Insolvency and Bankruptcy Code, 2016 — Section 7 — Section 60(2) & (3) — Simultaneous initiation of CIRP against principal borrower and corporate guarantor — Maintainability. (Paras 2–4, 73–79) The issue whether simultaneous proceedings for Corporate Insolvency Resolution Process (CIRP) may be maintained against the principal debtor and its corporate guarantor stands covered by the decision in BRS Ventures Investments Ltd. v. SREI Infrastructure Finance Ltd.. Section 60(2) of the IBC contemplates filing of proceedings relating to the corporate debtor and its guarantor before the same Adjudicating Authority. The liability of the guarantor being co-extensive with that of the principal debtor under Section 128 of the Contract Act, the IBC permits separate or simultaneous proceedings against both. Ratio Decidendi: The Insolvency and Bankruptcy Code permits initiation and continuation of simultaneous CIRP proceedings against a corporate debtor and its corporate guarantor; admission of one proceeding does not bar admission of the other for the same debt.

Insolvency and Bankruptcy Code, 2016 — Section 7 — Section 60(2) & (3) — Simultaneous initiation of CIRP against principal borrower and corporate guarantor — Maintainability. (Paras 2–4, 73–79)

The issue whether simultaneous proceedings for Corporate Insolvency Resolution Process (CIRP) may be maintained against the principal debtor and its corporate guarantor stands covered by the decision in BRS Ventures Investments Ltd. v. SREI Infrastructure Finance Ltd.. Section 60(2) of the IBC contemplates filing of proceedings relating to the corporate debtor and its guarantor before the same Adjudicating Authority.

The liability of the guarantor being co-extensive with that of the principal debtor under Section 128 of the Contract Act, the IBC permits separate or simultaneous proceedings against both.

Ratio Decidendi: The Insolvency and Bankruptcy Code permits initiation and continuation of simultaneous CIRP proceedings against a corporate debtor and its corporate guarantor; admission of one proceeding does not bar admission of the other for the same debt.

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IBC — Rejection of ‘one debt–one proceeding’ theory — Interpretation of Vishnu Kumar Agarwal — Clarification of law. (Paras 73–79)

The view in Vishnu Kumar Agarwal that once a Section 7 application is admitted against one corporate debtor, a second application for the same claim cannot be admitted against another, does not represent the correct legal position in view of subsequent authoritative pronouncement in BRS Ventures.

Ratio Decidendi: Admission of CIRP against one obligor (principal borrower or guarantor) does not legally preclude admission of CIRP against the other obligor in respect of the same debt.

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IBC — Nature of proceedings — Not mere recovery proceedings — Scope of discretion under Section 7(5)(a). (Paras 80–86)

IBC proceedings are not pure recovery proceedings; they are aimed at insolvency resolution and maximization of asset value. However, if statutory conditions of “debt” and “default” are satisfied, admission cannot be denied solely on the ground that recovery may incidentally follow.

Reliance placed on Axis Bank Ltd. v. Vidarbha Industries Power Ltd. regarding discretion under Section 7(5)(a).

Ratio Decidendi: While the Adjudicating Authority has limited discretion under Section 7(5)(a), simultaneous CIRP against debtor and guarantor cannot be refused merely because IBC is not intended as a recovery mechanism.

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Doctrine of Election — Applicability to IBC — Rejected. (Paras 87–95)

The doctrine of election requires (i) existence of two or more remedies, (ii) inconsistency between such remedies, and (iii) a choice of one. Simultaneous proceedings under IBC against debtor and guarantor do not satisfy these conditions.

The Code contains no statutory mandate compelling a financial creditor to elect between remedies against principal borrower and guarantor.

Ratio Decidendi: The doctrine of election is inapplicable to simultaneous insolvency proceedings against principal borrower and guarantor; creditor cannot be compelled to restrict or split its claim.

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Clean Slate Principle — Filing of full claim necessary — No compulsory bifurcation of debt. (Paras 90–93)

In light of the ‘clean slate’ principle explained in Ghanshyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. and Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, if a creditor fails to lodge its full claim in a CIRP, it risks extinguishment of the unpaid portion upon approval of the resolution plan.

