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                         [REPORTABLE]

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

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

P.M. Abubakar                                                      ….Appellant(s)  

Vs.

State of Karnataka and Ors.                                …Respondent(s)

WITH

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

WITH

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

J U D G M E N T

A. M. KHANWILKAR, J.

Delay condoned.

2. Leave granted.

3. These cross appeals have been filed by the debtor (Keshva N.

Kotian)  and  auction-purchaser  (P.M.  Abubakar).  As  the  debtor

committed default in repayment of loan to the Bank (Mahalakshmi

Co-operative Bank Limited), recovery proceedings were initiated by

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the  Bank.  That  culminated  with  an  award  passed  by  the  Joint

Registrar Co-operative Societies, Mysore dated 02.01.2004 against

the debtor for recovery of Rs. 13, 65,899.70 with interest at 19%

p.a.  As the debtor failed to pay the amount in terms of the award,

execution petition was filed.  The debtor, however, filed an appeal

being  Appeal  No.  419  of  2004  before  the  Karnataka  Appellate

Tribunal,  Bangalore.   On  21.06.2004,  the  Tribunal  passed  a

conditional order of stay requiring the debtor to deposit 40% of the

awarded amount within eight weeks, failing which the stay would

stand vacated.  The debtor failed to deposit that amount. Therefore,

the bank after obtaining valuation report relating to the mortgage

property,  issued notice  on 2.2.2005 in Form No.  6.   In  spite  of

notice, no payment was made by the debtor.   As a result, the Bank

issued notice of attachment in Form No. 7 on 25.02.2005.   The

notice of attachment was followed by a notice of auction issued on

3.3.2005, fixing the auction date as 11.04.2005.  On 7.3.2005, the

debtor’s brother (Shri Anand Kotian) filed an objection to the said

proceedings.  According  to  him,  the  property  was  a  joint  family

property.    This  objection  was  enquired  into  and  rejected  on

22.3.2005.    

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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

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auction sale  was postponed.   The objection filed by the  debtor’s

brother was considered on eight dates. He, however, filed a memo

before ARCS on 21.12.2006 for withdrawal of his objection.  The

said objection was finally dismissed on 16th July, 2007.

7. On 30.4.2007, appeal preferred by the debtor challenging the

award dated 2.1.2004 was dismissed by the Karnataka Appellate

Tribunal, Bangalore. That decision has not been challenged.   

8. Once again a notice for auction sale of the mortgage property

was issued on 18.7.2007, fixing the date of auction on 28.08.2007.

The  debtor  filed  a  Writ  Petition  No.  13204  of  2007  (CS-DAS),

challenging  the  sale  proclamation.   The  High  Court  by  order

27.08.2007 granted interim protection to the debtor on condition of

depositing 40% of  the awarded amount within two weeks, failing

which  the  protection  would  stand  vacated.   The  debtor  had

deposited  Rs.1,00,000/-  on  21.8.2007.  He  deposited  further

amount  of  Rs.  50,000/-  on  27.8.2007  and  assured  to  pay  Rs.

50,000/- on 30.8.2007.  On his request the auction sale fixed on

28.8.2007 was postponed.

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

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fixing the auction sale on 12.11.2007.  The debtor   filed memo

before the High Court in Writ Petition No. 13204 of 2007 (CS-DAS),

on  the  basis  of  which  the  said  Writ  Petition  was  dismissed  as

withdrawn having become infructuous.   

10. As the balance awarded amount was not forthcoming, a fresh

notice  for  auction  was  issued  on  30.11.2007,  fixing  the  date  of

auction  sale  as  27.2.2008.   The  debtor  then  filed  a  fresh  Writ

Petition No. 3098 of 2008 (CS-DAS) challenging the auction sale.

The High Court vide order dated 25.2.2008 showed indulgence to

him and stayed the auction sale scheduled for 27.2.2008 subject to

the debtor depositing Rs. 10,00,000/-  (Rs. Ten Lakhs only) within

six weeks.  It was made clear that if the debtor failed to pay the

amount as directed, the protection as given shall stand vacated and

then  it  would  be  open  to  the  bank  to  proceed  with  the  sale  of

mortgage 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 for auction sale was issued on 28.7.2008 fixing the date for

auction  as  10.9.2008.   The  Respondent-Bank  had  obtained

valuation report which estimated the value of the mortgage property

at Rs. 44,80,000/-.  The debtor was served with the notice of the

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auction sale.  That notice was also published in the local Newspaper

and by proclamation and tom tom.  The debtor  did not  file  any

objection to the sale.  The auction sale was accordingly, held on

10.9.2008,  in  which  the  appellant  -  auction  purchaser  was  the

highest bidder for Rs.51,50,000/- .  The debtor then filed objections

before the ARCS for setting aside the sale. That objection after due

enquiry was rejected by the ARCS on 14.10.2008. That order has

not been challenged.   

