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Saturday, November 19, 2016

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.= 2016 Nov. P.M.ABUBAKAR Vs. STATE OF KARNATAKA & ORS.


                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                     CIVIL  APPEAL NOS.10894-10895/2016
             (Arising out of S.L.P. (C) Nos.30130-30131 of 2012)

P.M. Abubakar


State of Karnataka and Ors.                                …Respondent(s)


                      CIVIL APPEAL NOS.10896-10897/2016
             (Arising out of S.L.P. (C) Nos.33314-33315 of 2012)


                      CIVIL APPEAL NO.10898-10899/2016
             (Arising out of S.L.P (C) Nos.25613-25614 of 2013)



      Delay condoned.

2.    Leave granted.

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

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

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

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:


      The confirmation order passed  by  the  Asst.  Registrar  Co-operative
Societies    also    Recovery    Officer's     Court     in     case     No.
AR38/case/83/Executive/82/08-09 dated 02-03-2009 is hereby set-aside.

      The Petitioner should remit the below  mentioned  amount  within  four
weeks from the date of this order-
      1) Auction amount           Rs.   51,50,000-00
      2) Registration charges                  4,84,465-00
      3) Solatium account                 2,57,500-00
      4) Khatha expenses                     25,000-00
      5) Court expenses                      20,000-00
      6) Other expenses                      10,000-00
                             Total Rs.  59,46,965-00
He has to remit  at  6%  from  13-02-2009  until  depositing  the  money  at
Mahalakshmi Co-operative Bank (Ltd), Udupi. Under the said  head  the  court
charges and other charges shall born by the said  bank  and  Respondent  No.
(4) equally (i.e. the person who purchased the property in auction).   After
remitting the balance amount, the  bank  shall  transfer  the  same  to  the
respondent No. (4) within 3 days.

      This order pronounced in the open court today i.e. on 18-07-2009.


                                        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.

16.   The auction purchaser and  the  bank  being  aggrieved  by  the  order
passed by the DRCS, preferred Writ  Petition  No.23690/2009  and  23196/2009
(CS-DAS) respectively.  These writ  petitions  were  heard  by  the  learned
Single Judge. He opined that considering the  wide  difference  between  the
high value of the property and the awarded amount, there  was  no  necessity
to sell the entire property.  In that, the property consisted of a  building
and also vacant property. The learned Single Judge was of the  opinion  that
the reason recorded by the Appellate Authority (DRCS) was  just  and  proper
and did not warrant any interference in exercise of writ jurisdiction.    As
a result, the writ petitions filed by the auction  purchaser  and  the  Bank
were dismissed by a common judgment dated 11.01.2010.

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:

“11.  A   memo of calculation filed by the advocate for Respondent  No.5  on
11.8.2011 indicating the different amounts deposited by the appellant is  as

                             Memo of Calculation

      (a)   Amount deposited by the
            Appellant on 10.09.2008:-Rs. 7,72,500/- interest @
                                  8% for 2 years 11 months
                                        Rs. 1,80,250/- (A)
      (b)   Amount deposited by the
                Appellant     on     25.10.2008:-Rs.43,77,500/-     Interest
      8% for 2 years 10 months
                                        Rs. 9,92,233/- (B)
      (c)   Stamp duty for registration
            paid on 06.03.2009:-  Rs. 4,84,465/- interest @
                                  8% for 2 years 6 months
                                        Rs. 96,893/- (C)
                                  (A)+(B)+(C)=Rs.12,69,376/- (D)
      (i)   Amount in deposit with
            A.R.C.S. from 25.10.08:-Rs. 20,82,616/- interest @
                                  4% for 2 yrs 10 months
                                        Rs. 2,36,030/- (E)
      (ii)  Amount deposited by the
            Respondent No.5 on
            06/02/2010:-          Rs. 41,69,200/- interest @
                                        4% for 1 yrs 6 months
                                        Rs. 2,50,152/- (F)
      (iii)      Amount in F.D. On orders
            of this Hon'ble Court:-     Rs. 62,51,816/- interest @
                                        8% for 3 months
                                        Rs. 1,25,036/- (G)
                             (E)+(F)+(G)=Rs. 6,11,218/- (H)
      12. He has calculated  the  interest  deposited  by  the  appellant  -
purchaser for different periods as stated above.   He  has  also  shown  the
amount in deposit with the ARCS after deducting the amount that  has  to  be
paid to the appellant - bank.