Ratio Decidendi: A financial creditor is entitled to file its entire claim in each CIRP proceeding against obligors jointly and severally liable; mandatory election or bifurcation would undermine statutory rights under the Code.

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Double Enrichment — Safeguards under Regulations 12A and 14 of CIRP Regulations, 2016. (Paras 96–100)

Though simultaneous proceedings are permissible, a creditor cannot recover more than the debt due. Regulation 12A obligates updating of claims when satisfied wholly or partly; Regulation 14 requires revision of admitted claims upon additional information.

Reliance placed on Maitreya Doshi v. Anand Rathi Global Finance Ltd..

Ratio Decidendi: While simultaneous CIRP is maintainable, recovery cannot exceed the debt due; regulatory safeguards prevent double enrichment.

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Judicial Restraint — Refusal to frame additional guidelines on group insolvency. (Paras 101–104)

Though submissions were made seeking guidelines on modalities of simultaneous proceedings and group insolvency, the Court declined to legislate judicially, leaving the matter to legislative and regulatory authorities.

Ratio Decidendi: Policy refinements concerning group insolvency or procedural modalities fall within the legislative/regulatory domain and not judicial prescription.

Criminal Procedure — Quashing of FIR — Civil dispute given criminal colour — Scope of judicial scrutiny under Article 226/Section 482 CrPC — Duty to examine admitted documents along with FIR. (Paras 15, 29–30) While ordinarily the allegations in the FIR are to be taken at face value, where the dispute is essentially civil in nature, the Court must examine attending circumstances and admitted documents to ascertain whether a criminal offence is prima facie made out or whether the proceedings amount to abuse of process. Ratio Decidendi: Where the foundational dispute arises from a contractual arrangement and admitted documents negate the essential ingredients of alleged offences, continuation of criminal proceedings constitutes abuse of process and warrants quashing.

Criminal Procedure — Quashing of FIR — Civil dispute given criminal colour — Scope of judicial scrutiny under Article 226/Section 482 CrPC — Duty to examine admitted documents along with FIR. (Paras 15, 29–30)

While ordinarily the allegations in the FIR are to be taken at face value, where the dispute is essentially civil in nature, the Court must examine attending circumstances and admitted documents to ascertain whether a criminal offence is prima facie made out or whether the proceedings amount to abuse of process.

Ratio Decidendi: Where the foundational dispute arises from a contractual arrangement and admitted documents negate the essential ingredients of alleged offences, continuation of criminal proceedings constitutes abuse of process and warrants quashing.

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Indian Penal Code, 1860 — Sections 420, 406 — Cheating and Criminal Breach of Trust — Absence of dishonest intention at inception — Non-fulfilment of contractual obligations. (Paras 25–28)

The Joint Venture Agreement (JVA) dated 16.08.2010 governed the rights and obligations of the parties. Allegations of non-performance, non-refund of security deposit and breach of contractual terms, absent evidence of dishonest intention at inception, do not constitute offences of cheating or criminal breach of trust.

Security money under Clause 5 was non-refundable and adjustable against the share of the first party; hence, non-refund could at best give rise to civil consequences.

Ratio Decidendi: Mere breach of contract or failure to perform contractual obligations, without fraudulent or dishonest intention at the inception of the transaction, does not attract Sections 420 or 406 IPC.

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Indian Penal Code, 1860 — Sections 467, 468, 471 — Forgery — Meaning of “false document” under Section 464 IPC — Non-traceability of certificate insufficient. (Paras 23–24)

A letter issued by the Tehsildar was alleged to be forged merely because it was not traceable in official records after several years. The Court held that absence of record does not ipso facto establish fabrication. A document constitutes a “false document” only if it satisfies the ingredients of Section 464 IPC, including dishonest or fraudulent making, alteration or execution.

Ratio Decidendi: Non-traceability of an official certificate in departmental records does not establish forgery; criminal liability for forgery arises only when the document satisfies the statutory ingredients of a “false document” under Section 464 IPC.