12. Besides the objection filed before ARCS, the debtor also filed a

writ petition before the High Court of Karnataka at Bangalore being

Writ  Petition  No.  12901/2008  (CS-DAS),  challenging  the  sale  in

favour  of  the  auction  purchaser.   The  High  Court  once  again

showed  indulgence  to  the  debtor  by  passing  conditional  interim

order on 7.10.2008 directing the debtor to deposit  Rs.5,00,000/-

within three weeks failing which the interim protection would cease

to operate.   The debtor deposited Rs.  5,00,000/- on 3.11.2008.  

13. Significantly, the Writ Petitions filed by the debtor being Writ

Petition No. 3098/2008 and Writ Petition No. 12901/2008 came to

be  dismissed  by  the  High  Court  on  3.12.2008.   By  these  Writ

Petitions, the debtor had challenged the auction sale with a prayer

to set aside the auction in favour of the auction purchaser.  With

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the dismissal of the said Writ Petitions, the challenge to the auction

sale of the subject property on 10.09.2008 became final.   Indeed,

the debtor filed Writ Appeal No. 1914/2009 against the rejection of

his writ petitions.  That was disposed of on the basis of statement

made  by  the  debtor  that  writ  appeal  filed  by  him  before  the

Karnataka  Appellate  Tribunal  against  the  award  dated  2.1.2004

was  pending.  That  statement  was  incorrect  as  the  said  appeal

(Appeal  No.  419/2004)  was  already  dismissed  on  30.4.2007.

Because of the said misleading statement made by the debtor, the

High Court vide order dated 15.1.2009, whilst disposing the writ

appeal  observed that it  would be in the fitness of  things for the

Tribunal to take up the appeal on merits expeditiously  preferably

within six weeks.  It also observed that the objections filed by the

debtor against the auction sale be considered in accordance with

law.  

14. The Sales Officer on 17.2.2009, after due consideration of the

matter  recommended  confirmation  of  the  sale  in  favour  of  the

auction  purchaser.   On  the  basis  of  the  said  recommendation,

ARCS passed a detailed order on 2.3.2009, confirming the sale in

favour of the auction purchaser.  Thereafter, Sale Deed in Form No.

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10 was executed in favour of the auction purchaser on 5.3.2009;

and sale certificate was also issued in his favour.    

15. The debtor,  however,  chose to file appeal  before the Deputy

Registrar of Co-operative Societies, Udupi District (DRCS) against

the order of confirmation of sale dated 02.03.2009, being appeal No.

07/08-09. The DRCS entertained the said appeal and by his order

dated  18.7.2009  held  that  the  sale  was  in  accordance  with  the

Rules but it was a case of under valuation of the property.  On that

ground, the confirmation of sale was set aside on condition that the

debtor shall deposit Rs. 59,46,965/- with interest at 6% p.a. from

13.2.2009  till  payment.   The  operative  order  passed  by  Deputy

Registrar Co-operative Societies reads thus:  

“  ORDER

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

The Petitioner should remit the below mentioned amount within four weeks from the date of this order-

1) Auction amount Rs. 51,50,000-00 2) Registration charges   4,84,465-00 3) Solatium account   2,57,500-00 4) Khatha expenses      25,000-00 5) Court expenses      20,000-00 6) Other expenses      10,000-00

------------------- Total Rs. 59,46,965-00                   ----------------------

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He has to remit at 6% from 13-02-2009 until depositing the  money at  Mahalakshmi  Co-operative  Bank (Ltd), Udupi.  Under  the  said  head  the  court  charges  and other  charges  shall  born  by  the  said  bank  and Respondent  No.  (4)  equally  (i.e.  the  person  who purchased the property in auction).  After remitting the balance amount, the bank shall transfer the same to the respondent No. (4) within 3 days.

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

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

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proper  and  did  not  warrant  any  interference  in  exercise  of  writ

jurisdiction.   As a result,  the writ petitions filed by the auction

purchaser and the Bank were dismissed by a common judgment

dated 11.01.2010.  

