# 11 S.C.R. I 03 P. M. ABUBAKAR v. STATE OF KARNATAKA AND ORS

- **Citation:** [2016] 11 S.C.R. 103
- **Court:** Supreme Court of India
- **Decided:** 2016-11-17
- **Case number:** Civil Appeal Nos.10894-10895 of2016
- **Bench:** Anil R. Dave, A. M. Khanwilkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/11-s-c-r-i-03-p-m-abubakar-v-state-of-karnataka-and-ors-31316
- **Pages:** 26

## Headnote

Auction:
Karnataka Cooperative Societies Act, 1959 - ss.89A, 106 -
Auction sale of mortgage property - Debtor committed default in
repayment of loan to Bank, recovery proceedings were initiated by
the Bank - Award passed for the recovery of money - Debtor failed
to pay the awarded amount in spite of repeated opportunities -
Mortgaged property auctioned - Appellant was the highest
bidder - Competent authority confirmed auciion sale in favour of
appellant - Sale certificate issued to appellant - Debtor preferred
appeal before the Deputy Registrar (CS) uls. 106 - Deputy Registrar
(CS) held that sale was in accordance with Rules hut it was a case
of under valuation of the property and on that ground set aside the
confirmation of sale 011 the condition that the debtor shall deposit
stipulated amount with interest - Debtor again failed to comply with
the order - Appellant-auction purchaser filed writ petition against
the order of Deputy Registrar (CS), which was dismissed by High
Court - On appeal, held: Order of confirmation of sale is ascribable
to s.89A of the Act rlw. r.38 of the Rules ,... No remedy of appeal
against that decision is provided - s.106 of the Act does not provide
for an appeal against the order confirming an auction sale, passed
uls.89A r/w. r.38 - s.89A of the Act rlw. r.38 of the Rules provide for
special dispensation - Order passed by the Deputy Registrar (CS)
in appeal was without jurisdiction - Therefore, High Court committed
error in dismissing the writ petition filed by appellant-auction
purchaser - Order passed by Deputy Registrar (CS) setting aside
auction sale in favour of appellant-auction purchaser and order of
High Court confirming it, accordingly set aside - Karnataka
Cooperative Societies Rules - r. 38.
Allowing the appeals by the auction purchaser and
dismissing the appeals by the debtor, the Court held
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[2016] II S.C.R.
HELD: 1. 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 Karuataka
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. Resultantly, the Competent Authority
proceeded to confirm the auction sale, followed by grant of a
certificate of sale and execution of a Sale Deed in the prescribed
I;orm. The sale of the subject property thus, became final. [Para
23] 1120-C-E)
2. 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
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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
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Karnataka Cooperative Societies Act, 1959 Act read with Rule
38 of Karnataka Cooperative Societies 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,
is without jurisdiction. [Para 24) [120-E-H]
3. The debtor unsuccessfully challenged the auction sale
and prayed for setting aside the same by filing writ petitions. That
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relief has been rejected. A formal application for setting aside
the sale filed by the debtor was also rejected by the ARCS. The
appeal prefe

## Text

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[2016) 11 S.C.R. I 03
P. M. ABUBAKAR
v.
STATE OF KARNATAKA AND ORS.
(Civil Appeal Nos.10894-10895 of2016)
NOVEMBER 17, 2016
(ANIL R. DAVE AND A. M. KHANWILKAR, JJ.)
Auction:
Karnataka Cooperative Societies Act, 1959 - ss.89A, 106 -
Auction sale of mortgage property - Debtor committed default in
repayment of loan to Bank, recovery proceedings were initiated by
the Bank - Award passed for the recovery of money - Debtor failed
to pay the awarded amount in spite of repeated opportunities -
Mortgaged property auctioned - Appellant was the highest
bidder - Competent authority confirmed auciion sale in favour of
appellant - Sale certificate issued to appellant - Debtor preferred
appeal before the Deputy Registrar (CS) uls. 106 - Deputy Registrar
(CS) held that sale was in accordance with Rules hut it was a case
of under valuation of the property and on that ground set aside the
confirmation of sale 011 the condition that the debtor shall deposit
stipulated amount with interest - Debtor again failed to comply with
the order - Appellant-auction purchaser filed writ petition against
the order of Deputy Registrar (CS), which was dismissed by High
Court - On appeal, held: Order of confirmation of sale is ascribable
to s.89A of the Act rlw. r.38 of the Rules ,... No remedy of appeal
against that decision is provided - s.106 of the Act does not provide
for an appeal against the order confirming an auction sale, passed
uls.89A r/w. r.38 - s.89A of the Act rlw. r.38 of the Rules provide for
special dispensation - Order passed by the Deputy Registrar (CS)
in appeal was without jurisdiction - Therefore, High Court committed
error in dismissing the writ petition filed by appellant-auction
purchaser - Order passed by Deputy Registrar (CS) setting aside
auction sale in favour of appellant-auction purchaser and order of
High Court confirming it, accordingly set aside - Karnataka
Cooperative Societies Rules - r. 38.