       13.   The  appellant  -  bank  has  also  filed  a  calculation  memo
indicating the actual claim amount, the date of  receipt  of  claim  amount,
number of days from the auction date till the amount received on  13.3.2009,
rate of interest and the actual amount of interest payable  apart  from  the
expenses incurred by them after 10.9.2008  for  various  litigations.   This
amount totally comes to Rs. 3,05,149/- as indicated below:

      1.       Date of Receipt of Claim amount
      2.    Claim amount                Rs. 30,67,384.00
      3.    Number of days from auction date
            10-9-2008 to amount received
            date 13-3-2009                   160 days
      4.    Rate of interest                       17%

      5.    Interest receivable for 160 days Rs. 2,28,583.00
      6.    Court expenses spent after
            10-9-2008 for various disputed   Rs. 76,566.00
                                  Total            Rs. 3,05,149.00

      14. So far as the auction purchaser is concerned, we note that he  has
made the following payments:

1.    10.9.2008                         :    Rs.   7,72,500/-

2.    25.10.2008                  :     Rs. 43,77,500/-

3.    Stamp duty for registration

      Paid on 6.3.2009                  :    Rs.  4,84,465/-

      15. As per the orders of the DRCS, he has to receive  Rs.  59,46,965/-
including solatium with interest at 6% per annum from 13.2.209.   Till  date
so far as auction purchaser is concerned not even a single pie is paid  back
to him. In case, the auction purchaser were  to  have  the  confirmation  of
sale in his favour, this calculation would not be  of  any  relevance.   The
fact remains the concerned authority has exercised the discretion and  there
is prima facie  material  to  indicate  there  was  under-valuation  of  the
property as well.  But this does not mean  the  auction  purchaser  who  has
parted with different amount by selling his own property should  be  put  to
financial loss apart from hardship.  So far as the bank  is  concerned,  the
amount was lying with the Recovery Officer and only on  13.3.2009  they  got
the claim amount.  However, this claim amount includes  interest  only  upto
the date of  auction  and  not  the  subsequent  interest  payable.  If  the
respondent - borrower intends to retain his property for  the  reasons  best
known to him, either for emotional attachment or other  reason,  he  has  to
compensate the purchaser for causing the loss to him.   The  amount  of  Rs.
59,46,965/- includes solatium of Rs. 2,57,500/-, but it does not  spell  out
the interest he would have got on this amount or the profit  he  could  have
got on the property which he sold in order to pay the auction price.

      16. In order to meet the ends of justice, it would be just and  proper
to order payment of interest at 12% per annum for the date of  deposit  made
by him on different amounts indicated  above.   He  shall  also  be  paid  a
solatium of Rs. 2,57,500/- apart from the interest at 12% per annum  on  all
the amounts he has spent till the date of  payment.  So far as the  bank  is
concerned, interest has to be paid for 160 days and Court  expenses  of  Rs.
76,566/-.  The amount was laying with the Recovery Officer  for  quite  some
time and it cannot be  the  entire  fault  of  the  respondent  -  borrower.
Therefore the bank shall get interest at 6% per  annum  on  Rs.  30,67,384/-
for 160 days apart from the Court expenses of Rs. 76,566/- spent by them.

      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.”

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

                          “ORDER ON I.A. No. 1/2012

Heard the learned counsel for the applicant, who is 5th respondent  in  W.A.
No. 2433/2010 (CS)  on  I.A.  No.  1/2012  filed  seeking  clarification  of
judgment dated 24.8.2011.

It is seen that by judgment dated 24.8.2011 this  Court  allowed  W.A.  Nos.
1006/2010 c/w 2433/2010 with certain  directions.   As  could  be  seen,  in
paragraph 16 of the judgment the intent of this Court is  very  clear,  that
is, the auction purchaser appellant in W.A. No. 1006/2010  should  get  back
his money with solatium, interest damages, etc.  as  specified  therein  and
the same was required to be paid by 3rd respondent.   No  mode  for  payment
was specified in the said judgment.

