Karnataka High Court
S Nagappa And Sons vs Sri S M Jain By His Lrs on 7 September, 2023
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NC: 2023:KHC-D:10201
RSA No. 5205 of 2010
IN THE HIGH COURT OF KARNATAKA,
DHARWAD BENCH
DATED THIS THE 7TH DAY OF SEPTEMBER, 2023
BEFORE
THE HON'BLE MR JUSTICE ANANT RAMANATH HEGDE
REGULAR SECOND APPEAL NO. 5205 OF 2010 (DEC/INJ-)
BETWEEN:
S. NAGAPPA AND SONS
REGISTERED PARTNERSHIP FIRM,
S.MADHU, S/O S NAGAPPA,
AGED ABOUT 60 YEARS,
PARVATHI NAGAR,
BELLARY-583101.
...APPELLANT
(BY SMT. IRFANA NAZEER AND
SRI. SHRAVAN MADHAV K.P, ADVOCATES)
AND:
1. SRI. S.M.JAIN
SINCE DECEASED BY HIS LRS
A) KAMALADEVI W/O LATE S.M. JAIN
SAROJA AGED 69 YEARS, HOUSE WIFE,
HANGARAKI R/O: MARTIN ROAD,
Digitally signed by
SAROJA HANGARAKI
BELLARY-583101.
Date: 2023.09.20
10:33:33 +0530
B) S.RAJENDRA KUMAR JAIN
S/O LATE S.M.JAIN,
AGED 51 YEARS,
R/O: MARTIN ROAD,
BELLARY-583101.
2. BELLARY CITY MUNICIPALITY NOW
BELLARY CITY MUNICIPAL CORPORATION
REP. BY THE COMMISSIONER,
BELLARY CITY MUNICIPAL CORPORATION,
BELLARY-583101.
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NC: 2023:KHC-D:10201
RSA No. 5205 of 2010
3. THE STATE OF KARNATAKA,
REP. BY DEPUTY COMMISSIONER,
BELLARY-583101.
...RESPONDENTS
(BY SRI. C.V.ANGADI, ADVOCATE FOR R2;
R1(A) AND R1(B)- NOTICE SERVED;
SMT. KIRTILATA R PATIL, HCGP FOR R3)
THIS RSA IS FILED U/S. 100 OF CPC., AGAINST THE
JUDGEMENT & DECREE DTD: 05-01-2010 PASSED IN
R.A.NO.150/2004 ON THE FILE OF THE FAST TRACK-I AT BELLARY,
ALLOWING THE APPEAL, FILED AGAINST THE JUDGMENT DTD: 19-
03-1998 AND THE DECREE PASSED IN O.S.NO.666/1986 ON THE
FILE OF THE II ADDL. CIVIL JUDGE (JR. DN.), BELLARY, DISMISSED
THE SUIT FILED FOR DECLARATION.
THIS APPEAL, COMING ON FOR FURTHER HEARING, THIS DAY,
THE COURT DELIVERED THE FOLLOWING:
JUDGMENT
This second appeal is filed challenging the divergent finding in R.A. No.150/2004 on the file of the Fast Track Court at Ballari reversing the judgment and decree passed in O.S.No.666/1986 on the file of II Additional Civil Judge, Ballari.
2. The original suit referred to above is filed for the relief to declare that the auction held on 20.06.1980 in respect of the suit schedule property is not binding on the plaintiffs and that the approval granted by the Government of Karnataka vide its GO.No.HID 257 TWD 80 -3- NC: 2023:KHC-D:10201 RSA No. 5205 of 2010 dated 06.02.1984 Bengaluru, is also illegal and to restrain the first defendant - Municipality from executing a sale deed in favour of third defendant.
3. The suit is filed on the premise that on 16.05.1980 the suit property along with four other plots of the same dimension were put for auction. The plaintiff was the highest bidder in the said auction who bid to purchase the property for Rs.1,25,000/-. Since the plaintiff did not comply with the terms and conditions of the auction relating to the payment to be made by him, the auction was cancelled. Thereafter, one more auction was conducted on 20.06.1980 in which the third defendant emerged as the highest bidder for Rs.64,000/- and he complied with the terms and conditions of the auction by depositing the balance amount payable.