17. The auction purchaser and the Bank preferred separate Writ

appeals,  being  W.A.  No.  1006/2010  (CS-DAS)  and  W.A.  No.

2433/2010 (CS-DAS) respectively. The Division Bench of the High

Court vide its common judgment dated 24.8.2011 disposed of both

the  appeals.   The  Division  Bench  noted  that  the  Appropriate

Authority  concerned was competent  to  set  aside the sale even if

there was no application for setting aside the sale or factually such

application has already been rejected.  It noted that from the orders

of  DRCS and  the  learned  Single  Judge,  it  was  evident  that  the

debtor did not fulfill his obligation in spite of repeated opportunity

given to him to pay the awarded amount.  Even after noting this

fact, the Division Bench opined that as the property in question was

under valued at the time of auction sale, no fault could be found

with the discretion exercised to set aside the sale under proviso to

Sub  rule  6(a)  of  Rule  38.   On  that  finding,  the  Division  Bench

rejected the plea of  the debtor and the Bank that without a pre

deposit of the awarded amount as required under Rule 38 and that

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too within the time prescribed under the said Rule, the Appropriate

Authority could not have set aside the sale.  The Division Bench

then adverted to the memo of calculation filed by the debtor and

proceeded to pass order, which in its opinion was just and proper

so as to adjust equities between the parties. The relevant extract of

the impugned judgment, reads thus:  

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

Memo of Calculation

(a) Amount deposited by the  Appellant on 10.09.2008:-Rs. 7,72,500/- interest @

8% for 2 years 11 months  Rs. 1,80,250/- (A)  

(b) Amount deposited by the  Appellant on 25.10.2008:-Rs.43,77,500/- Interest   

8% for 2 years 10 months Rs. 9,92,233/- (B)

(c) Stamp duty for registration paid on 06.03.2009:- Rs. 4,84,465/- interest @

8% for 2 years 6 months Rs. 96,893/- (C)

(A)+(B)+(C)=Rs.12,69,376/- (D)

(i) Amount in deposit with A.R.C.S. from 25.10.08:-Rs. 20,82,616/- interest @  

4% for 2 yrs 10 months Rs. 2,36,030/- (E)  

(ii) Amount deposited by the  Respondent No.5 on 06/02/2010:- Rs. 41,69,200/- interest @

4% for 1 yrs 6 months  Rs. 2,50,152/- (F)  

(iii) Amount in F.D. On orders

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of this Hon'ble Court:- Rs. 62,51,816/- interest @ 8% for 3 months Rs. 1,25,036/- (G)

(E)+(F)+(G)=Rs. 6,11,218/- (H) 12.  He  has  calculated  the  interest  deposited  by  the

appellant - purchaser for different periods as stated above.  He has also shown the amount in deposit  with the ARCS after deducting the amount that has to be paid to the appellant - bank.

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

1.       Date of Receipt of Claim amount  13-3-2009

2. Claim amount Rs. 30,67,384.00 3. Number of days from auction date

10-9-2008 to amount received date 13-3-2009 160 days

4. Rate of interest 17%

5. Interest receivable for 160 days Rs. 2,28,583.00 6. Court expenses spent after

10-9-2008 for various disputed Rs. 76,566.00 -------------------------

Total Rs. 3,05,149.00 -------------------------

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

1. 10.9.2008 : Rs.   7,72,500/-

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

3. Stamp duty for registration

Paid on 6.3.2009 : Rs.  4,84,465/-

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

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

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17. with these observations, the appeals are disposed of directing the 5th respondent to pay the amount as indicated above within a period of four weeks from the date of receipt of copy of this order,  failing which the order of  confirmation of sale shall stand.”  

18. In spite of the aforementioned order, the debtor did not pay

the amount as directed by the High Court.  The matter, accordingly,

proceeded before the Assistant Registrar of  Co-operative Societies

(ARCS),  who  issued  a  detailed  communication  to  the  debtor  on

21.12.2011.  The ARCS considered the plea taken by the debtor

that he was entitled for certain adjustments and was not required

to pay any further amount.  The ARCS did not accept the said stand

taken by the debtor and was of the opinion that the amount as

directed by the Division Bench has not been paid. The ARCS in his

communication  dated  21.12.2011  has  noted  that  a  sum  of  Rs.