However, it is seen that ARCS, 3rd respondent in the appeals has  taken  his
own time in trying to interpret the  said  order  by  his  order  which  was
initially passed on 21.11.2011 and thereafter  corrected  as  21.12.2011  to
say that entire amount should have been deposited by the 5th  respondent  to
comply with the judgment of this Court which we  are  not  agreeable.   With
the available money, the 3rd respondent –ARCS should have first cleared  off
the amount to the auction purchaser with  interest,  solatium,  damages  and
whatever he is entitled to from out of the amount that  was  available  with
3rd respondent.  Thereafter, 3rd respondent should have  cleared  the  money
due to the bank, appellant in W.A. 2433/2010 alongwith interest at the  rate
specified therein.  If any is found in excess he should  have  given  it  to
5th respondent.

      In any event, if he had any  doubt  with  regard  to  the  above  said
aspect he should have approached this Court through the  Learned  Government
Advocate by filing an application seeking clarification.   Instead,  he  has
taken the responsibility of trying to  interpret  the  same  in  the  manner
known to him and also contrary to the intent of this Court.  In  any  event,
this Court feel there is no justification to keep  this  litigation  pending
forever.  Therefore,  to  put  quietus  to  this  litigation  it  is  hereby
directed that 3rd respondent ARCS  shall  immediately  disburse  the  entire
amount that is required to be paid to the auction purchaser and also to  the
bank within one week from today.  The excess of amount  that  remains  after
disbursing the amount shall be retained by him until further orders of  this

       Further,  after  receiving  the  amount  the  bank  and  the  auction
purchaser shall file memo of calculation to seek  additional  interest  from
the date of the judgment till actual date of  receipt  of  money  for  which
they are  entitled  to.   Whether  the  confusion  is  at  the  end  of  5th
respondent or at the instance of  3rd  respondent-ARCS  should  not  be  the
reason to deprive the fruits of the judgment to the  auction  purchaser  and
the  bank.  Therefore, they are called upon to  receive  the  entire  amount
pursuant to the judgment of this Court and  thereafter  file  memo  to  this
Court regarding the  extent  of  interest  they  are  entitled  to  for  the
different period, which will be considered by this Court at  the  next  date
of hearing.

Call this matter on 29.6.2012”.

The Division Bench thereafter  passed  the  following  order  on  29.6.2012,
which reads thus:

“These two writ appeals were disposed of by  common  judgment  on  24.8.2011
wherein  certain  directions  were  given  for  re-payment  of  the   amount
deposited by the auction purchaser and also the  amount  due  to  the  Bank.
Though sufficient amount was available  with  the  3rd  respondent-ARCS,  he
tried to interpret the order of  this  Court  differently  and  caused  some
delay in making payment  to  the  parties.   Though  strictly  there  is  no
mistake  on  the  part  of  the  5th  respondent-original  owner  in  making
available the requisite fund in terms of the order for refund of  money  due
to the auction purchaser and to clear the dues to the Bank,  it  is  because
of ARCS trying to interpret the order of this Court  differently,  confusion
has arisen in disbursement of the amount due to the  auction  purchaser  and
the Bank for which the auction purchaser and the Bank should not be made  to

      Insofar as the money that they were required to receive on  or  before
24.9.2011 which they have not received, they are entitled  to  interest  for
the difference period i.e.,  from  24.9.2011  till  they  receive  the  said
amount.  In that behalf, the ARCS is required to pay the  interest  for  the
difference period from out of the excess  amount  which  is  available  with
him.  If the said amount is short of interest to be paid for  the  different
period, he is directed to call upon the owner to  deposit  the  said  amount
within ten days therefrom or  if  the  amount  is  sufficient,  to  pay  the
interest from out of the  amount  available  and  to  return  the  remaining
amount to the original owner of the property.

      With this observation, the clarification sought to the judgment  dated
24.8.2011 is clarified.

      It is made clear that the ARCS shall see that the clarificatory  order
dated 8.6.20112 and the  order  passed  today  regarding  interest  for  the
difference period should be implemented within ten days  from  the  date  of
receipt of a copy of this order”


The Division Bench directed the ARCS to act upon to the clarificatory  order
dated 8.6.2012 and 29.6.2012 respectively and to implement the  same  within
10 days.