4. The plaintiff being aggrieved by the said auction and also the confirmation to the said auction granted by the Government in terms of the Government Order dated 06.02.1984, is before this Court questioning validity of the -4- NC: 2023:KHC-D:10201 RSA No. 5205 of 2010 auction as well as the Government Order confirming the auction.
5. The defendant Municipality as well as third defendant, the auction purchaser contested the suit. The second defendant is the State of Karnataka as the plaintiff has questioned the Government Order approving the auction sale.
6. Defendant No.3 took a stand that the plaintiff has no locus standi to question the auction, and the auction is held in compliance with the applicable provisions of law. Third defendant, being the successful bidder has deposited the entire amount as per the terms of the auction and he is in possession of the property. The Government has approved the auction. Thus, there cannot be any challenge to the auction which is legally conducted in accordance with law.
7. The trial Court has dismissed the suit on the premise that the suit is barred by limitation. The trial Court held that the auction is invalid. However did not set -5- NC: 2023:KHC-D:10201 RSA No. 5205 of 2010 aside the auction as the suit is time barred. In appeal in R.A. No.150/2004 by the plaintiff, cross-objection is filed by defendant No.3/respondent No.3 in R.A. No.150/2004, which is numbered as R.A. No.150A/2004 on the file of the Fast Track Court, Ballari. R.A. No.150/2004 is allowed holding that the plaintiff being a rate payer has the locus to question the auction and concluded that the auction is not in accordance with Rule 39 of the Karnataka Municipalities (Guidance of Officers, Grant of Copies and Miscellaneous Provisions) Rules, 1966 and Section 72(2) of the Karnataka Municipalities Act.
8. The cross-objection filed by the third defendant challenging the finding on the issue on court fee and issue on legality of the auction is also dismissed.
9. Aggrieved by the judgment and decree of the First Appellate Court allowing the appeal and decreeing the suit of the plaintiff in R.A. No.150/2004, this second appeal is filed. Appeal is not filed challenging dismissal of -6- NC: 2023:KHC-D:10201 RSA No. 5205 of 2010 cross-objection which is renumbered as R.A. No.150A/2004.
10. This appeal is admitted on 13.09.2010 to answer the following substantial questions of law:
1. Whether the judgment in a suit held to be barred by limitation be set aside even without referring to the issue of limitation?
2. Whether the Lower Appellate Court was right in ordering for re-auctioning of the property after a gap of 29 years?
11. After hearing the parties on the substantial question of law already framed, this Court felt that one more substantial question of law is required to be framed as under:
(i) Whether the auction dated 20.06.1980 is inconformity with the requirement of Section 72(2) of the Karnataka Municipalities Act and Rule 39 of the Karnataka Municipalities (Guidance of Officers, Grant of Copies and Miscellaneous Provisions) Rules, 1966?-7-
NC: 2023:KHC-D:10201 RSA No. 5205 of 2010
12. Learned counsel for the parties are heard on the additional substantial questions of law as well.
13. The questioned auction sale was conducted on 20.06.1980. The auction was confirmed on 06.02.1984. The suit is filed in the year 1986. Though it is urged that the plaintiff had filed one more suit in O.S. No.79/1984, that suit was dismissed as withdrawn. Same does not prevent the subsequent suit where the order confirming the auction is challenged. Though the auction is held on 20.06.1980, unless the auction is confirmed, the title does not pass in favour of the purchaser and the auction is not complete. The title gets transferred only after confirmation of the auction sale. Since the auction sale is confirmed in 1984, the suit filed in 1986 is in time. The finding of the Trial Court that the suit is bared by time as the plaintiff had the knowledge of auction in the year 1980 itself is untenable. The suit filed within three years from the sale confirmation is in time.
