,  the  Bank
initiated recovery proceedings on 28.11.2000.  
During the  pendency  of  the
recovery proceedings, Jagmohan Singh, one  of  the  partners  of  M/s.  Amar
Timber Works, died (on  27.1.2004).  
 On  16.4.2004,  the  Recovery  Officer
attached plot No.722, located at Exhibition Road, P.S. Gandhi Maidan,  Patna
(hereinafter referred to as ‘the property’) measuring 1298 sq.ft.  It  would
be pertinent to mention that the aforesaid plot  was  in  the  ownership  of
Jagmohan Singh, one of the partners in M/s. Amar Timber Works.

2.    On 10.6.2004, Harender Singh, brother  of  Jagmohan  Singh,  filed  an
objection petition before the Recovery Officer alleging, that  the  attached
property did not belong to the judgment debtors, but had been  purchased  by
him from his brother Jagmohan Singh,  by  executing  an  agreement  of  sale
dated 10.1.1991, which was duly notarized though not registered.
 It  would
be relevant to mention, that Harender Singh pursued the  objection  petition
filed by him before the Recovery  Officer  till  26.10.2005,  but  chose  to
abandon the proceedings  thereafter.   
The  order  passed  by  the  Recovery
officer when the Objector was represented for the last  time  on  26.10.2005
is being extracted below:
      “Ld. Advocate of Bank and objectors appears.  Objector reiterated  his
      points and invited attention towards Section 53 of TP Act.  Counsel of
      the bank submits that he  had  to  say  nothing  more  than  what  was
      said/submitted earlier.  He also submits  that  D.Drs.  was  guarantor
      also in this case hence his properties attached.  Put up  on  28.12.08
      for further hearing.

      Sd/- Illegible
      I/C R.O.”

3.    The recovery proceedings referred to  above  remained  pending  for  a
further period of more  than  two  years.   Finally,  the  Recovery  Officer
passed an order dated 5.5.2008, for the sale  of  the  property  by  way  of
public auction on 4.7.2008.
The Recovery Officer  fixed  Rs.12.92  lacs  as
the reserve price, and also fixed 28.8.2008 as the date of its auction.   At
the auction held on  28.8.2008,  Sadashiv  Prasad  Singh,  was  the  highest
bidder.  
Accordingly, the Recovery Officer ordered the sale of the  property
in his favour on 28.8.2008.  On 22.9.2008,  the  Recovery  Officer,  in  the
absence of any objections, confirmed the sale of the property in  favour  of
Sadashiv Prasad Singh.  
The Recovery Officer also ordered, the handing  over
of physical possession of the property to the auction  purchaser.   Sadashiv
Prasad Singh,  the  auction  purchaser,  took  physical  possession  of  the
property on 11.3.2009.

4.    In furtherance of the  proceedings  initiated  through  Mutation  Case
No.295/2/09-10, the land in question was mutated in favour  of  the  auction
purchaser.  It would  be  relevant  to  mention  that  the  application  for
mutation  filed  by  the  auction  purchaser,  Sadashiv  Prasad  Singh,  was
supported by letter dated 14.10.2008 of the Ministry of Finance,  Government
of India, Realization Authority, Patna.  It would be  relevant  to  mention,
that no objections were filed in the mutation  case  preferred  by  Sadashiv
Prasad Singh, by or  on  behalf  of  Harender  Singh,  before  the  Mutation
Officer.

5.    On 27.11.2009, CWJC No.16485 of  2009  was  filed  by  Harender  Singh
before the High Court of Judicature at Patna  (hereinafter  referred  to  as
the ‘High Court’).  In the aforesaid writ petition, Harender Singh  assailed
the order of the Recovery Officer dated 5.5.2008, whereby, the property  had
been ordered to be sold by public auction in discharge of the debt  owed  by
M/s Amar  Timber  Works  to  the  Allahabad  Bank.   Vide  its  order  dated
23.3.2010, the High Court  ordered  the  auction  purchaser,  i.e.  Sadashiv
Prasad Singh to be impleaded as  a  party-respondent.   On  27.11.2010,  the
High Court dismissed the above writ petition  by  accepting  the  objections
raised on behalf of the Bank, as well as, the auction purchaser  by  holding
as under :

      “The above facts do weigh with the Court in not interfering  with  the
      sale or the proceeding where it has been reached.  The petitioner  has
      no satisfactory explanation for not approaching the Court well  within
      time challenging such a decision  or  the  subsequent  proceedings  or
      orders of the Recovery Officer at an appropriate time.  The conduct of
      the petitioner by itself has precluded and prevented this  Court  from
      passing any order in his favour at this belated stage.