20.   The writ petition filed  by  the  debtor  (against  the  communication
dated 21.12.2011 of the ARCS) was allowed by the learned Single  Judge  vide
order dated 7.9.2012, which reads thus:


      An extent of 32 cents in Sy.No. 260/7 of  Kodavoor  village  in  Udupi
Taluk belonging to the  petitioner  was  brought  to  sale  to  recover  the
outstanding amount due to respondent No. 4 financial institution.  The  said
property was put to auction on  10.9.2008  for  Rs.  51,50,000/-.   The  3rd
respondent was the successful bidder and he deposited the amount  also.   On
appeal, the Deputy Registrar of Co-operative Societies set aside  the  order
dated 2.3.2009 by which the auction sale  was  confirmed  and  directed  the
petitioner  to  deposit  Rs.  59,46,965/-  within  four  weeks.    The   3rd
respondent-auction purchaser as well as the 4th respondent Bank were  before
this Court questioning the  said  order.   This  Court  dismissed  the  writ
petitions, against which W.A. Nos. 1006  and  2433/2010  were  filed.   This
Court disposed of the writ appeals with certain directions  in  as  much  as
the petitioner was directed to deposit Rs.  61,89,125/-  which  is  interest
component on the auction amount deposited by the 3rd respondent.

2.    It appears, the 3rd  respondent-Assistant  Registrar  of  co-operative
Societies was of the view that the petitioner was required  to  deposit  Rs.
80,64,916/- and there  was  short-fall  of  Rs.  18,75,791/-.     Hence,  an
application was filed by  the  petitioner  seeking  clarification  and  this
Court on two occasions clarified the position and was of the view  that  the
amount deposited by the petitioner was just  and  proper.    Notwithstanding
the clarification, made, the impugned order at Annexure-A is passed  calling
upon the petitioner to deposit the short-fall on calculation.

3.    When the  matter  is  taken-up,  Mr.  S.R.  Hegde  Hudlamane,  learned
counsel for the 3rd respondent auction purchaser  submits  that  as  against
the clarificatory order, the  auction  purchaser  has  filed  Special  Leave
Petition, which is yet to come-up before the Apex Court.

4.    In the circumstances, I am of the view that no useful purpose will  be
served by keeping this writ petition pending in as much as the  decision  to
be rendered by the Apex  Court  in  the  Special  Leave  Petition  filed  by
respondent No. 3 would regulate the present proceedings.   Till  such  time,
the matter is required to be kept pending by the 2nd respondent.  Hence  the
following order:-

      The petition is allowed.   The  impugned  order  is  set  aside.   The
proceedings  are  remanded  to  2nd  respondent,  who  shall  keep   pending
adjudication.  The proceedings shall be regulated  by  the  decision  to  be
rendered by the Apex Court”.

21.   In the present appeals filed by  the  appellant  -  auction  purchaser
before this Court, he has challenged the judgment rendered  in  writ  appeal
dated  24.8.2011  as  well  as  both  the  orders  passed  on  clarification
application dated 8.6.2012 and 29.6.2012 respectively. The  debtor,  on  the
other hand, has filed appeal against the  judgment  of  the  Division  Bench
dated 24.8.2011 in Writ Appeal No. 1006/2010.

22.   We have heard the learned counsel for the parties at length. From  the
indisputable facts mentioned in the  preceding  paragraphs,  it  is  evident
that the Award passed by the Competent Authority on 02.01.2004 became  final
after the dismissal  of  appeal  (Appeal  No.  419/2004)  by  the  Karnataka
Appellate Tribunal, Bangalore on 30.04.2007. The  debtor  did  not  pay  the
awarded amount in spite of  repeated  opportunity  given  to  him  on  every
occasion.  Thus,  for  effectuating  the  Award  and  for  recovery  of  the
outstanding dues from the debtor, his mortgage property was required  to  be
auctioned.  That auction sale was finally held  on  10th  August  2008.  The
appellant - auction purchaser turned out  to  be  the  highest  bidder.  The
debtor unsuccessfully attempted to  apply  for  setting  aside  the  auction
sale. He also challenged the sale by way of Writ  Petition  No.  12901/2008.
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.

