Navas v. Vazhithala Service Co-operative Bank Ltd

## **`IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE RAJA VIJAYARAGHAVAN V WEDNESDAY, THE 28[TH] DAY OF FEBRUARY 2024 / 9TH PHALGUNA, 1945 WP(C) NO. 3018 OF 2023`** ``` PETITIONER: ``` ``` NAVAS ``` ``` AGED48YEARS ``` ``` S/O.SULAIMAN,PURAMADATHILHOUSE,VENGALLOORKARA, PURAPPUZHAVILLAGE,THODUPUZHATALUK,IDUKKIDISTRICT, PIN-685583. ``` ## **`BY ADV M.SASINDRAN`** ## **`RESPONDENTS:`** - **`1 VAZHITHALA SERVICE CO-OPERATIVE BANK LTD NO. 908 REPRESENTED BY THE SECRETARY, VAZHITHALA, PURAPPUZHA VILLAGE, THODUPUZHA TALUK, IDUKKI DISTRICT, PIN - 685583.`** ``` 2SPECIALSALEOFFICER VANNAPPURAMSCB(GROUP),OFFICEOFTHECO-OPERATIVE ASSISTANTREGISTRAR(G),THODUPUZHA,IDUKKIDISTRICT, PIN-685584. ``` ## **`*ADDL R3 EMMANUEL JOSEPH`** ``` S/OJOSEPH,PUTHENPURAYILHOUSE,VAZHITHALA,PURAPPUZHA VILLAGE,THODUPUZHATALUK,IDUKKIDISTRICT,PIN-685583. ``` ``` [ADDL.R3ISIMPLEADEDASPERORDERDATED25.04.2023INIA NO.2/2023INWP(C)3018/2023] ``` ``` BYADVS. ManuGovind,SC ANILKUMARC A.JAYASANKAR(J-114) A.K.PREETHA(K/000363/1997) ``` ``` THISWRITPETITION(CIVIL)HAVINGCOMEUPFORADMISSIONON 28.02.2024,THECOURTONTHESAMEDAYDELIVEREDTHEFOLLOWING: ``` ``` WP(C)NO.3018OF2023 ``` ``` 2 ``` ## **JUDGMENT** The petitioner along with his brother and mother are stated to have availed financial facilities from the Vazhithala Service Co-operative Bank Ltd No.908, the 1st respondent herein. For securing the loan, 22.53 Ares of land comprised in 236/2-1, 236/3-10 and 229/9 of Purappuzha Village were furnished as security. According to the petitioner, owing to various reasons, they were not able to make regular remittances on time. It was only when Ext.P1 sale proclamation was served the petitioner realised that the Bank was proceeding to recover the amounts. As per Ext.P1 notice, the total amount due to the Bank is Rs.37,59,811/-. According to the petitioner, he is now in serious financial difficulties and is not in a position to pay the amount. He contends that if an opportunity is granted, he would be in a position to make remittances in 20 installments. It is in the afore circumstances that this writ petition is filed seeking the following relief:- Issue a writ in the nature of Mandamus or any other appropriate writ, order or suitable direction to enable the petitioner to pay the loan amount (as per Ext P1) in installments. 2. When this writ petition came up for consideration on 3.2.2023, this Court while issuing notice, ordered that any sale pursuant to Ext.P1 notice shall not be confirmed subject to the condition that the petitioner remits a sum of Rs.3 lakhs towards the loan liability on or before 8.2.2023. ``` WP(C)NO.3018OF2023 ``` ``` 3 ``` It is submitted that in terms of the directions issued, amounts were paid by the petitioner herein. 3. A counter affidavit has been filed by the 1st respondent. It is stated that the petitioner, along with his mother Smt.Khadeeja and brother Sri.Nazar, had availed three separate loans on 13.12.2012 for a sum of Rs.5 lakhs each. Gehan was registered against the properties owned by them. Default was committed, and registered notices were sent on 12.7.2014. Thereafter Arbitration Reference Cases were instituted in the year 2015. After considering the facts and circumstances, awards were passed on 15.5.2017 and on 17.5.2017. Despite the issuance of registered notices, not even a single paise was paid. It is in the said circumstances that recovery proceedings were initiated against the petitioner and his family members. Execution petitions were filed on 11.11.2017 and demand notices were issued consequently. It is stated that as per the execution applications, the total amount due is Rs.38,70,775/-. Later, steps were taken to carry out the auction in accordance with the provisions of law and the auction notice was published in the ‘Mathrubhoomi’ and ‘Malayala Manorama’ newspapers. The auction was finally held on 9.2.2023. It is stated that the petitioner is working as a police officer and his wife is a Primary School Teacher in Government Service. It is stated the brother of the petitioner is employed in the Forest Department. The petitioner has evaded from paying the amount ``` WP(C)NO.3018OF2023 ``` ``` 4 ``` despite having resources to settle the outstanding. 4. In the additional counter, it is stated that the petitioner had not exercised the auction as provided under Rule 82(2) of the Kerala Co-operative Societies Rules within 30 days from the date of auction by paying 5% of the purchase money. 