      The writ application has not merit.  It is dismissed accordingly.”



6.    Dissatisfied with the order dated 27.4.2010 whereby the writ  petition
filed by Harender Singh was dismissed by a Single Bench of the  High  Court,
he preferred Letters Patent Appeal  No.844  of  2010.   Before  the  Letters
Patent Bench, Harender Singh, brother of Jagmohan Singh, asserted  that  his
brother Jagmohan Singh had availed a loan of  Rs.14.70  lacks.   As  against
the aforesaid loan amount, the Bank had  initiated  proceedings  before  the
Debt Recovery Tribunal for the realization of a  sum  of  75,75,564/-.   The
property under reference was sold by  way  of  public  auction  to  Sadashiv
Prasad Singh for a sum of Rs.13.20 lacs.   As  against  the  aforesaid  sale
consideration paid by the auction purchaser, Harender Singh, offered  a  sum
of Rs.39 lacs before the Letters Patent Bench.  In the order passed  by  the
Letters Patent Bench disposing of Letters Patent Appeal No.844 of  2010,  it
stands noticed that the Bank had accepted to finally settle  the  matter  on
being paid a sum of Rs.45 lacs, subject to the condition that  the  Harender
Singh pays a sum of Rs.15 lacs immediately, and the balance amount of  Rs.30
lacs within a period of two years in  a  phased  manner.   Even  though  the
learned counsel representing the appellant, Harender Singh was agreeable  to
proposal of the Bank, the  rival  parties  could  not  amicably  settle  the
matter.  It is,  therefore,  that  the  letters  patent  Bench  went  on  to
adjudicate the matter on its merits.  The above factual  position  has  been
noticed for the reason that it has a nexus to  the  final  order  which  was
eventually passed by the Letters Patent Bench disposing  of  LPA  No.844  of
2010.  In fact, it would be in the fitness of matters to  extract  paragraph
8 from the impugned judgment rendered in LPA No.844  of  2010  in  order  to
appreciate  the  niceties  of  the  matter.   The  aforesaid  paragraph  is,
accordingly, being extracted herein :

      “8. At this juncture, we may state that the brother of  the  appellant
      had availed a loan of Rs.14.70 lacs.  The said aspect is not  disputed
      by Mr. Ajay Kumar Sinha, learned counsel for the Bank.  The  Bank  had
      initiated  a  proceeding  before  the  Tribunal  for  realization   of
      approximately a sum of Rs.75.75 lacs.  The property has been sold  for
      Rs.13.20 lacs.  It is submitted by Mr. Ojha that the prices have  gone
      up and he is being offered more than 39 lacs for the same.  It is  not
      in dispute that the price,  the  auction-purchaser  has  tendered,  is
      Rs.13.20 lacs.  On  the  earlier  occasion,  a  suggestion  was  given
      whether the Bank would  accept  Rs.45  lacs  in  toto  to  settle  the
      dispute.  Mr.  Sinha,  learned  counsel  for  the  Bank  has  obtained
      instructions that the Bank has no objection to settle the same, if the
      appellant pays Rs.15 lacs immediately so that the same can be paid  to
      the auction-purchaser and Rs.30 lacks should be paid within  a  period
      of two years in a phased manner.  Mr. Choubey, learned counsel for the
      appellant submitted that the appellant is agreeable to pay  the  same.
      Mr. Ojha  submitted  that  he  has  instructions  not  to  accept  the
      suggestion.”



7.    During the course of appellate proceedings, the  High  Court  referred
to  Chapter  V  of  the  Recovery  of  Debts  Due  to  Banks  and  Financial
Institutions Act, 1993 (hereinafter referred to as the Debt Recoveries  Act)
and particularly to Section 29 which is being extracted hereunder:

      “29.  Application  of  certain  provisions  of   Income-tax   Act.—The
      provisions of the Second and Third Schedules to  the  Income-tax  Act,
      1961 (43 of 1961) and the Income-tax (Certificate Proceedings)  Rules,
      1962, as in force from time to time shall, as far as  possible,  apply
      with necessary modifications as if the said provisions and  the  rules
      referred to the amount of debt due under this Act instead  of  to  the
      Income-tax :

           Provided that any reference under the said  provisions  and  the
      rules to the “assessee” shall be  construed  as  a  reference  to  the
      defendant under this Act.”