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Cheating — False representation regarding title — Construction of contractual assurances — No explicit statement of “no litigation pending.” (Paras 19–21, 26)

The JVA contained assurances regarding absence of attachment, restraint orders, and indemnification for marketable title, but did not contain any specific representation that no litigation was pending. Allegations in the FIR that the accused falsely represented absence of litigation were unsupported by the terms of the agreement.

Ratio Decidendi: Where contractual covenants do not contain the alleged misrepresentation and no falsity in declared assurances is demonstrated, the offence of cheating is not made out.

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Delay in lodging FIR — Indicative of civil dispute — Absence of prompt allegation of fraud. (Para 25)

The JVA was executed in 2010; FIR was lodged in 2021. The prolonged delay without intervening allegation of fraudulent conduct indicates a contractual dispute rather than criminality at inception.

Ratio Decidendi: Long delay in initiating criminal proceedings in a purely contractual dispute, without contemporaneous allegation of fraud, reinforces the inference that the matter is civil in nature.

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Final Holding

The dispute arose from a Joint Venture Agreement and disclosed, at best, a civil cause of action. Essential ingredients of offences under Sections 406, 420, 467, 468 and 471 IPC were not made out even on a complete reading of the FIR along with admitted documents.

The judgment of the High Court was set aside. FIR No. 0112 of 2021 dated 14.03.2021 and all consequential proceedings were quashed.

Pending applications disposed of.

Constitution of India — Articles 14, 15, 21 — Prison administration — Right to life and dignity of prisoners — Rehabilitative justice — Open Correctional Institutions (OCIs) as constitutional instruments of reform. (Paras 33–42, 74–76) This Court reaffirmed that incarceration does not extinguish fundamental rights and that Article 21 guarantees prisoners the right to live with dignity, including access to reformative and rehabilitative avenues. Open Correctional Institutions, premised on graded liberty, trust and self-discipline, are constitutionally aligned mechanisms for decongestion, reformation and reintegration. Ratio Decidendi: The constitutional guarantee of dignity under Article 21 obliges the State to operationalise reformative penology through effective establishment, expansion and humane governance of Open Correctional Institutions; prison administration must be rehabilitation-oriented and equality-compliant.

Constitution of India — Articles 14, 15, 21 — Prison administration — Right to life and dignity of prisoners — Rehabilitative justice — Open Correctional Institutions (OCIs) as constitutional instruments of reform. (Paras 33–42, 74–76)

This Court reaffirmed that incarceration does not extinguish fundamental rights and that Article 21 guarantees prisoners the right to live with dignity, including access to reformative and rehabilitative avenues. Open Correctional Institutions, premised on graded liberty, trust and self-discipline, are constitutionally aligned mechanisms for decongestion, reformation and reintegration.

Ratio Decidendi: The constitutional guarantee of dignity under Article 21 obliges the State to operationalise reformative penology through effective establishment, expansion and humane governance of Open Correctional Institutions; prison administration must be rehabilitation-oriented and equality-compliant.

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Prison Overcrowding — Under-utilisation of Open Correctional Institutions — Duty of States and Union Territories — Judicial enforcement of reformative framework. (Paras 45–48, 73–74)

Despite prior directions in In Re: Inhuman Conditions in 1382 Prisons, existing OCIs remained substantially under-utilised and several States/UTs lacked such facilities altogether. The Court held that failure to utilise or establish OCIs defeats both reformative objectives and constitutional mandates. States/UTs were directed to assess feasibility, frame time-bound protocols, fill vacancies, and expand infrastructure.

Ratio Decidendi: Where empirical material demonstrates chronic overcrowding and simultaneous under-utilisation of OCIs, States are constitutionally obligated to establish, expand and optimally utilise open correctional infrastructure through structured, time-bound measures.

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Gender Equality in Prison Administration — Exclusion of women from OCIs — Violation of Articles 14, 15 and 21 — Mandate for gender-sensitive inclusion. (Paras 49–54, 110–112)

Several States excluded women prisoners from eligibility for OCIs or failed to operationalise transfer despite legal permissibility. Relying upon constitutional equality guarantees and international norms (Nelson Mandela Rules; Bangkok Rules), the Court held such exclusion to be impermissible. States were directed to restructure capacity, amend rules, and ensure timely transfer of eligible women prisoners.