Allowing the appeals by the auction purchaser and
dismissing the appeals by the debtor, the Court held
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SUPREME COURT REPORTS
[2016] II S.C.R.
HELD: 1. 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 Karuataka
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. Resultantly, the Competent Authority
proceeded to confirm the auction sale, followed by grant of a
certificate of sale and execution of a Sale Deed in the prescribed
I;orm. The sale of the subject property thus, became final. [Para
23] 1120-C-E)
2. 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
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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
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Karnataka Cooperative Societies Act, 1959 Act read with Rule
38 of Karnataka Cooperative Societies 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,
is without jurisdiction. [Para 24) [120-E-H]
3. The debtor unsuccessfully challenged the auction sale
and prayed for setting aside the same by filing writ petitions. That
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relief has been rejected. A formal application for setting aside
the sale filed by the debtor was also rejected by the ARCS. The
appeal preferred by the debtor before the Deputy Registrar (CS)
was against the decision of the Competent Authority confirming
the auction sale. It was not maintainable under Section 106 of the
Act. The Deputy Registrar (CS) had no jurisdiction. Further, once
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P. M. ABUBAKAR v. STATE OF KARNATAKA AND ORS.
the auction sale is confii-med 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. 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.
[Paras 29, 30, 31] [122-B-E]
4. 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 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
in favour of the debtor to set aside the auction sale on conditiOns
specified therein, 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. [Para 34) [126-C-E]
5~ 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). 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
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[2016] 11 S.C.R.
A to the benefit of debtor who is in default, having become functus
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officio. [Para 36) [127-C-F]
Annapurna v. Mallikarjun & Anr. (2014) 6 SCC 397 :
2014 (7) seR 299- referred to.
J.Rajiv Subramaniyan & Anr. v. Pandiyas & Ors.
(2014) 5 sec 651: 2014 (3) SeR II40; Vasu P. Shetty
v. Hotel Vandana Palace & Ors. (2014) 5 sec 660 :
2014 (9) seR 38 - held inapplicable
c 2014 (7) SCR 299
2014 (3) SeR 1140
Case Law Reference
referred to
held inapplicable
Para34
Para JS
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2014 (9) SCR 38
held inapplicable
Para 35
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1089410895 of2016.
From the Judgment and Order dated 08.06.2012 and 29.06.2012
of the High Court ofKarnataka, at Bangalore in Writ Appeal No. 1006/
2010 C/W Writ Appeal No. 2433 of2010(CS)
WITH
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C. A. NOS. I 0896-10897 of 2016 and
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C. A. NOS. 10898-10899 of 2016.
R. S. Hegde, Ms. Farhat Jahan Rehmani, Shanti Prakash (For
Rajeev Singh), Advs., for the Appellant.
Haren Raval, Sr. Adv., Nataraj Balla!, Rajesh Mahale, Krutin R.
Joshi, Girish Ananthamurthy (For Mrs. Vaijayanthi Girish),
V. N. Raghupathy, Ms. Shomila Bakshi, Advs. for the Respondents.
The Judgment of the Court.was delivered by
A. M. KHANWILKAR, J. 1. 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 ofloan to the Bank (Mahalakshmi Co-
P. M. ABUBAKAR v. STATE OF KARNATAKA AND ORS.
[A. M. KHANWILKAR, J.]
operative Bank Limited), recovery proceedings were initiated by the
Bank. That culminated with an award passed by the Joint Registrar Cooperative 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 ofauction 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
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[2016] 11 S.C.R.
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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 I 61h July, 2007.
7. On 30.4.2007, appeal preferred by the debtor challenging the
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award dated 2.1.2004 was dismissed by the KarnatakaAppellate 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 of2007 (CS-DAS), challenging
c 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
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on 28.8.2007 was postponed.
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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 of2007 (CS-DAS), on the
basis of which the said Writ Petition was dismissed as withdrawn having
become infructuous.
· I 0. 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
of2008 (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.
I 0,00,000/- (Rs. Ten Lakhs only) within six weeks. It was made clear
that ifthe 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 property.
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 forauction sale was issued on 28. 7 .2008 fixing the date for auction
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as 10.9.2008. The Respondent-Bank had obtained valuation report which
P. M. ABUBAKAR v. STATE OF KARNATAKA AND ORS.
[A. M. KHANWILKAR, J.]