The High Court while interpreting  Section  29  extracted  above,  concluded
that certain provisions of the Income Tax Act and  Income  Tax  (Certificate
Proceedings) Rules would be applicable mutatis mutandis  in  the  matter  of
recovery of debts under the  Debt  Recoveries  Act.   The  High  Court  then
referred to Rule 11 of the Income Tax (Certificate  Proceedings)  Rules  and
arrived at the conclusion that  sub-rule  (2)  of  Rule  11,  had  not  been
complied with by the Recovery Officer, inasmuch as, the objection raised  by
Harender Singh had not been adjudicated  upon.   As  such,  the  High  Court
finally concluded that the proceedings before the Recovery Officer  were  in
flagrant violation of the  provisions  of  Rule  11(2)  of  the  Income  Tax
(Certificate Proceedings) Rules.  Having so concluded, the  High  Court  set
aside the proceedings conducted by the Recovery Officer, including the  sale
of the property by public auction.  
In order to appreciate the basis of  the
order passed by the High Court, Rule  11  of  the  Second  Schedule  of  the
Income Tax Act, 1961, is being extracted herein:

      “Investigation by Tax Recovery Officer.

      11. (1)     Where any claim is preferred to, or any objection is  made
      to the  attachment  or  sale  of,  any  property  in  execution  of  a
      certificate, on the ground that such property is not  liable  to  such
      attachment  or  sale,  the  Tax  Recovery  Officer  shall  proceed  to
      investigate the claim or objection:

           Provided that no such investigation shall be made where the  Tax
      Recovery Officer considers that the claim or objection was  designedly
      or unnecessarily delayed.

      (2)   Where the property to which the claim or objection  applies  has
      been advertised for sale, the Tax Recovery Officer ordering  the  sale
      may postpone it pending the investigation of the claim  or  objection,
      upon such terms as to  security  or  otherwise  as  the  Tax  Recovery
      Officer shall deem fit.

      (3)   The claimant or objector must adduce evidence to show that-

           (a)   (in the case of immovable property) at  the  date  of  the
           service of the notice issued under  this  Schedule  to  pay  the
           arrears, or

           (b)   (in the case of movable  property)  at  the  date  of  the
           attachment,

           he had some interest in, or was possessed of,  the  property  in
           question.

      (4)   Where, upon the said investigation, the Tax Recovery Officer  is
      satisfied that, for the reason stated in the claim or objection,  such
      property was not, at the said date, in the possession of the defaulter
      or of some person in truest for him or in the occupancy of a tenant or
      other person paying rent to him, or that, being in the  possession  of
      the defaulter at the said date, it was so in his  possession,  not  on
      his own account or as his own property, but on account of or in  trust
      for some other person, or partly on his  own  account  and  partly  on
      account of some other person, the Tax Recovery Officer shall  make  an
      order releasing the property, wholly or to such extent  as  he  thinks
      fit, from attachment or sale.

      (5)   Where the Tax Recovery Officer is satisfied  that  the  property
      was, at the said date, in the possession of the defaulter as  his  own
      property and not on account  of  any  other  person,  or  was  in  the
      possession of some other person in trust for him, or in the  occupancy
      of a tenant or other person paying  rent  to  him,  the  Tax  Recovery
      Officer shall disallow the claim.

      (6)   Where a claim or an objection is preferred,  the  party  against
      whom an order is made may  institute  a  suit  in  a  civil  court  to
      establish the right which he claims to the property in  dispute;  but,
      subject to the result of such suit (if any),  the  order  of  the  Tax
      Recovery Officer shall be conclusive.”


