Karnataka High Court
Sri B R Krishnappa vs The Deputy Registrar on 9 January, 2018
Author: S.N.Satyanarayana
Bench: S.N.Satyanarayana
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 9TH DAY OF JANUARY 2018
BEFORE
THE HON' BLE MR. JUSTICE S.N.SATYANARAYANA
WRIT PETITION No.34477/2010 (CS)
BETWEEN:
Sri.B.R.Krishnappa S/o.Ramaiah,
Age:63 years; OCC: Business;
R/at.Mayura Circle,
Shidlaghatta Town,
Shidlaghatta Taluka,
Pin Code-562105,
Chikkaballapur District.
... Petitioner
(By Sri G A Srikante Gowda, Advocate)
AND:
1. The Deputy Registrar,
Co-Operative Societies,
Chikkaballapur,
Chikkaballapur District.
2. The Secretary,
Taluka Agricultural Produce Marketing
Co-Operative Society Ltd.,
2
Shidlaghatta,
Chikkaballapur District.
3. The Special Officer,
T.A.P.C.M.S Ltd, Shidlaghatta,
Recovery Officer of D.C.C. Bank, Kolar,
Assistant Registrar of
Co-Operative Societies, Kolar.
4. The Senior Supervisor and Sales Officer,
D.C.C.Bank, Shidlaghatta Branch,
Shidlaghatta Taluka,
Chikkaballapur District.
5. The Managing Director,
The District Central
Co-Operative Bank Ltd.,
Kolar. ... Respondents
(By Sri Laxminarayan, AGA for R1 to R3,
Sri Devi Prasad Shetty, Advocate for R2,
Sri G.F.Hunasikattimath, Advocate for R4 & R5)
This Writ Petition is filed under Articles 226 and 227 of
the Constitution of India praying to quash the impugned order
dated 21.10.2010, passed by the R1, a copy of which is
produced herein as per annexure-J and etc.,
This Writ Petition coming on for dictating judgment this
day, the Court made the following:
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ORDER
The petitioner herein is impugning the judgment dated 21.10.2010 passed by the first respondent in Appeal No.DRK/APPEAL/03/2007-2008, which is at Annexure-J.
2. Admittedly, the petitioner herein was third respondent in the aforesaid proceedings, which was filed by the second respondent in this writ petition. The said appeal filed under Section 106 of the Karnataka Co-operative Societies Act, 1959 (Hereinafter referred to as the 'CS Act', for brevity), was in challenging the sale of property belonging to second and third respondents which was brought to auction for clearance of loans due to respondents no.4 and 5.
3. The brief facts leading to this writ petition are as follows:-
3.1. The second respondent - Secretary and the third respondent - Special Officer, Taluka Agricultural Produce Marketing Co-operative Society Limited (Hereinafter referred 4 to as the 'TAPMCSL', for brevity) had borrowed three loans from respondent no.4, the District Central Co-operative Bank Limited (Hereinafter referred to as the 'DCC Bank', for brevity). It is seen that as against the loans which were granted by the fifth respondent, charge was created on property bearing No.419/384-365, which consisted of 3 units, (a) AC sheet roofed construction measuring 65 x35 feet, (b) vacant space measuring 33 x 19 feet (c) vacant space measuring 46 x 33 feet and also property bearing khata No.1207/1096-1054 measuring 91 x 76 feet.
3.2. The records would indicate that for recovery of the three loans, three proceedings were initiated in Disputes No.1288/1997-98, 1289/1997-98 and 1290/1997-98 before the competent authority and after obtaining awards, execution was levied for recovery in Execution No.62 to 64 of 2001-02, wherein order was secured for auction sale of the property which was subjected to attachment.5
3.3. The record would further indicate that initially on 31.1.2004 an attempt was made to auction the aforesaid properties, which could not take place for want of valid bid. It was again taken up for auction on 31.3.2005 on which date also, the auction could not be carried out for want of valid bid.
However, on 31.7.2006, auction was successfully completed and the property was purchased by the petitioner herein for valuable consideration of Rs.50.00 lakh. The auction sale which took place on 31.7.2006 was confirmed on 23.9.2006 after receiving the entire bid amount from the petitioner herein and thereafter a sale deed was also executed in favour of the petitioner on 26.9.2006.
3.4. It is thereafter the sale of the property in favour of the petitioner was subject matter of challenge before the first respondent, Deputy Registrar by two persons namely, Nagendra and Munivenkatappa, who were said to be the members of the second respondent TAPMCSL. It is seen that the appeal which was filed by them was not taken on record since they did not 6 have locus standi to file the appeal. It is evident from the original records which is made available by the Office of the Deputy Registrar that an endorsement was issued in No.DRG/Appeal/2/2007-08 dated 27.10.2007. In the said endorsement, there is reference to a writ petition being filed in WP No.6628/2007 (CS-RES) in respect of the very same subject, which is said to have been disposed of by order dated 6.7.2007 granting three weeks' time to the fourth respondent in the said proceedings to do the needful. It is thereafter that an appeal was filed by the second respondent, Secretary, TAPMCSL, Shidlaghatta, challenging the auction sale dated 31.7.2006 and also confirmation of the sale dated 23.9.2006.
3.5. Incidentally, as on the date when the said writ petition was filed, the management of the TAPMCSL was under the Special Officer and the said Special Officer is the Recovery Officer of the DCC Bank.