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 I 0.9.2008, 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 cha!lenged.
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. I 0.2008.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.
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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 - E
Writ Petitions, the challenge to the auction sale of the subject property
on l 0.09.2008 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
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the matter recommended confirmation of the sale in favour of the auction
purchaser. On the basis of the said recommendation, ARCS passed a
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detailed order on 2.3.2009, confirming the sa.le 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.
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15. The debtor, however, chose to file appeal before the Deputy
Registrar of Co-operative Societies, Udupi District (DRCS) against the
order ofconfirmation of sale dated 02.03 .2009, being appeal No. 07 /0809. 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 confinnation
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:
"ORDER
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The confirmation order passed by the Asst. Registrar
Co-operative Societies also Recovery Officers 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
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within four weeks from the date of this orderF
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1) Auction amount
2) Registration charf(es
3) Solatium account
4) Khatha expenses
5) Court expenses
6) Other expenses
Total
Rs.
Rs. 51,50,000-00
4,84,465-00
2,57,500-00
25,000-00
20,000-00
10,000-00
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
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(i.e. the person who purchased the property in auction). After
P. M. ABUBAKAR v. STATE OF KARNATAKA AND ORS.
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[A. M. KHANWILKAR, J.]
remitting the balance amount, the bank shall transfer the
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same to the respondent No. (4) within 3 days.
This order pronounced in the open court today i.e. 011
J 8~07-2009.
Sd/-
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 tl}e 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
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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:
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'"11. A memo of calculation filed by the advocate for
Re~pondent No. 5 on 11. 8.2011 indicating the different
amounts deposited by the appellant is as under:
Memo of Clllcul"tion
(a) Amount deposited by the
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Appellant on 10.09.2008:-Rs. 7, 72,5001- interest @
8% for 2 years 11 111onths
Rs. 1,80,2501- (A)
(b) Amount deposited by the
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Appellant on 25. 10.2008:-Rs.43, 77,5001- Interest
8% for 2 years 10 months
Rs. 9,92,2331- (B)
(c) Sta111p duty for registration
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paid on 06.03.2009:-
Rs. 4,84,4651- imerest @
8% for 2 years 6 months
Rs. 96,8931- (C)
(A)+(B)+(C) =Rs.12, 69, 3 761-
(D)
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(i)
A111ount in deposit with
A.R.C.S. from 25.10.08:-Rs. 20,82,6161- interest@
4% for 2 yrs 10 months
Rs. 2,36,0301- (E)
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(ii) Amount deposited by the
Respondent No.5 on
0610212010:-
Rs. 41,69,200/- imerest @
4% for 1 yrs 6 months
Rs. 2,50,1521- (F)
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P. M. ABUBAKAR v. STATE OF KARNATAKA AND ORS.
113
[A. M. KHANWILKAR, J.]
(iii) Amount in F.D. On orders
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of this Hon 'ble Court:-
Rs. 62,51,816/- interest@
8% for 3 months
Rs. 1,25,0361- (G)
(E)+(F)+(GJ=Rs. 6,11,2181- (H)
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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.
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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
ainount of interest payable apart from the expenses incurred
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by them after 10.9.2008for various litigations. This amount
. totally comes to Rs. 3,05,1491- as indicated below:
1.
Date of Receipt of Claim amount
13-3-2009
2. Claim amount
Rs. 30,67,384.00
3. Number qf days from auction date
10-9-2008 to amount received
date 13-3-2009
160 days
4. Rate of interest
17%
5. /merest receivable for 160 days
6. Court expenses spent qfter
10-9-2008 for various disputed
Total
Rs. 2,28,583.00
Rs. 76,566.00
Rs. 3,05,149.00
14. So far as the auction purchaser is concerned, we note
that he has made the following payments:
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1.
10.9.2008
Rs.
7,72,50012.
25.10.2008
Rs. 43, 77,50013.
Stamp duty for registration
Paid on 6.3.2009
Rs. 4,84,465115. As per the orders of the DRCS, he has to receive Rs.
59,46,9651- includi11g solatium with interest at 6% per an11um
from 13.2.209. Till date so jar as auction purchaser is
concerned not even a single pie is paid back to him. In case,
the auctio11 purchaser were to have the confirmation of sale
in his favour, this calculation would not be of any releva11ce.
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 jar as the ba11k is concerned,
the amou11t 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 auctio11 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. 59,46,9651- i11cludes solatium
of Rs. 2,57,5001-, 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.