Ratio Decidendi: Denial or exclusion of women prisoners from access to Open Correctional Institutions constitutes gender discrimination violative of Articles 14 and 15(1) and infringes the right to dignity under Article 21; States must ensure gender-sensitive and non-discriminatory access.

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Eligibility Criteria — Rigid incarceration thresholds — Need for individualised reformative assessment — Prohibition against labour-camp model. (Paras 55–61, 113–117)

Stringent requirements of 4–21 years of prior incarceration and agriculture-centric functioning diluted the reformative character of OCIs. The Court mandated rationalisation of eligibility criteria based on reformative potential and institutional conduct, diversification of vocational training, fair wages, healthcare, banking access, education, grievance redressal and family integration.

Ratio Decidendi: Eligibility for transfer to OCIs must be based on individualised reformative assessment rather than rigid temporal thresholds; OCIs must function as structured rehabilitation centres and not as custodial labour camps.

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Uniform Standards — Fragmented governance across States — Constitution of High-Powered Committee for Common Minimum Standards. (Paras 62–65, 118–126)

Noting disparities in eligibility norms, wages, healthcare, family integration and discipline, the Court directed constitution of a High-Powered Committee headed by a former Judge of this Court to formulate Common Minimum Standards for governance of OCIs, harmonise practices, and recommend systemic reforms.

Ratio Decidendi: To secure equality and uniform constitutional compliance in prison administration, nationally consistent Common Minimum Standards for Open Correctional Institutions are necessary and may be judicially mandated through expert institutional mechanisms.

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Cost-Effectiveness of OCIs — Fiscal prudence and administrative sustainability — Expansion mandated. (Paras 66–72, 127–129)

Empirical data from Rajasthan demonstrated stark cost differentials: per-prisoner per-day expenditure of approximately Rs.333.12 in closed prisons versus Rs.49.60 in open prisons. Open prisons required minimal staffing and infrastructure, with inmates largely self-sustaining. The Court held that expansion of OCIs advances both constitutional and fiscal rationality.

Ratio Decidendi: Open Correctional Institutions are demonstrably more cost-effective and administratively sustainable than closed prisons; expansion of open correctional infrastructure is constitutionally justified and fiscally prudent.

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Continuing Mandamus — Monitoring by High Courts — Institutional accountability. (Paras 129–133)

To ensure effective implementation, High Courts were directed to register suo motu writ petitions as continuing mandamus; State-level Monitoring Committees were mandated; and periodic reporting mechanisms were instituted.

Ratio Decidendi: Where structural reform of prison administration is required to enforce fundamental rights, this Court may invoke continuing mandamus and multi-tiered monitoring to secure effective compliance.

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Operative Outcome

Comprehensive directions issued for:
• Establishment and optimal utilisation of OCIs;
• Inclusion of women prisoners;
• Rationalisation of eligibility norms;
• Strengthening of rehabilitative frameworks;
• Constitution of a High-Powered Committee for Common Minimum Standards;
• Expansion of open correctional infrastructure; and
• Judicial monitoring through High Courts and State Committees.

Matter listed for periodic compliance review.

Evidence before Motor Accidents Claims Tribunal — FIR/Criminal proceedings — Limited evidentiary value — Tribunal to be guided by evidence led before it. (Paras 7–9) The respondent relied on documents relating to a criminal case allegedly involving confession of the trailer driver. The Court declined to place reliance on such documents, observing that the FIR details were unclear and that criminal proceedings concluded much before disposal of the claim petition were not proved before the Tribunal. Following National Insurance Co. Ltd. v. Chamundeswari, it was reiterated that what matters before the Tribunal is the evidence adduced therein, and contents of FIR or criminal proceedings cannot override clear oral evidence recorded in the claim proceedings. Ratio Decidendi: In motor accident claims, findings on negligence must be based on evidence adduced before the Tribunal; FIR contents or criminal case outcomes do not by themselves determine civil liability

Motor Vehicles Act, 1988 — Motor accident — Collision between vehicle in front and vehicle behind — Duty to maintain safe distance — Regulation 23 of the Rules of the Road Regulations, 1989 — Liability of insurer. (Paras 6, 10–11)

The accident involved a trailer moving in front and a truck following behind. The claimant, a Cleaner travelling in the truck, deposed that the truck was travelling at a distance of only 20 feet behind the trailer and that at a speed of 30–40 km per hour, a gap of 40–50 feet was necessary to ensure effective control. He admitted that had such distance been maintained, the accident could have been averted.