80,64,916/-  was  payable  by  the  debtor  out  of  which  he  had

remitted  only  a  sum  of  Rs.  41,69,200/-   on  6.2.2010  and  Rs.

20,19,925/- on 22.9.2011 totaling Rs. 61,89,125/-.  There was still

shortfall  of  Rs.  18,75,791.40  payable  by  the  debtor.  The

communication of the ARCS dated 21.12.2011 was challenged by

the debtor, by way of Writ Petition No. 48814/2011(CS-DAS) filed

on 29.12.2011 before the High Court of Karnataka at Bangalore.

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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. 1/2012

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

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

However, it is seen that ARCS, 3rd respondent in the appeals has taken his own time in trying to interpret  the  said  order  by  his  order  which  was initially  passed  on  21.11.2011  and  thereafter corrected as 21.12.2011 to say that entire amount should have been deposited by the 5th respondent to comply with the judgment of this Court which we are not  agreeable.   With  the  available  money,  the  3rd respondent –ARCS should have first cleared off the amount  to  the  auction  purchaser  with  interest, solatium,  damages  and  whatever  he  is  entitled  to from out of the amount that was available with 3rd

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respondent.  Thereafter, 3rd respondent should have cleared the money due to the bank, appellant in W.A. 2433/2010 alongwith interest  at  the rate specified therein.  If  any is found in excess he should have given it to 5th respondent.  

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

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

Call this matter on 29.6.2012”.

The  Division  Bench  thereafter  passed  the  following  order  on

29.6.2012, which reads thus:

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

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

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

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

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.  

The  Division  Bench  directed  the  ARCS  to  act  upon  to  the

clarificatory order dated 8.6.2012 and 29.6.2012 respectively and to

implement the same within 10 days.   

20. The  writ  petition  filed  by  the  debtor  (against  the

communication dated 21.12.2011 of the ARCS) was allowed by the

learned Single Judge vide order dated 7.9.2012, which reads thus:

“ORDER

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

2. It  appears,  the  3rd respondent-Assistant Registrar  of  co-operative  Societies  was  of  the  view that  the  petitioner  was  required  to  deposit  Rs.

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

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

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

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

21. In  the  present  appeals  filed  by  the  appellant  -  auction

purchaser  before  this  Court,  he  has  challenged  the  judgment

rendered in writ appeal dated 24.8.2011 as well as both the orders

passed on clarification application dated 8.6.2012 and 29.6.2012

respectively. The debtor, on the other hand, has filed appeal against

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the judgment of the Division Bench dated 24.8.2011 in Writ Appeal

No. 1006/2010.

22. We have heard the learned counsel for the parties at length.

From  the  indisputable  facts  mentioned  in  the  preceding

paragraphs, it is evident  that the Award passed by the Competent

Authority on 02.01.2004 became final after the dismissal of appeal

(Appeal  No.  419/2004)  by  the  Karnataka  Appellate  Tribunal,

Bangalore  on  30.04.2007.  The  debtor  did  not  pay  the  awarded

amount  in  spite  of  repeated  opportunity  given  to  him  on  every

occasion. Thus, for effectuating the Award and for recovery of the

outstanding  dues  from  the  debtor,  his  mortgage  property  was

required to be auctioned.  That auction sale was finally held on 10th

August 2008. The appellant - auction purchaser turned out to be

the highest bidder. The debtor unsuccessfully attempted to apply

for setting aside the auction sale. He also challenged the sale by

way of Writ Petition No. 12901/2008.  Even the Writ Petition was

dismissed  on  3rd December  2008.  In  the  said  writ  petition,  the

debtor had also prayed for setting aside the sale.  That prayer was

also rejected. Indeed, the debtor resorted to remedy of writ appeal

being  Writ  Appeal  No.  1914/2009.   That  was  disposed  of  by

recording  an  incorrect  statement  of  the  debtor  that  his  appeal

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21

against the Award was still pending. As a matter of fact, the appeal

preferred by  the  debtor  before  the  Karnataka  Appellate  Tribunal

being Appeal  No.419/2004,  was already dismissed on 30th April,

2007.  As a result  of  which,  the Award passed against  him had

become final.  