3.6. The records would also indicate that in fact, the order appointing a Special Officer was passed on 31.1.2006 for 7 managing the affairs of the second respondent TAPMCSL. It is only till such time that the Secretary was in charge of the affairs and he ceased to be in-charge of the affairs of the society even as on the date when the appeal was filed by him before the first respondent in Appeal No.3/2007-08 wherein one of the grounds urged by him to set aside the sale was that the person who had brought the property for auction is none other than the officer of the fourth respondent who had initiated proceedings for recovery of money and another ground is that though the value of the property which was brought for auction sale was Rs.5.00 crore as on the date it was put to public auction, the same was sold for Rs.50.00 lakh which is grossly undervalued with an intention to cause grave financial loss to the second respondent - TAPMCSL. The said appeal came to be allowed by the first respondent herein by order dated 21.10.2010 which is sought to be challenged in this writ petition by the third respondent in the said proceedings on the ground that the appeal under Section 106 of the CS Act is not maintainable 8 with reference to auction sale which was conducted pursuant to Rule 38 of the Karnataka Co-operative Societies Rules, 1960 (Hereinafter referred to as the 'CS Rules', for brevity).
4. It is the contention of the learned Counsel for the petitioner that the auction sale which is conducted under Rule 38(2)(f) of the CS Rules can be challenged by the petitioner even before the sale is confirmed by depositing the entire amount as contemplated under Rule 38(3). It is contended that though the auction sale is completed, the same can be challenged within 30 days from the date of sale by depositing the entire award amount with interest and also costs incurred for the conducting the auction, it is open for the debtor to seek setting aside the same. However, if they fail to do so within 30 days, thereafter, it is not open for the debtor to challenge the same, more particularly by filing an appeal under Section 106 of the CS Act. In support of the same, he would rely upon a judgment rendered in the case of P.M.Abubakar vs. State of 9 Karnataka reported in AIR 2016 SC 5602 wherein the Head Note reads as follows:
"(A) Karnataka Co-operative Societies Act (11 of 1959), S.106 - Karnataka Co-operative Societies Rules (1960), R.38 - Appeal - Auction sale of debtor's property - Failure of debtor to file application to set aside sale - Appeal filed against sale after its confirmation - Not maintainable under S.106."
5. However, the learned Counsel appearing for the contesting respondent no.2 tried to enlighten the Court that the said judgment has dealt with a loan transaction wherein Section 89A of the CS Act is attracted. What is required to be considered here is the procedure which is required to be followed while conducting sale in an auction. The procedure required to be followed is governed under Rule 38 of the CS Rules, which is rightly discussed at para 34 of the judgment which reads as under:
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"34. That takes us to the decision of this Court in the case of Annapurna vs. Mallikarjun and Anr. 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 11 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."
6. In that view of the matter, this Court find that the objection raised by the learned Counsel for respondent no.2 in trying to assert that the aforesaid judgment has no bearing on the facts and circumstances of the case is without any basis.
7. Now coming to the other ground which is urged attributing mala fides to the Sale Officer on the ground that the property worth Rs.5 Core was sold for Rs.50.00 lakhs, the same is without any basis. As could be seen from the records, the valuation of the property as it stood on that day is tried to demonstrated before this Court by the learned Counsel for the petitioner relying upon an endorsement issued by the Sub- Registrar, which would indicate that the valuation of the commercial property for the year 2006-07 is at Rs.250/- per 12 square foot. Admittedly, the auction sale is dated 31.7.2006, which comes within the period specified in the aforesaid endorsement. However, the learned counsel for the respondent has produced and relied upon an endorsement dated 14.1.2016 which is with reference to the period 2007-08, wherein the valuation of the commercial property is shown at Rs.450/- per square foot. Admittedly, the property sold under auction is measuring an extent of 9191 square feet and the sale price for which it is sold is Rs.50.00 lakh. Thus, the valuation of the property is in the range of Rs.544 /- per sq.ft, as against Rs.450/- per sq.ft which was prevailing in the year 2007-2008. Even if this is taken into consideration, the value for which the property is sold is at least 20% over and above the value as in the year 2007-08. Whereas the valuation which is shown in the year 2006-07 is at Rs.250/- per sq.ft.
8. In that background, this Court find that the mala fides attributed to the Sale Officer is without any basis. 13 Admittedly, the second respondent - TAPMCSL comes under the jurisdiction of the fourth respondent - DCC Bank and it is normal practice which is accepted and is permissible in law to appoint one of the officers of that bank to be the Special Officer of the TAPMCSL. Therefore, the appointment of Special Officer of that bank to manage the affairs of the third respondent - bank also cannot be termed as an erroneous step and the sale which is conducted by him also cannot be construed as sale by a person who does not have competence to conduct the same. This Court is of the opinion that there is a serious error committed by the first respondent while dealing with the appeal which was filed by the Secretary of the TAPMCSL, who in the first place did not have authority to file an appeal and in the second place, the grounds urged by him were not tenable. The reasons given for setting aside the sale are erroneous in as much as the sale being concluded following the procedure as prescribed under Rule 38 could not have been 14 interfered with under Section 106, as opined by the Supreme Court in the aforesaid judgment.
9. In the light of aforesaid discussion, the order impugned dated 21.10.2010 is required to be quashed and the sale of the property confirmed vide order dated 23.9.2016 is required to be affirmed in this writ petition. Accordingly, the writ petition is allowed by quashing the order of the first respondent and confirming the sale of the aforesaid property in favour of the petitioner herein.
In view of the writ petition being allowed, the application in I.A.1/2013 does not survive for consideration and stands disposed of. In view of the sale being confirmed, liberty is reserved to the petitioner to secure possession of the property in accordance with law.
Sd/-
JUDGE nv