8.    Having dealt with the controversy  in  the  manner  expressed  in  the
foregoing paragraphs, the Division Bench of the High Court was of  the  view
that the matter in hand ought to be settled  by  working  out  the  equities
between the parties.  Accordingly, the High Court disposed of the matter  in
the following manner:

      “12.  Though we have held  the  same  could  not  have  been  sold  in
      auction, yet equities are to be worked out.  Regard being had  to  the
      fact that the respondent-purchaser has deposited Rs.13.20 lac  between
      28.8.2008 to 22.9.2009 and thus the amount is with the Bank for almost
      more than one year  and  10  months  and  thereafter  there  had  been
      challenge to the order in the writ petition and after dismissal of the
      writ petition the present L.P.A. has been filed in  quite  promptitude
      and that the amount of the respondent-purchaser was blocked,  it  will
      be  obligatory  on  the  part  of  the  appellant  to  compensate  the
      respondent-purchaser at least by way of payment  of  interest  at  the
      Bank rate.  We are disposed to think that if a sum of  Rs.17  lacs  is
      paid to the auction-purchaser, it would sub-serve the cause of justice
      and house of the appellant shall be  saved  and,  accordingly,  it  is
      directed that the appellant shall deposit a sum of Rs.17 lacks  within
      a period of four weeks from today in the Bank.   After  such  deposit,
      the Bank shall hand it over to the purchaser by way of a  bank  draft.
      The same shall be sent by registered  post  with  acknowledgment  due.
      Thereafter the appellant shall deposit a further  sum  of  Rs.32  lacs
      within a period of two years; sum of Rs.16 lacs by  25th  March,  2011
      and further sum of Rs.16 lacs by 25th March, 2012.   Needless  to  say
      pro-rate interest shall accrue in favour of  the  Bank  for  the  said
      period.

      13.   After the amount is paid to the purchaser, it would be the  duty
      of the Recovery Officer to hand over the possession to the appellant.”



9.    Sadashiv  Prasad  Singh,  the  auction  purchaser,  has  assailed  the
impugned order passed by the Division Bench of the High Court in LPA  No.844
of 2010 praying for the setting aside of the order  by  which  he  has  been
deprived of the property purchased by him in  the  public  auction  held  on
28.8.2008, which was subsequently confirmed by the Recovery Officer  of  the
Debt Recovery Tribunal on  23.9.2008.
  This  challenge  has  been  made  by
Sadashiv Prasad Singh by filing  Special  Leave  Petition  (C)  No.23000  of
2010.  The impugned order passed by the High Court on  17.5.2010,  has  also
been assailed by Harender Singh by preferring  Special  Leave  Petition  (C)
No.26550 of 2010.  The prayer made by Harender Singh is, that  order  passed
by the Division Bench places him in the shoes of the auction purchaser,  and
as such, he could have  only  been  asked  to  pay  a  sum  of  Rs.17  lacs.
Requiring him to pay a further sum of Rs.32 lacs is  unsustainable  in  law,
and accordingly, deserved to be set aside.

10.   Leave granted in both the Special Leave Petitions.

11.   For the narration of facts, we have relied upon the pleadings and  the
documents appended to Special Leave Petition (C) No.23000 of 2010.

12.    Learned counsel for the auction purchaser Sadashiv Prasad  Singh,  in
the first instance vehemently contended, that
in terms of the  law  declared
by this Court, property purchased by a third  party  auction  purchaser,  in
compliance of a court order, cannot be interfered with on the basis  of  the
success or failure of parties to a  proceeding,  if  auction  purchaser  had
bonafidely purchased the property.  
In order to substantiate  his  aforesaid
contention,  learned  counsel  representing  Sadashiv  Prasad  Singh  placed
emphatic reliance, firstly, on a judgment rendered by this Court  in  Ashwin
S. Mehta & Anr. vs. Custodian & Ors., (2006) 2 SCC 385).  Our attention  was
drawn to the following observations recorded therein :

      “In that view of the matter, evidently, creation  of  any  third-party
      interest is no longer in dispute nor the same is subject to any  order
      of this Court.  In any event, ordinarily, a bona  fide  purchaser  for
      value in an auction-sale is treated differently than  a  decree-holder
      purchasing such properties.  In the  former  event,  even  if  such  a
      decree is set aside, the interest of the bona  fide  purchaser  in  an
      auction-sale is saved. (See Nawab Zain-ul-Abdin Khan v.  Mohd.  Asghar
      Ali Khan (1887) 15 IA 12)  The said decision has been affirmed by this
      Court in Gurjoginder Singh v. Jaswant Kaur (1994) 2 SCC 368).”
                                                          (emphasis is ours)