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NC: 2023:KHC-D:10201 RSA No. 5205 of 2010
14. It is relevant to note that the decree in R.A. No.150A/2004, filed by the auction purchaser is not questioned. In terms of the said decree, the first appellate Court confirmed the trial court's finding that the auction is invalid. Thus in a way, the auction purchaser has accepted the finding as there is no appeal by the purchaser. Notwithstanding this technicality, this Court has considered the appellant's plea that the sale is valid.
15. Thus, the Court has to consider whether the auction is in accordance with requirements of Section 72 (2) of the Karnataka Municipalities Act, 1964 (hereinafter referred to as "the Act 1964" for brevity) and Rule 39 of the Karnataka Municipalities (Guidance of Officers, Grant of 1966 Copies and Miscellaneous Provisions) Rules, 1966, (hereinafter referred to as "the Rules 1966" for brevity).
16. Learned counsel Sri Shravan Madhav, appearing for the appellant placing reliance on the Division Bench judgment of this Court in the case of H.L.Shivarame Gowda Vs. Sate of Karnataka reported in ILR 1987 -9- NC: 2023:KHC-D:10201 RSA No. 5205 of 2010 KAR 2033 would submit that the First Appellant Court was in error in holding that prior sanction is required under Section 72 of the Act 1964. Placing reliance on the judgment referred to above, it is urged that the approval before confirmation amounts to compliance of Section 72 of the Act of 1964. This Court has considered the aforementioned judgment. In view of the law laid down, prior sanction is not necessary for sale, lease or auction of the Municipalities property. The approval can be obtained even subsequent to the sale under Section 72 of the Act 1964. However the post facto approval can be granted only if the other requirements under the applicable law are complied.
17. Learned counsel for the appellant would submit that even the requirements of 39, of the Rules 1966 are complied with. It is necessary to refer to the said Rule 39 which reads as under:
"39. Procedure in respect of lease, sale or auction.- Save as otherwise provided in the Act or rules, when the Municipal Council proposes to lease,
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NC: 2023:KHC-D:10201 RSA No. 5205 of 2010 sell or auction any moveable or immoveable property, it shall give notice of such lease, sale or auction by.-
i) affixing copies thereof on the notice board of the Offices of the Municipal Council;
ii) exhibiting copies thereof in all municipal reading rooms and places considered by the Municipal Council to be conspicuous within the Municipality;
iii) publication in a daily newspaper having wide circulation within the Municipality;
iv) by beat of drum or circulation of notice in the locality."
18. The rule prescribes the procedure for lease, sale or auction of Municipal property. As per the Rule, before auctioning the property, the Municipal Council must follow certain procedures. The Municipal Council has to give notice of lease, sale or auction;
(a) by affixing copies thereof on the notice board of the offices of the Municipal Council;
(b) by exhibiting copies thereof in all municipal reading rooms and places considered by the Municipal Council to be conspicuous within the municipality;
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NC: 2023:KHC-D:10201 RSA No. 5205 of 2010
(c) by publishing in a daily newspaper having wide circulation within the Municipality;
(d) by beat of drum or circulation of notice in the locality
19. On plain reading of the aforementioned provision, it is evident that before transferring the Municipal property on lease or sale, or auctioning the same, the Municipal Council has to issue the notice in the aforementioned manner.
20. Learned counsel, Sri Shravan Madhav appearing for the appellant emphasizing on the semicolon after each of the different types of notices, referred to in Rule 39, would submit that semicolon would indicate that each of the publications referred to Rule 39 is independent of another. He would also urge that the word 'and' is missing between each of the publications referred to Rule 39 and comma is also missing. Thus, he would urge that each of the publications referred to in Rule 39 is independent of each other, and stand alone. Thus he urged that the
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NC: 2023:KHC-D:10201 RSA No. 5205 of 2010 compliance of one of the publications amounts to compliance of Rule 39 in substance.
21. He would also urge that the whole object of Rule 39 is to give wide publicity and wide publicity is given before auctioning the property by beat of drum in the locality.
1. M/s. Universal Media Co., Vs. The Assistant Commissioner of Commercial Taxes reported in W.P.Nos.15749/2017 & 53072-53082/2017.