23. Be that as it may, it is common ground that the debtor did not

prefer application for setting aside the sale, inconformity with the

remedy  provided  in  that  behalf  in  terms  of  Section  89A  of  the

Karnataka Cooperative Societies Act, 1959 read with Rule 38 of the

Karnataka  Cooperative  Societies  Rules.   That  remedy  could  be

availed  by  the  debtor  only  after  depositing  the  awarded  amount

together with interest thereon with the Recovery Officer, in terms of

Rule 38(4)(a) of the Rules.  The application as filed by the debtor

was  dismissed  by  the  ARCS  on  14.10.2008.  Resultantly,  the

Competent  Authority  proceeded  to  confirm  the  auction  sale  on

02.03.2009, followed by grant of a certificate of sale and execution

of  a  Sale  Deed  in  the  prescribed  Form.  The  sale  of  the  subject

property thus, became final.  

24.  The debtor, however, was ill advised to prefer an appeal before

the  Deputy  Registrar  (CS)  of  Cooperative  Societies,  against  the

decision of  the Competent Authority confirming the auction sale.

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22

For, remedy of appeal before that Authority could be availed only in

terms of Section 106 of the Act,  against an order passed by the

Authority  (Registrar)  in  exercise  of  powers  ascribable  to  the

provisions referred to therein.  The order of confirmation of sale is

ascribable to Section 89A of the Act read with Rule 38 of the Rules.

No remedy of appeal against that decision is provided. Section 106

of  the  Act  does  not  provide  for  an  appeal  against  the  order

confirming an auction sale,  passed under Section 89A read with

Rule 38.   Section 89A of the Act read with Rule 38 of the Rules

provide  for  a  special  dispensation.   Thus  understood,  the  order

passed by the Deputy Registrar (CS) on the appeal preferred by the

debtor being Appeal No.7/2008-2009, is without jurisdiction. The

learned Single Judge as well as the Division Bench has completely

glossed over this crucial aspect.  

25. The order passed by the Deputy Registrar (CS) dated 18th July

2009,  assuming that it is ascribable to Rule 38(6)(a) as held by the

High Court, the fact remains that the debtor failed to comply with

the said order requiring him to pay an amount of Rs.59,46,965/-

along with interest thereon within the specified time. On account of

non-compliance of that direction, the relief granted by the Deputy

Registrar (CS) in terms of order dated 18th July 2009 of setting aside

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23

the  auction  sale  became  ineffective.  Admittedly,  the  debtor

deposited  a  sum  of  Rs.41,69,200/-  on  6th February  2010  and

Rs.20,19,925/-  on  22nd September  2011.   That  was  not  in

compliance with the order dated 18th July 2009.  

26. The fact that Writ Petitions were filed by the auction purchaser

and the Bank against the order of Deputy Registrar (CS) dated 18th

July 2009, that could not extricate the debtor from complying with

the  order  of  Deputy  Registrar  (CS)  which  he  allowed  to  attain

finality. As a matter of fact, the said order was passed on an appeal

preferred  by  the  debtor  himself  and  thus  he  was  bound  by  the

same.  

27. The debtor cannot be heard to claim benefit of the proceedings

in the form of Writ Petitions followed by Writ Appeals filed by the

auction purchaser and the Bank. For, it is noticed that the Division

Bench in its order dated 24th August 2011 determined the liability

of  the  debtor  to  pay  Rs.59,46,965/-  along  with  solatium  and

interest  thereon.   At  least  in  terms of  that  decision,  the  debtor

ought to have paid the entire amount. However, there was still a

shortfall  of  Rs.18,75,791.40.  The  debtor,  instead,  represented

before the ARCS that he was not liable to pay any further amount

in  excess  of  the  amount  already  deposited  by  him  until  22nd

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24

September 2011 totalling  Rs.61,89,125/-.  In our view, in the facts

of the present case, it is only upon deposit of the entire awarded

amount, the request of the debtor to absolve him of his liability

could be entertained.  

28. The argument pursued on behalf of the debtor that there was

calculation error in determination of his liability to the extent of

Rs.59,46,965/- including the interest accrued thereon  as directed;

and not giving adjustment of the deposits already made prior to the

order passed by the Division Bench on 24th August 2011 as was

manifest  from  the  no  dues  certificate  given  by  the  Deputy

Commissioner,  Commercial  Tax vide letter  dated 20th September

2010,  cannot  be  countenanced.  In  the  first  place,  the

communication  dated  September  2010  was  tendered  across  the

Bar for the first time before this Court during the argument.  It was

not made part of the record before the High Court nor was pressed

into  service  before  the  High  Court.  Moreover,  the  said

communication is in respect of the effect of exemption of 90% of

the interest under Tax Settlement Scheme. Thirdly, the matter on

hand arises out of the order passed by the Deputy Registrar (CS)

setting aside the sale confirmed in favour of the auction purchaser.