Relying on Nishan Singh v. Oriental Insurance Co. Ltd. and Regulation 23 of the Rules of the Road Regulations, 1989, the Court reiterated that the driver of a vehicle following another must maintain sufficient distance to avoid collision in case of sudden braking. Failure to maintain such distance amounts to negligent driving.

The Tribunal had rightly fastened negligence on the truck driver. The High Court erred in reversing the finding.

Ratio Decidendi: Where a vehicle travelling behind fails to maintain sufficient distance as mandated by Regulation 23, and collision occurs upon sudden braking of the vehicle ahead, negligence lies primarily on the following vehicle.

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Evidence before Motor Accidents Claims Tribunal — FIR/Criminal proceedings — Limited evidentiary value — Tribunal to be guided by evidence led before it. (Paras 7–9)

The respondent relied on documents relating to a criminal case allegedly involving confession of the trailer driver. The Court declined to place reliance on such documents, observing that the FIR details were unclear and that criminal proceedings concluded much before disposal of the claim petition were not proved before the Tribunal.

Following National Insurance Co. Ltd. v. Chamundeswari, it was reiterated that what matters before the Tribunal is the evidence adduced therein, and contents of FIR or criminal proceedings cannot override clear oral evidence recorded in the claim proceedings.

Ratio Decidendi: In motor accident claims, findings on negligence must be based on evidence adduced before the Tribunal; FIR contents or criminal case outcomes do not by themselves determine civil liability.

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Contributory negligence — Plea — Absence of evidence — Rejection. (Para 12)

The attempt to attribute contributory negligence was rejected for want of any valid evidence establishing negligence on the part of the trailer driver sufficient to displace the primary negligence of the truck driver.

Ratio Decidendi: Contributory negligence must be established by cogent evidence; mere suggestion in cross-examination without substantive proof is insufficient.

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Final Order

Order of the High Court set aside. Award of the Tribunal restored, fastening liability on the insurer of the truck, namely Tata AIG General Insurance Company Limited. Appeal allowed. Pending applications disposed of.

Maharashtra Co-operative Societies Act, 1960 — Sections 98, 156 — Execution of award — Property of judgment-debtor liable to attachment and sale — Challenge to validity of mortgage after award attained finality — Impermissible. (Paras 21–23) An ex parte award dated 04.04.1994 under Section 91 attained finality; application to set aside the award was rejected. The award operated as a money decree executable under Section 98 as a decree of a Civil Court. The predecessor-in-interest of respondents being a judgment-debtor, his property was amenable to attachment and sale for recovery of decretal dues. Objection regarding absence of prior Government permission for mortgage was held irrelevant at the stage of execution of a final award. Ratio Decidendi: Once an award under the 1960 Act attains finality and becomes executable as a civil decree under Section 98, property of the judgment-debtor can be attached and sold for realization of dues; validity of the underlying mortgage cannot be re-opened in execution.

Maharashtra Co-operative Societies Act, 1960 — Sections 98, 156 — Execution of award — Property of judgment-debtor liable to attachment and sale — Challenge to validity of mortgage after award attained finality — Impermissible. (Paras 21–23)

An ex parte award dated 04.04.1994 under Section 91 attained finality; application to set aside the award was rejected. The award operated as a money decree executable under Section 98 as a decree of a Civil Court. The predecessor-in-interest of respondents being a judgment-debtor, his property was amenable to attachment and sale for recovery of decretal dues. Objection regarding absence of prior Government permission for mortgage was held irrelevant at the stage of execution of a final award.

Ratio Decidendi: Once an award under the 1960 Act attains finality and becomes executable as a civil decree under Section 98, property of the judgment-debtor can be attached and sold for realization of dues; validity of the underlying mortgage cannot be re-opened in execution.