2. K.R.Govind vs. State of Karnataka reported in W.P.No.6656 of 1979 dated 12th December 1986.
3. Mohan P. Sonu vs. State of Karnataka reported in I.L.R.1992 KAR 1219.
4. D.V.Satyanarayana vs. Tax Recovery Officer reported in I.L.R.1992 KAR 1224.
5. J.Jaichand and Another vs. The Town Municipality, Robertsonpet K.G.F. and Others reported in WP No.3919 and 3920/74
6. Jayant Verma and others vs. Union of India and others reported in (2018) 4 SCC 743.
7. Aswini Kumar Ghose vs. Arabinda Bose and another reported in (1952) 2 SCC 237: 1952 SCC OnLine SC 97.
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NC: 2023:KHC-D:10201 RSA No. 5205 of 2010
22. Sri Shravan Madhav, the learned counsel would also refer to Class (iii) of Rule 39 which contemplates newspaper publication having wide circulation within the municipality and not throughout the State, or the district. Thus, he would urge that the circulation of notice by beat of drum is valid enough publication.
23. Sri Angadi, the learned counsel appearing for the respondent municipality would urge that Rule 39 of 1966, Rules contemplates four different modes of publication and all modes have to be complied to ensure fair and transparent lease, sale or auction of the property belonging to the Municipality.
24. This Court has considered the contentions raised at the Bar and also perused the aforementioned judgments.
25. The effect of use of semicolon in Rule 39 between each of the four different types of publications is concerned, there is no difficulty in holding that the each of the modes of publications is independent of the other
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NC: 2023:KHC-D:10201 RSA No. 5205 of 2010 modes of publication prescribed under Rule 39. The question is whether the use of semicolon in Rule 39 between each of the modes of publications gives an option to the municipality to use one of the modes of publications to urge that compliance of one of the modes of publication is sufficient compliance of Rule 39. To answer the question the Court has to consider the object behind Rule 39 of 1966 Rules. Rule 39 is incorporated in the Rules 1966 to ensure that there is transparency while the municipal council deals with the property belonging to the municipality. Wherever decision is taken to lease, sell or to auction of the municipal property, wide publicity is to be given to ensure that the municipality gets the highest price for its intended lease, sale or auction. This can be achieved only by way of wide publicity. There can be no dispute over this. If so, publication of notice in all four different modes of publications becomes imperative. Merely, because semicolon is used between each of the modes of publication in Rule 39, the Court cannot come to the conclusion that municipality has an option to follow
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NC: 2023:KHC-D:10201 RSA No. 5205 of 2010 any one or few of them and to discard the remaining modes of publication. Such a construction defeats the very object of Rule 39. The judgments cited above by the appellant though deal with the use of semicolon and comma in a provision of law, and consequences flowing from it, the interpretation on use of semicolon in those judgments cannot be straight away applied like a mathematical formula, to all provisions of law where the semicolon is used. The law in those judgments on the implication of semicolon cannot lead to the conclusion that Rule 39 in Rules, 1966 has to be interpreted holding that mode of one type of publication is sufficient compliance of Rule 39. In the first place, the judgments cited above do not deal with questions raised with reference to use of semicolon in Rule 39 or about the object behind or requirements under Rule 39. Hence the said judgments do no assist the appellant.
26. Admittedly, in this case except alleged publication by beat of drums, there is no other publication.
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NC: 2023:KHC-D:10201 RSA No. 5205 of 2010 What is the consequence of it is self-evident. The first auction was conducted on 16.05.1980 apparently post newspaper publication. In the first auction, the plaintiff was the successful bidder for Rs.1,25,000/- The present appellant was one of the participants in the first auction which took place on 16.05.1980 and his bid was at Rs.1,05,000/-. Though the plaintiff emerged as successful bidder for Rs.1,25,000/- for the reasons best known to him, he did not comply with the terms and conditions of the bid and did not deposit the balance amount required. Hence, auction was cancelled. A decision was taken to re- auction the property on 07.06.1980.