23.   Be that as it may, it is common ground that the debtor did not  prefer
application for  setting  aside  the  sale,  inconformity  with  the  remedy
provided  in  that  behalf  in  terms  of  Section  89A  of  the   Karnataka
Cooperative  Societies  Act,  1959  read  with  Rule  38  of  the  Karnataka
Cooperative Societies Rules.  That remedy could be  availed  by  the  debtor
only after depositing the awarded  amount  together  with  interest  thereon
with the Recovery Officer, in terms of Rule  38(4)(a)  of  the  Rules.   The
application as filed by the debtor was dismissed by the ARCS on  14.10.2008.
Resultantly, the Competent Authority proceeded to confirm the  auction  sale
on 02.03.2009, followed by grant of a certificate of sale and  execution  of
a Sale Deed in the prescribed Form. The sale of the subject  property  thus,
became final.

24.    The debtor, however, was ill advised to prefer an appeal  before  the
Deputy Registrar (CS) of Cooperative Societies, against the decision of  the
Competent Authority confirming the auction  sale.   For,  remedy  of  appeal
before that Authority could be availed only in terms of Section 106  of  the
Act, against an order passed by the Authority  (Registrar)  in  exercise  of
powers ascribable to the provisions  referred  to  therein.   The  order  of
confirmation of sale is ascribable to Section 89A of the Act read with  Rule
38 of the Rules.  No remedy of appeal against  that  decision  is  provided.
Section 106 of the Act does not provide for  an  appeal  against  the  order
confirming an auction sale, passed under Section  89A  read  with  Rule  38.
Section 89A of the Act read with Rule 38 of the Rules provide for a  special
dispensation.  Thus understood, the order passed  by  the  Deputy  Registrar
(CS) on the appeal preferred by the debtor being Appeal  No.7/2008-2009,  is
without jurisdiction. The learned Single  Judge  as  well  as  the  Division
Bench has completely glossed over this crucial aspect.

25.   The order passed by the Deputy Registrar (CS) dated  18th  July  2009,
assuming that it is ascribable to Rule 38(6)(a) as held by the  High  Court,
the fact remains that the debtor  failed  to  comply  with  the  said  order
requiring him to  pay  an  amount  of  Rs.59,46,965/-  along  with  interest
thereon within the specified time. On  account  of  non-compliance  of  that
direction, the relief granted by the  Deputy  Registrar  (CS)  in  terms  of
order dated 18th  July  2009  of  setting  aside  the  auction  sale  became
ineffective. Admittedly, the debtor deposited a  sum  of  Rs.41,69,200/-  on
6th February 2010 and Rs.20,19,925/- on 22nd September 2011.  That  was  not
in compliance with the order dated 18th July 2009.

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.

27.   The debtor cannot be heard to claim benefit of the proceedings in  the
form of Writ Petitions  followed  by  Writ  Appeals  filed  by  the  auction
purchaser and the Bank. For, it is noticed that the Division  Bench  in  its
order dated 24th August 2011 determined the liability of the debtor  to  pay
Rs.59,46,965/- along with solatium and interest thereon.  At least in  terms
of that decision, the debtor ought to have paid the entire amount.  However,
there was  still  a  shortfall  of  Rs.18,75,791.40.  The  debtor,  instead,
represented before the ARCS that he  was  not  liable  to  pay  any  further
amount in  excess  of  the  amount  already  deposited  by  him  until  22nd
September 2011 totalling  Rs.61,89,125/-.  In our view, in the facts of  the
present case, it is only upon deposit of  the  entire  awarded  amount,  the
request of the debtor to absolve him of his liability could be  entertained.

28.    The  argument  pursued  on  behalf  of  the  debtor  that  there  was
calculation error in  determination  of  his  liability  to  the  extent  of
Rs.59,46,965/- including the interest accrued  thereon   as  directed;   and
not giving adjustment of the  deposits  already  made  prior  to  the  order
passed by the Division Bench on 24th August 2011 as was  manifest  from  the
no dues certificate given by the Deputy Commissioner,  Commercial  Tax  vide
letter dated 20th September 2010,  cannot  be  countenanced.  In  the  first
place, the communication dated September 2010 was tendered  across  the  Bar
for the first time before this Court during the argument.  It was  not  made
part of the record before the  High  Court  nor  was  pressed  into  service
before the High Court. Moreover, the said communication  is  in  respect  of
the effect of exemption of 90% of the interest under Tax Settlement  Scheme.
Thirdly, the matter on hand arises out of the order  passed  by  the  Deputy
Registrar (CS) setting aside the sale confirmed in  favour  of  the  auction