2,57,5001- 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. 76,5661-. The amount was laying
with the Recovery Officer for quite some time and it cannot
be the entire fault of the respondent - borrower. Therefore
P. M. ABUBAKAR v. STATE OF KARNATAKA AND ORS.
[A. M. KHANWILKAR, J.]
the bank shall get interest at 6% per annum on Rs. 30,67,3841for 160 days apart from the Court expenses of Rs. 76,5661spent 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. 48814/201 l(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 thus:
"ORDER ON I.A. No. 112012
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Heard the learned counsel for the applicant, who is J'f•
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respondent in WA. No. 243312010 (CS) on I.A. No. 112012
filed seeking clarification of judgment dated 24.8.2011.
It is seen that by judgment dated 24.8.2011 this Court allowed
WA. Nos. 100612010 clw 243312010 with certain directions.
As could be seen, in paragraph 16 of the judgment the intent
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of this Court is very clear, that is, the auction purchaser
appellant in W.A. No. 100612010 should get back his money
with solatium, interest damages. etc. as specified therein and
the same was required to be paid by 3"' respondent. No
mode for payment was specified in the said judgment.
However, it is seen that ARCS, 3"' respondent in the app_eals
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 5
1h respondent to comply
with the judgment of this Court which we are not agreeable.
With the available money, the 3"' respondent -ARCS should
have first cleared off the amount to the auction purchaser
with interest, solatium, damages and whatever he is entitled.
to fro111 out of the amount that was available with 3n1
respondent. Thereafter, 3"' responde111 should have cleared
the money due to the bank, appellant in W.A. 243312010
alongwith interest at the rate specified therein. If any is
found in excess he should have given it to 51h 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 t~ keep this litigation
pending forever. Therefore, to put quietus to this litigation it
is hereby directed that 3"' respondent ARCS shall i111111ediately
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 re111ains after
disbursing the amount shall be retained by him u111il further
orders of this Court.
Further, after receiving the amount the bank and the
auction purchaser shall file me1110 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 5
111 responde111 qr at
P. M. ABUBAKAR v. STATE OF KARNATAKA AND ORS.
[A. M. KHANWILKAR, J.]
the instance of 3"' respondent-ARCS should not be the reason
to deprive the fruits oi 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 repayment 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 respondelll-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 purchqser and
the Bank should not be made to suffer.
Insofar as the money that they were required to receive on
or before 24.9.2011 which they have not received, they are
elllitled to interest for the difference period i.e.,from 24.9.2011
till they receive the said amoul1f. 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 differe/11 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 origin.al owner of the
property.
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With this observation, the clarification sought to the
;udgment 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
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implemented within ten days from the date of receipt of a copy
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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 tiled 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:
"ORDER
An extent of 32 cents in Sy.No. 26017 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 wds put to
auction on 10.9.2008 for Rs. 51,50,0001-. The 3ni responde111
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.
59,46,9651- within four weeks. The 3n1 respondent-auction
purchaser as well as the 4'" respondent Bank were before
this Court questioning the said order. This Court dismissed
the writ petitions, against which W.A. Nos. 1006 and 24331
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, 1251- which is interest component
on the auction amount deposited by the 3n1 respondent.
2. It appears, the 3n1 respondent-Assistant Registrar of cooperative Societies was of the view that the petitioner was
required to deposit Rs. 80,64,9161- and there was short-fall
ojRs. 18, 75,7911-.
Hence, an application was filed by the
petitioner seeking clarification and this Court on two
P. M. ABUBAKAR v. STATE OF KARNATAKA AND ORS.
[A. M. KHANWILKAR, J.]
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 3"1 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 2'"1 respondent. Hence
the following order:-
The petition is allowed. The impugned order is set aside.
The proceedings are remanded to 2"'1 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. I 006/20 I 0.
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 I Oth August 2008. The appellant- auction purchaser turned
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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. 1290 I /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.
8
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 30'h April, 2007. As a result of which, the Award passed against him
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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
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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
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and execution of a Sale Deed in the prescribed Form. The sale of the
subject property thus, became final.
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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
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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
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the debtor being Appeal No.7/2008-2009, is without jurisdiction. The
P. M. ABUBAKAR v. STATE OF KARNATAKA AND ORS.
[A. M. KHANWILKAR, J.]
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 l81h
July 2009, assuming that it is ascribable to Rule 38(6)(a) as held by the
High Com1, the fact remains that the debtor failed to comply with the
said order requiring him to pay an amount ofRs.59,46,965/- along with
interest thereon within the specified time. On account ofnon-compliance
of that direction, the relief granted by the Deputy Registrar (CS) in terms
of order dated I 81h July 2009 of setting aside the auction sale became
ineffective. Admittedly, the debtor deposited a sum ofRs.41,69,200/- on
61h February 20 I 0 and Rs.20, 19,925/- on 22nd September 2011. That
was not in compliance with the order dated l 81h 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 l 81h 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.