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Maharashtra Co-operative Societies Act, 1960 — Section 154 — Revisional jurisdiction — Scope — Maintainability against confirmation of sale — Not curtailed by Rule 107 remedies — No pre-deposit required when revision not against recovery certificate. (Paras 24–42)

The legal representatives of the borrower filed revision under Section 154 challenging confirmation of auction sale. It was contended that remedy lay exclusively under Rule 107(13) or (14) of the 1961 Rules and that revision was not maintainable. The Court held that Section 154 confers wide revisional power to examine legality or propriety of any decision or order of a subordinate officer where no appeal lies. Remedies under Rule 107 are applications to set aside sale on specified grounds and do not eclipse statutory revisional power. Pre-deposit under Section 154(2-A) is attracted only when revision is against a recovery certificate; here revision was against confirmation of sale.

Ratio Decidendi: The revisional power under Section 154 of the 1960 Act is plenary and cannot be restricted by procedural remedies under Rule 107; revision is maintainable against confirmation of sale without pre-deposit where challenge is not to the recovery certificate.

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Maharashtra Co-operative Societies Rules, 1961 — Rule 107(11)(g) & (h) — Deposit of 15% at auction and balance within stipulated period — Mandatory requirement — Non-compliance renders sale a nullity — No discretion to extend time for balance payment. (Paras 45–48, 55)

Under Rule 107(11)(g), 15% of purchase price must be deposited at the time of sale; under Rule 107(11)(h), the remainder must be paid within 15 days (as applicable at the time). No provision authorises extension of time for payment of the balance purchase money. Consequences of default include forfeiture and resale after fresh proclamation under Rule 107(11)(i) & (j). Relying on Shilpa Shares & Securities v. National Co-operative Bank Ltd. and earlier precedents, the Court affirmed that non-deposit within prescribed time renders the sale void, not merely irregular.

Ratio Decidendi: Compliance with Rule 107(11)(g) and (h) is mandatory; failure to deposit the balance purchase money within the stipulated period vitiates the sale, rendering confirmation a nullity.

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Waiver — Applicability — Auction conditions under Rule 107 — Not confined to creditor’s benefit — Serve public purpose — No waiver by borrower. (Paras 50–55)

The auction purchaser relied on General Manager, Sri Siddheshwara Co-operative Bank Ltd. v. Ikbal to contend that time stipulation could be waived. The Court distinguished the decision, noting that Rule 9(4) of the SARFAESI Enforcement Rules expressly permitted extension by written agreement, whereas Rule 107 contains no such provision. Moreover, the stipulation under Rule 107 serves broader public interest in maintaining sanctity of public auctions and preventing manipulation. There was no material indicating waiver by the borrower or his heirs.

Ratio Decidendi: Time stipulation under Rule 107(11)(h) is not merely for the creditor’s benefit and cannot be waived in absence of statutory provision; absence of timely deposit invalidates the sale notwithstanding creditor’s acceptance.

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Relief — Consequence of void auction — Appropriate order — Fresh auction — Refund with interest — Protection of equities. (Paras 57–58)

While upholding that the sale and its confirmation were void, the Court modified the High Court’s directions. The property was directed to be put to fresh auction under Rule 107(11)(j). The auction purchaser, having deposited the entire amount as permitted by the Recovery Officer, was held entitled to refund with 6% interest per annum from date of deposit till repayment. Liberty was reserved to the Bank and judgment-debtors to arrive at settlement before the Recovery Officer.

Ratio Decidendi: Upon declaring an auction void for non-compliance with mandatory rules, the proper course is to direct resale in accordance with law and order refund of the purchase money with reasonable interest to the auction purchaser.

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Final Order

Auction sale dated 29.01.2005 and confirmation dated 18.03.2005 declared null and void. Property to be re-auctioned under Rule 107(11)(j). Bank to refund Rs.1,51,00,000 to M/s. Adishakti Developers with 6% interest from date of deposit till repayment. Liberty for settlement between decree-holder and judgment-debtors reserved. Appeals disposed of. No order as to costs.