27. This Court has secured the records from the Municipality relating to the decision taken on 07.06.1980 to hold fresh auction. The resolution dated 07.06.1980 reads as under:-
"June 1980 7.6.80
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NC: 2023:KHC-D:10201 RSA No. 5205 of 2010 Sub: CMC Bellary- Engineering T.S.No.653 Block No.4, Ward No. XVI conversion into plots-auction of - confirmation of highest bids-regarding.
The Divisional Commissioner, Gulbarga has inspected the site in T.S.No.653 Block 4, Ward XVI along with the Deputy Commissioner, Bellary on 20.12.79 and suggested to auction the sites and the amount utilised for improving amenities to the city.
Accordingly the sites has been converted into 4 plots measuring 43ft* 54ft each.
The said plots have been public auctioned on 16.5.80, giving wide publicity and the following highest bidds have been achieved in public auction.
1. Plot no.1 Sri. S.M.Jain Rs. 1,25,000/-
2. Plot no.2. Sri. B.Venkateshwara and Bros Rs.1,30,000/-
3. Plot No.3. Sri. Nagappa and bros Rs. 81,000/-
4. Plot No.4. Sri. S Nagappa and Bros Rs. 1,16,000/-
Excepting Sri. S.M.Jain, the highest bidder of plot no.1, the other bidders have deposited
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NC: 2023:KHC-D:10201 RSA No. 5205 of 2010 the 25% of the bid amount and also paid 75% of the bid amount within time stipulated in auction notice. Sri.S.M.Jain has failed to deposit the 25% as required under auction notice. Has his initial deposit of Rs. 4,000/- paid requires to the forfeited to the Municipality funds as per condition of auction notice.
The bids achieved exceeds Rs. 5,000/- for which approval of the Govt. is required under section 72(2)of the K.M.Act 1964.
The subject is placed before the administrator for confirmation of the highest bids except Sl.no.1, subject to confirmation the competent authority and to re auction the plot as the bidder has failed to fulfil the auction conditions.
Resolution : Confirmed sales subject to the approval by the Govt. as per Sec.72(2) of K.M.Act.1964."
28. From the said resolution, it is apparent that the Municipality has taken a decision to cancel the previous auction and to hold a fresh auction. The resolution is silent as to the modes of publication to be adopted for the future
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NC: 2023:KHC-D:10201 RSA No. 5205 of 2010 auction and in that resolution, even date is not fixed as to when the re auction is to be held.
29. The resolution No.95 is marked at Ex.P9 and this is a resolution confirming the auction sale held on 20.06.1980. This confirmation is granted by the Commissioner. This resolution at Ex.P9 refers to resolution no.85 dated 07.06.1980 authorizing re-auction of the property. However, when the decision is taken to hold the auction on 20.06.1980 is not forthcoming. What are the modes of publication sought to be adopted before auctioning the property is also not forthcoming. It is also not forthcoming from the records as to whether the Municipal Council has taken a decision to fix the auction on 20.06.1980. Rule 39 prescribes that Municipal Council has to take a decision and Municipal Council has to follow four different modes of publication prescribed under Rule 39. At whose instance a decision is taken only to circulate the notice by beat of drum is not forthcoming.
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30. It is also relevant to note that in the previous auction, the property was auctioned for Rs.1,25,000/-. The base price fixed was Rs.1,00,000/-. Thus, the auction has taken place almost 27 days after the first auction. In a span of 27 days, the base price has been reduced to Rs.64,000/-. The reason for reducing the base price by almost 50% from the highest bid secured 27 days earlier is not forthcoming. The resolution placed before the Court does not disclose as to who has taken a decision to fix the base price at Rs.64,000/-.
31. This being the position, this Court is of the view that the auction said to have been held on 20.06.1980 casts too many doubts about its legality.There was no justification at all in fixing the base price at Rs.64,000/- just after 27 days of cancellation of previous auction where the highest bid was for Rs1.25,000/- and few other bidders bid in excess of Rs one lac. A person who bid for Rs.1,05,000/-, 27 days earlier, has participated in the second auction which is evidently without due publicity,
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NC: 2023:KHC-D:10201 RSA No. 5205 of 2010 and not in compliance of Rule 39 of 1966 Rules, purchased the property for Rs.64,000/- when the reserve price is said to be Rs.64,000/- for the reasons never disclosed.