On the same subject, and to the same end, learned  counsel  placed  reliance
on another judgment rendered by this Court
in Janatha Textiles  &  Ors.  vs.
Tax Recovery Officer & Anr., (2008) 12  SCC  582,  wherein  the  conclusions
drawn in Ashwin S. Mehta’s case (supra)  came  to  be  reiterated.   In  the
above judgment, this Court relied upon the decisions of  the  Privy  Council
and of this Court in Nawab Zain-Ul-Abdin Khan  v.  Mohd.  Asghar  Ali  Khan,
(1887-88) 15  IA  12;  Janak  Raj  vs.  Gurdial  Singh,  AIR  1967  SC  608;
Gurjoginder Singh vs. Jaswant Kaur, (1994) 2  SCC  368;  Padanathil  Ruqmini
Amma vs. P.K. Abdulla, (1996) 7  SCC  668,  as  also,  on  Ashwin  S.  Mehta
(supra) in order to conclude, that it is an established  principle  of  law,
that a third party auction purchaser’s interest, in the  auctioned  property
continues to be protected, notwithstanding that  the  underlying  decree  is
subsequently set aside or otherwise.
It is, therefore, that this  Court  in
its ultimate analysis observed as under:

      “20. Law makes a clear distinction between a stranger who  is  a  bona fide purchaser of the property at an auction-sale and a  decree-holder purchaser at a  court  auction.   
The  strangers  to  the  decree  are afforded protection by the court because they are not  connected  with the decree.  
Unless the protection is extended to them the court sales
would not fetch market value or fair price of the property.”
                                                          (emphasis is ours)


On the issue as has been dealt with in the foregoing paragraph,  this  Court
has carved out one exception.
The aforesaid exception came to  be  recorded
in
Velji Khimji and Company  vs.  Official  Liquidator  of  Hindustan  Nitro
Product (Gujarat) Limited & Ors., (2008) 9 SCC 299, wherein it was  held  as
under :

      “30. In the first case mentioned above i.e. where the auction  is  not
      subject to confirmation by any authority, the auction is  complete  on
      the fall of the hammer, and certain rights accrue  in  favour  of  the
      auction-purchaser.   However,  where  the  auction   is   subject   to
      subsequent confirmation by some authority (under a statute or terms of
      the auction) the auction is not complete and no  rights  accrue  until
      the sale is confirmed by the said authority.  Once, however, the  sale
      is confirmed by that authority, certain rights accrue in favour of the
      auction-purchaser, and these rights cannot be extinguished  except  in
      exceptional cases such as fraud.

      31. In  the  present  case,  the  auction  having  been  confirmed  on
      30.7.2003 by the Court it cannot be set aside  unless  some  fraud  or
      collusion has  been  proved.   We  are  satisfied  that  no  fraud  or
      collusion has been established by anyone in this case.”
                                                          (emphasis is ours)


It is, therefore, apparent that the rights of an  auction-purchaser  in  the
property purchased by him cannot be extinguished except in cases  where  the
said purchase can be assailed on grounds of fraud or collusion.

13.   It is imperative for us, to adjudicate upon the veracity of  the  sale
of the property by way of public auction, made in favour of Sadashiv  Prasad
Singh on 28.8.2008.  It is not a matter of dispute,  that  the  lis  in  the
present controversy was between the Allahabad Bank on the one hand  and  the
partners of M/s. Amar  Timber Works, namely, Jagmohan  Singh,  Payam  Shoghi
and Dev Kumar Sinha on the other.  Sadashiv Prasad Sinha was not a party  to
the proceedings before the Debt Recovery Tribunal  or  before  the  Recovery
Officer.  By an order dated 5.5.2008, the Recovery Officer ordered the  sale
of the property by  way  of  public  auction.   On  4.7.2008,  the  Recovery
Officer fixed Rs.12.92 lacs as the reserve price, and also  fixed  28.8.2008
as the date of auction.  At the public auction held on  28.8.2008,  Sadashiv
Prasad Sinha was the highest bidder, and accordingly, the  Recovery  officer
ordered the sale of the  property  in  his  favour  on  28.8.2008.   In  the
absence of any objections, the Recovery Officer confirmed the  sale  of  the
property in favour  of  Sadashiv  Prasad  Sinha  on  22.9.2008.   Thereafter
possession of the property was also handed over to the auction-purchaser  on
11.3.2009.  Applying the  law  declared  by  this  Court  in  the  judgments
referred in the foregoing paragraphs irrespective of the merits of  the  lis
between the rival parties, namely, the Allahabad Bank and  the  partners  of
M/s. Amar Timber Works, it is not open for anyone to assail the purchase  of
the property made by Sadashiv Prasad Sinha in the  public  auction  held  in
furtherance of the order passed by the Recovery Officer  on  28.8.2008.   In
the above view of the matter, especially in the absence  of  any  allegation
of fraud or collusion, we are of the view that the High Court clearly  erred
while setting aside the auction ordered in favour of the  auction-purchaser,
Sadashiv Prasad Sinha in the impugned order dated 17.5.2010.