29.   As aforesaid, the debtor unsuccessfully challenged  the  auction  sale
and prayed for setting aside  the  same  by  filing  writ  petitions.   That
relief has been rejected. In that, a formal application  for  setting  aside
the sale filed by the debtor was rejected by the ARCS on  14.10.2008.    The
appeal preferred by the debtor before the Deputy Registrar (CS) was  against
the decision of the Competent  Authority  confirming  the  auction  sale  on
02.03.2009. That it was not maintainable under Section 106 of the  Act.  The
Deputy Registrar (CS) had no jurisdiction.

30.    Further,  once  the  auction  sale  is  confirmed  by  the  Competent
Authority, it is not open to the Authority  to  exercise  power  under  Rule
38(6), to  set  aside  the  sale.  That  would  be  against  the  spirit  of
legislative intent of giving finality  to  the  auction  sale  process  upon
passing of an order of confirmation of sale.

 31.  It is only the Authority referred to in Rule 38, who  could  have  set
aside the sale by recording reasons in writing in exercise of  powers  under
Rule 38 of the Rules, albeit before passing an order confirming the  auction
sale.  Rule 38 reads thus:

“38. Attachment and sale of immoveable property.-  (1)  Immoveable  property
shall not be sold in execution of a decree unless  such  property  has  been
previously attached:

      Provided that where the decree has been obtained on the basis of a
mortgage of such property it shall not be necessary to attach it.

(2) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

(3) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

(4) (a) Where immoveable property has been sold, any  person  either  owning
such property or holding an interest therein by virtue of a  title  acquired
before such sale may apply to have the sale  set  aside  on  his  depositing
with the Recovery Officer.-

(i) For payment to the purchaser a sum equal to 5 per cent of  the  purchase
money; and

(ii) 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  amount
which may since the date of such proclamation  have  been  received  by  the

(b)   If such deposit and application are made within 30 days from the  date
of sale, the Recovery Officer shall pass an order  setting  aside  the  sale
and shall repay to the purchaser the purchase money so far as  it  has  been
deposited together with the 5 per cent deposited by the applicant.

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:

       [Provided further that where the purchaser  is  the  Government,  the
sale be  set  aside  if  the  person  owning  the  property  or  any  person
interested, therein,-

Makes the application within sixty days from the date of sale along with,-

A sum equal  to  five  per  cent  of  the  purchase  money  for  payment  to
Government; and

Fifty per cent of the amount due under the decree for payment to the  decree
holder; and

Pay the balance within thirty days thereafter i.e., within ninety days  from
the date of sale.]

If a person applies  under  sub-rule  (5)  to  set  aside  the  sale  of  an
immoveable property, he shall not be entitled to make an  application  under
this sub-rule.

(5) (a) At any time within  30  days  from  the  date  of  the  sale  of  an
immoveable property, the decree-holder or any person entitled to share in  a
rateable distribution of the assets or whose interests are affected  by  the
sale, may apply to the Recovery Officer to set aside the sale on the  ground
of a material irregularity or mistake or fraud in publishing  or  conducting

       Provided  that  no  sale  shall  be  set  aside  on  the  ground   of
irregularity or mistake  or  fraud  unless  the  said  Recovery  Officer  is
satisfied that the applicant has sustained substantial injury by  reason  of
such irregularity, mistake or fraud:

       [Provided further where the purchaser is Government the sale will  be

After the expiration of sixty days where no application  to  have  sale  set
aside is made under sub-rule (4); or

After the expiration of ninety days where an application to set aside  under
sub-rule (4) is made but the balance of the amount due under the  decree  is
not deposited within ninety days from the date of sale.]

If the application be allowed, the said Recovery  Officer  shall  set  aside
the sale and may direct a fresh one.

(6) (a) On the expiration of thirty days  from  the  date  of  sale,  if  no
application to have the sale set aside, either under sub-rule  (4)  or  sub-
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:

      Provided that if he shall have reason to think that the sale ought  to
be set aside notwithstanding that no such application has been  made  or  on
grounds other than those alleged in any application which has been made  and
rejected, he may, after recording his reasons  in  writing,  set  aside  the

      (b) Whenever the sale of any immoveable property is not  confirmed  or
is set aside, the deposit or the purchase money, as the case may  be,  shall
be returned to the purchaser.