32. It is further relevant to note that the auction dated 17.05.1980 was preceded by news paper publication. Surprisingly, no decision has been taken as to the mode of publication of auction notice. And it is also relevant to note that on which date, the decision is taken to hold the auction on 20.06.1980 is not forthcoming. It is also relevant to note that the auction notice does not disclose the date when it is generated. It does not disclose the date of its publication. Obviously, Rule 39 (i) (ii) and
(iii) are not complied with. The appellant only contended that the Rule 39 (iv) is compiled and compliance of Rule 39 (iv) is sufficient compliance of Rule 39. The said contention if accepted, then it is quite possible that the municipal council will publish the auction notice within the premises of municipality or on the notice board of municipality, which may not come to the notice of the
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NC: 2023:KHC-D:10201 RSA No. 5205 of 2010 general public who may be interested in purchasing the property of the municipality. Thus, this Court is of the view that compliance with all the four types of publication of notice of the proposed lease, sale or auction contemplated under Rule 39 is a must.
33. The first appellate Court ought to have considered the plea of limitation before allowing the appeal. However, this Court has considered the plea of limitation and the suit is in time. Hence the substantial questions of law are answered in favour of the respondents. The first appellate court has held that the sale is illegal. However, there cannot be a direction to hold a fresh auction. It is for the Municipal Council to decide the future course of action as to whether there should be a fresh auction. It may take a decision to hold a fresh auction or may take a decision not to auction the property.
34. Hence the substantial questions of law are answered accordingly.
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35. It is relevant to note that the sale deed is not yet executed in favour of the appellant. However, it appears that he is put in possession of the property by the respondent-Municipality. The plaintiff has also obtained a decree for injunction in OS no.83/1984 on the file of the Munsiff, Bellary. The said decree has attained finality. It is required to be noticed that when the decree was passed, the auction was not yet challenged by anyone. Now, as the auction is held to be invalid, the possession of defendant no.3 cannot be protected forever. The defendant No. 3 has to deliver the possession of the property to the defendant Municipality.
36. It is also relevant to note that defendant no.3- the auction purchaser has already deposited Rs.64,000/- as contemplated in the auction notice. Since the auction is held to be invalid, defendant no.3 is entitled to refund of the entire amount along with interest.
37. This Court is of the view that the auction is said to be invalid because of noncompliance of mandatory
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NC: 2023:KHC-D:10201 RSA No. 5205 of 2010 procedure on the part of the respondent-Municipality. The noncompliance of the procedure by the Municipal Council has resulted in auction being set aside and needless to say that defendant no.3-appellant is put to substantial inconvenience and hardship. Hence, this Court is of the view that, in exercise of power under Order XLI Rule 33 of the Code of Civil Procedure, 1908, appropriate relief is to be granted in favour of appellant.
38. Hence the following.
(i) The defendant municipality is directed to repay the appellant / defendant No.3, Rs.64,000.00 the sale consideration amount paid by the appellant, along with interest at the rate of 18% per annum, from the date of payment of the said amount till the date of repayment of said amount to the appellant.
(ii) Since defendant no.3 is in possession of the suit property, as held in O.S.No.18/1984, the defendant- Municipality shall not dispossess the plaintiff till the Rs.64,000.00 along with interest at the rate of 18%
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NC: 2023:KHC-D:10201 RSA No. 5205 of 2010 per annum is repaid to the appellant as ordered above. Once the amount is repaid, the appellant is deemed to have vacated the suit premises and handed over the same to the defendant Municipality.
(iii) It is further made clear that in case defendant no.3 has put up any structure in the property, pursuant to the auction, he is entitled to remove the same at his own cost.
(iv) Whether the property is to be auctioned or retained by the defendant Municipality is left to the decision of the Municipal Council, which of course is to be taken in accordance with law.
(v) The appeal is disposed of with above said modifications.
Sd/-
JUDGE SH- upto para 11 Vmb, List No.: 2 Sl No.: 1 ..