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25

29. As aforesaid, the debtor unsuccessfully challenged the auction

sale and prayed for setting aside the same by filing writ petitions.

That  relief  has  been  rejected.  In  that,  a  formal  application  for

setting aside the sale filed by the debtor was rejected by the ARCS

on 14.10.2008.   The appeal  preferred by the debtor  before the

Deputy Registrar (CS) was against the decision of the Competent

Authority confirming the auction sale on 02.03.2009. That it was

not  maintainable  under  Section  106  of  the  Act.  The  Deputy

Registrar (CS) had no jurisdiction.

30. Further, once the auction sale is confirmed by the Competent

Authority, it is not open to the Authority to exercise power under

Rule 38(6), to set aside the sale. That would be against the spirit of

legislative intent of giving finality to the auction sale process upon

passing of an order of confirmation of sale.

31. It is only the Authority referred to in Rule 38, who could have

set aside the sale by recording reasons in writing in exercise of

powers under Rule 38 of the Rules, albeit before passing an order

confirming the auction sale.  Rule 38 reads thus:  

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

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26 Provided that where the decree has been obtained on the  

basis of a mortgage of such property it shall not be  necessary to attach it.  

(2) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

(3) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

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

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

(ii)  for  payment  to  the  decree-holder  the  amount  of  arrears specified in the proclamation of sale as that for the recovery of which the sale was ordered together with interest thereon and the expenses of attachment, if any, and sale and other costs due in respect of such amount, less amount which may since the date of such proclamation have been received by the decree-holder.

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

Provided that,  if  more persons than one have made deposit and application under this sub-rule, the application of  the  first  depositor  to  the  Recovery  Officer  shall  be accepted:

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

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

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

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

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

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27 (c) If a person applies under sub-rule (5) to set aside the sale of

an immoveable property, he shall not be entitled to make an application under this sub-rule.

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

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

[Provided further where the purchaser is Government the sale will be confirmed,-

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

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

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

(6) (a) On the expiration of thirty days from the date of sale, if no application to have the sale set aside, either under sub-rule (4) or sub-rule (5) is made or if such application has been made and is rejected, the said Recovery Officer shall make an order confirming the sale:

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

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

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28 (7)    On the confirmation of a sale under this rule, the Recovery

Officer shall grant a certificate of sale bearing his seal and signature to the purchaser, and such certificate shall state the  property  sold  and the  name of  the  purchaser,  and it shall be conclusive evidence of the fact of the sale to such purchaser.  

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

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

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

32. The  order  passed  by  the  learned  Single  Judge  dated  7th

December 2012 to set aside the communication of the Assistant

Registrar  (CS)  dated  21st December  2011  cannot  extricate  the

debtor from the consequences of auction sale having become final

on issuance of sale certificate and execution of the agreement in

favour of the auction purchaser. Similarly, the fact that the debtor

deposited certain amounts after the decision of the Division Bench

cannot  come  to  his  aid.  For,  he  ought  to  have  deposited  the

awarded  amount  along  with  interest  accrued  thereon  and  that

must be accepted by the auction purchaser as satisfaction of the

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order  of  the  Division  Bench of  the  High  Court.  Admittedly,  the

debtor had failed to pay the entire awarded amount.  Significantly,

the auction purchaser did not acquiesce of the order of the Deputy

Registrar or that of the High Court, but has challenged the same in

the present appeals.   

33. We are  also  of  the  considered opinion  that  the  writ  appeal

having been disposed of, in the guise of clarification, the Division

Bench could  not  have  passed  any  order  at  the  instance  of  the

debtor  who  had  failed  to  challenge  the  decision  of  the  Deputy

Registrar. The writ appeals were filed by the auction purchaser and

the Bank assailing the wrongful rejection of their Writ Petitions by

the learned Single Judge.  As the decision of the Deputy Registrar

deserves to be set aside, the debtor cannot succeed on the basis of

some  observations  made  in  the  impugned  judgments  of  the

Division Bench or for that matter by the learned Single Judge and

including some infirmity in the letter of the Assistant Registrar (CS)

dated 21st December 2011.