14.   A perusal of the impugned order especially paragraphs  8,  12  and  13
extracted hereinabove reveal that the impugned order came to  be  passed  in
order  to  work  out  the  equities  between  the   parties.    The   entire
deliberation at the hands of  the  High  Court  were  based  on  offers  and
counter offers, inter se between the Allahabad Bank on the one hand and  the
objector Harender Singh on the other, whereas the rights of Sadashiv  Prasad
Sinha – the auction-purchaser, were not at  all  taken  into  consideration.
As a matter of fact, it is Sadashiv Prasad Sinha who was to be  deprived  of
the property which came to be vested in him as far  back  as  on  28.8.2008.
It is nobody’s case, that at the time of the auction-purchase, the value  of
the property purchased by Sadashiv Prasad Sinha was in excess  of  his  bid.
In fact, the factual position depicted under paragraph  8  of  the  impugned
judgment reveals, that the escalation of prices had taken place  thereafter,
and the value of  the  property  purchased  by  Sadashiv  Prasad  Sinha  was
presently much higher than the bid amount.  Since it was nobody’s case  that
Sadashiv Prasad Sinha, the  highest  bidder  at  the  auction  conducted  on
28.8.2008, had purchased the property in question at  a  price  lesser  than
the then prevailing market price, there was no justification  whatsoever  to
set aside the auction-purchase made by  him  on  account  of  escalation  of
prices thereafter.  The High Court in  ignoring  the  vested  right  of  the
appellant in the property in question, after his auction  bid  was  accepted
and confirmed,  subjected  him  to  grave  injustice  by  depriving  him  to
property which he had genuinely  and  legitimately  purchased  at  a  public
auction.  In our considered view, not only did the  Division  Bench  of  the
High Court in the matter by ignoring the sound, legal and  clear  principles
laid down by this Court in respect of a third party auction  purchaser,  the
High Court also clearly  overlooked  the  equitable  rights  vested  in  the
auction-purchaser during the  pendency  of  a  lis.   The  High  Court  also
clearly overlooked the equitable rights  vested  in  the  auction  purchaser
while disposing of the matter.

15.   At the time of hearing, we were thinking of remanding  the  matter  to
the Recovery Officer to investigate into the  objection  of  Harender  Singh
under Rule 11 of the Second Schedule to  the  Income  Tax  Act,  1961.   But
considering the delay such a remand may cause, we  have  ourselves  examined
the objections of Harender Singh and reject the objections for a variety  of
reasons.  Firstly, the contention raised at the  hands  of  the  respondents
before the High Court, that  the  facts  narrated  by  Harender  Singh  (the
appellant in Special Leave Petition (C)  No.26550  of  2010)  were  a  total
sham, as he was  actually  the  brother  of  one  of  the  judgment-debtors,
namely,  Jagmohan  Singh.   And  that  Harender   Singh   had   created   an
unbelievable story with the connivance and help of his  brother,  so  as  to
save the  property  in  question.   The  claim  of  Harender  Singh  in  his
objection petition, was based on an unregistered  agreement  to  sell  dated
10.1.1991. Not only that such an agreement to sell would not vest any  legal
right in his favour; it is apparent that it may not have been difficult  for
him to have had the aforesaid agreement  to  sell  notarized  in  connivance
with his brother, for the purpose sought to be achieved.   Secondly,  it  is
apparent from the factual position  depicted  in  the  foregoing  paragraphs
that  Harender  Singh,  despite  his  having  filed  objections  before  the
Recovery Officer, had abandoned the contest raised by him by  not  appearing
(and  by  not  being  represented)  before  the   Recovery   Officer   after
26.10.2005, whereas, the Recovery Officer had passed the order  of  sale  of
the property by way of public auction more than two years  thereafter,  only
on 5.5.2008.  Having abandoned his claim before  the  Recovery  Officer,  it
was not open to him to have reagitated the same by filing  a  writ  petition
before the High Court.   
Thirdly,  a  remedy  of  appeal  was  available  to
Harender Singh in respect of the order of the Recovery Officer  assailed  by
him before the High Court under Section 30, which is being extracted  herein
to assail the order dated 5.5.2008:

      “30.  Appeal   against   the   order   of   Recovery   Officer.—   (1)
      Notwithstanding anything contained in section 29, any person aggrieved
      by an order of the Recovery Officer made under this  Act  may,  within
      thirty days from the date on which a copy of the order  is  issued  to
      him, prefer an appeal to the Tribunal.

      (2) On receipt of an appeal under sub-section (1), the  Tribunal  may,
      after giving an opportunity to the appellant to be  heard,  and  after
      making such inquiry as it deems fit, confirm, modify or set aside  the
      order made by the Recovery Officer in exercise  of  his  powers  under
      section 25 to 28 (both inclusive).”



The High Court ought not to have interfered with in the matter  agitated  by
Harender Singh in exercise of its writ jurisdiction.  
In fact,  the  learned
Single Judge rightfully  dismissed  the  writ  petition  filed  by  Harender
Singh.  
Fourthly, Harender Singh could not be allowed to raise  a  challenge
to the public auction held on  28.8.2008  because  he  had  not  raised  any
objection  to  the  attachment  of  the  property   in   question   or   the
proclamations and notices  issued  in  newspapers  in  connection  with  the
auction thereof.  
All these facts cumulatively lead to the  conclusion  that
after 26.10.2005, Harender Singh had lost all interest in  the  property  in
question and had therefore, remained a silent spectator  to  various  orders
which came to be passed from time to time.  
He had, therefore, no  equitable
right in his favour to assail the auction-purchase made by  Sadashiv  Prasad
Sinha on 28.8.2008.  
Finally, the public auction under  reference  was  held
on 28.8.2008.  Thereafter the same was confirmed on 22.09.2008.   Possession
of the property was handed over to  the  auction-purchaser  Sadashiv  Prasad
Sinha on 11.3.2009.  The auction-purchaser  initiated  mutation  proceedings
in respect of the property in question.  Harender Singh did  not  raise  any
objections in the said mutation proceedings.  
The said mutation  proceedings
were also finalized in favour of  Sadashiv  Prasad  Sinha.   Harender  Singh
approached the High Court through CWJC No.16485 of 209 only  on  27.11.2009.
We are of the view that the challenged raised by  Harender  Singh  ought  to
have been rejected on the grounds of delay and latches,  especially  because
third party rights had emerged  in  the  meantime.   More  so,  because  the
auction purchaser was  a  bona  fide  purchaser  for  consideration,  having
purchased the property in furtherance of a duly publicized  public  auction,
interference by the  High  Court  even  on  ground  of  equity  was  clearly
uncalled for.

      For the reasons recorded hereinabove, we are  of  the  view  that  the
impugned order dated 17.5.2010 passed by the  High  Court  allowing  Letters
Patent Appeal No.844 of  2010  deserves  to  be  set  aside.   The  same  is
accordingly set aside.  The right of the appellant Sadashiv Prasad Sinha  in
Plot No.2722, Exhibition Road, P.S. Gandhi  Maidan,  Patna,  measuring  1289
sq.ft. is hereby confirmed.  In the above view  of  the  matter,  while  the
appeal preferred by Sadashiv Prasad Sinha stands allowed, the one  filed  by
Harender Singh is hereby dismissed.

                                                               ………………………….J.
                                                              (A.K. Patnaik)



                                                               ………………………….J.
                                                      (Jagdish Singh Khehar)
New Delhi;
January 8, 2014









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