(7)    On the confirmation of a sale under this rule, the  Recovery  Officer
shall grant a certificate of sale bearing his  seal  and  signature  to  the
purchaser, and such certificate shall state the property sold and  the  name
of the purchaser, and it shall be conclusive evidence of  the  fact  of  the
sale to such purchaser.

(8)    the land purchased by Government in satisfaction of any decree  prior
to commencement of the Karnataka Co-operative Societies (V amendment)  Rules
  1977 shall be reconveyed to the person who own the  property  or  held  an
interest therein by virtue of a title acquired before the sale if  he  makes
application for such receonveyance and deposits with  the  recovery  officer
with in a period of ninety days from the date of coming into force of  these
rules, -

          (a) five per cent of the purchase money as solatium;

          (b) purchase money at  the  interest  of  eight  and  a  half  per
cent per annum from the date of sale up to the date of deposit.”

32.   The order passed by the learned Single Judge dated 7th  December  2012
to set aside the communication of the Assistant Registrar  (CS)  dated  21st
December 2011 cannot extricate the debtor from the consequences  of  auction
sale having become final on issuance of sale certificate  and  execution  of
the agreement in favour of the auction purchaser. Similarly, the  fact  that
the debtor deposited certain amounts after  the  decision  of  the  Division
Bench cannot come to his aid. For, he ought to have  deposited  the  awarded
amount along with interest accrued thereon and that must be accepted by  the
auction purchaser as satisfaction of the order of the Division Bench of  the
High Court. Admittedly, the debtor had failed  to  pay  the  entire  awarded
amount.  Significantly, the auction  purchaser  did  not  acquiesce  of  the
order of the Deputy Registrar or that of the High Court, but has  challenged
the same in the present appeals.

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

34.   That takes us to the decision of this Court in the case  of  Annapurna
vs. Mallikarjun & Anr.[1] That decision  is  in  respect  of  provisions  of
Order 21 Rule 89 of C.P.C. The question decided in this case is whether  the
time limit prescribed in Article 127 of the Limitation Act, 1963 would  come
into play even in respect of an application to set aside sale  in  terms  of
Order 21 Rule 89 of the Code of Civil Procedure.   In the present case,  the
debtor did not choose to file an application for setting aside the  sale  in
terms of Rule 38(4) of the Rules at all. Instead,  he  preferred  an  appeal
under Section 106 of the Act before the Assistant Registrar after the  order
of confirmation of sale  was  passed  by  ARCS  in  favour  of  the  auction
purchaser.  Such appeal under Section 106 of the Act was  not  maintainable.
The decision of confirmation of  sale  is  not  ascribable  to  any  of  the
provisions expressly referred to in Section 106 of the Act,  in  respect  of
which remedy of appeal is provided. Further, the order passed by the  Deputy
Registrar dated 18th July 2009 in favour of the  debtor  to  set  aside  the
auction  sale  on  conditions  specified  therein,  in  our  view,  is   not
ascribable even to an order passed under Rule 38(6).   That  discretion  has
to be exercised only by the Recovery Officer  and  more  importantly  before
the order of confirmation of auction sale.

35.   The counsel for the debtor, however, placed reliance on two  decisions
of this Court in J.Rajiv Subramaniyan & Anr.  Vs.  Pandiyas  &  Ors.[2]  and
Vasu P.Shetty vs. Hotel Vandana Palace &  Ors.[3]  Emphasis  was  placed  on
paragraphs 18 and  29  of  the  decision  in  Subramaniyan’s  case  (supra).
Firstly,  that  decision  is   in   respect   of   proceedings   under   the
Securitization and Reconstruction of Financial  Assets  and  Enforcement  of
Security Interest Act, 2002.  Further, the decision is on the facts of  that
case. In this case, the grievance regarding under valuation of the  property
could have been raised by the debtor by way of a formal  application  to  be
filed for setting aside the sale, as  per  the  statutory  provisions  (Rule
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.


                                                             (Anil R. Dave)



New Delhi,
Dated: November 17, 2016

[1]    (2014) 6 SCC 397
[2]    (2014) 5 SCC 651
[3]    (2014)5 SCC 660

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