34. That  takes  us  to  the  decision  of  this  Court  in  the  case  of

Annapurna vs. Mallikarjun & Anr.1 That decision is in respect of

provisions of Order 21 Rule 89 of C.P.C. The question decided in

1 (2014) 6 SCC 397

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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 18 th July

2009  in  favour  of  the  debtor  to  set  aside  the  auction  sale  on

conditions specified therein, in our view, is not ascribable even to

an  order  passed  under  Rule  38(6).   That  discretion  has  to  be

exercised only by the Recovery Officer and more importantly before

the order of confirmation of auction sale.   

35. The counsel for the debtor, however, placed reliance on two

decisions  of  this  Court  in  J.Rajiv  Subramaniyan  & Anr.  Vs.

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31

Pandiyas & Ors.2 and Vasu P.Shetty vs. Hotel Vandana Palace

& Ors.3 Emphasis was placed on paragraphs 18 and 29 of  the

decision in Subramaniyan’s case (supra). Firstly, that decision is in

respect of proceedings under the Securitization and Reconstruction

of Financial Assets and Enforcement of Security Interest Act, 2002.

Further, the decision is on the facts of that case. In this case, the

grievance  regarding  under  valuation  of  the  property  could  have

been raised by the debtor by way of a formal application to be filed

for setting aside the sale, as per the statutory provisions (Rule 38).

That contention is not relevant to answer the matters in issue, in

the  present  case.   Reliance  was  then  placed  on  the  dictum in

paragraphs 23 and 25 in the case of Shetty (supra) to contend that

inaction or intentional conduct of the debtor does not extricate the

Bank  from  following  mandatory  conditions  including  proper

valuation of  the property.  We fail  to  understand as to how this

decision will come to the aid of the debtor who has failed to pursue

statutory remedy for  setting aside the sale as per Rule 38;  and

moreso after the sale has already been confirmed in favour of the

auction purchaser. Notably, even after the confirmation of sale, the

Deputy  Registrar  showed  indulgence  to  the  debtor  to  deposit

2 (2014) 5 SCC 651 3 (2014)5 SCC 660

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Rs.59,46,965/- with interest only at 6% from 13th February 2009

till the date of payment. The debtor, however, remitted the amount

firstly  on  6th February  2010  a  sum  of  Rs.41,69,200/-  and

thereafter on 22nd September 2011 Rs.20,19,925/-. It was not in

conformity with the order passed by the Deputy Registrar dated

18th July 2009.  

36. Taking any view of the matter, therefore, we must hold that

the High Court committed manifest error in dismissing the Writ

Petitions filed by the appellant - auction purchaser challenging the

decision of the Deputy Registrar (CS) dated 18th July 2009. The

High Court ought to have allowed the Writ Petition as the Deputy

Registrar had no jurisdiction to entertain appeal against the order

of confirmation of sale issued under Section 89A read with Rule 38

of the Rules; and also because, admittedly, the debtor failed to pay

the awarded amount in spite of repeated opportunities given to him

from time to time. Moreover, the debtor cannot succeed in the Writ

Petition filed by the auction purchaser and the Bank against the

decision of the Deputy Registrar and get higher or further relief in

such proceedings. Thus, the Division Bench having finally disposed

of the writ appeal ought not to have entertained the application

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33

preferred by the debtor in the guise of clarification and to pass any

order thereon - which would enure to the benefit of debtor who is

in default, having become functus officio.

37. Accordingly,  we  allow  the  appeals  preferred  by  the  auction

purchaser  (P.M.Abubakar)  being  Civil  Appeals  arising  out  of

SLP(Civil)  Nos.  30130-30131/2012  and  SLP(Civil)  Nos.

33314-33315/2012 in the above terms. The order passed by the

Deputy Registrar (dated 18.7.2009); and of the High Court (dated

11.01.2010;  24.8.2011,  8.6.2012 and 29.6.2012)  confirming  the

order of the Deputy Registrar of setting aside the sale of the subject

mortgage property in favour of the auction purchaser, are hereby

set  aside.  The  Civil  Appeals  arising  out  of  SLP(Civil)  Nos.

25613-25614/2013  filed  by  the  debtor  (Keshava  N.  Kotian)  are

dismissed  with  observation  that  the  Appropriate  Authority  shall

proceed to disburse the amount already deposited by the debtor

and including the amount of sale proceeds, in accordance with law

forthwith. No order as to costs.  

……………………………..J.                 (Anil R. Dave)

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 ……………………………J.               (A.M.Khanwilkar) New Delhi, Dated: November 17, 2016