5. In the counter affidavit filed by the additional 3rd respondent, it is stated that he is a non-resident Indian. He had participated in the auction, which was held on 9.2.2023, was declared the highest bidder and has remitted a sum of Rs.60,20,000/-. It is stated that in view of the interim order passed by this Court, the auction has not been confirmed. 6. Sri.M.Sasindran, the learned counsel appearing for the petitioner, submitted that all that the petitioner is seeking is a breathing time to pay the amount. According to the learned counsel, much prior to the auction, on 3.2.2023, this Court had ordered that the auction shall not be confirmed, and as ordered by this Court, a sum of Rs.3 lakhs has been paid. It is submitted that in that view of the matter, it is only just and proper that the petitioner be permitted to pay the entire amount in installments and the property be conveyed back to the petitioner. 7. Sri.Manu Govind, the learned counsel appearing for the Bank has vehemently opposed the submissions. According to the learned counsel, the petitioner committed default in the year 2012. An award has been ``` WP(C)NO.3018OF2023 ``` ``` 5 ``` passed by the Arbitration Court and it is thereafter that recovery proceedings were initiated. According to the learned counsel, the property has been bid in auction by the party respondent by paying a sum of Rs.60,20,000/-. It is further submitted that inference by this Court at this stage would frustrate the very object and purpose behind auctions and deter public confidence and participation in the same. It is submitted that the attempt of the petitioner is only to protract the matter. 8. The learned Counsel appearing for the party respondent also supported the submissions of the learned Standing Counsel appearing for the Bank. It is submitted that the 3rd respondent has remitted a sum of Rs.60,20,000/- after participating in the auction. 9. I have considered the submissions advanced and have gone through the records. In the case on hand, the sequence of events would show that the default was committed in the year 2012 and the arbitration proceedings were initiated in the year 2015. It was in the year 2017 that awards were passed in the cases. Ample time was granted to the petitioner to pay the amount. The auction was finally conducted on 9.2.2023. As rightly submitted by the learned counsel appearing for the Bank, the attempt of the petitioner is merely to protract the proceedings as his prayer in this writ petition is to grant him 20 installments to clear the installments. 10. It would be apposite at this juncture to refer to Rule 82 of the ``` WP(C)NO.3018OF2023 ``` ``` 6 ``` ## Co-operative Societies Rules, which deals with the power to set aside the sale. The said provision reads as under. 82. Application to set aside sale on deposit. (1) Where immovable property has been sold by the sale officer, 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 Registrar:- - (a) for payment to the purchaser, a sum equal to 5% of the purchase money, and (b) for payment to the decree-holder, the amount of arrears specified in the proclamation of sale for the recovery of which the sale ordered together with interest thereon and the expenses of attachment, if any, and sale and other costs due in respect of such amount less any amount which may since the date of such proclamation have been received by such decree-holder. (2) If such deposit and application are made within thirty days from the date of sale, the Registrar 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 rule, the application of the first depositor to the officer authorised to set aside the sale shall be accepted. (3) If a person applies under Rule 83 to set aside the sale of immovable property, he shall not be entitled to make an application under this rule. 11. The petitioner could have approached the Registrar with an application to set aside the sale but for such purpose, he is required to deposit 5% of the purchase money and also the amounts specified in the ``` WP(C)NO.3018OF2023 ``` ``` 7 ``` proclamation of sale together with interest and expenses within thirty days from the date of sale. 12. This Court, by an interim order dated 10.1.2024 had passed an interim order requiring the petitioner to confirm whether he is prepared to deposit the entire amounts with the Bank together with interest for the payment of 60.20 lakhs made by the auction purchaser. However, it appears that the petitioner does not have the means to effect payment of the total outstanding as well as the interest for the amounts deposited by the auction purchaser. Thus, the attempt of the petitioner is only to seek further time and nothing more. The Apex Court in **Celir LLP v. Bafna Motors (Mumbai) (P) Ltd.** , [(2024) 2 SCC 1] had occasion to expatiate on the sanctity of public auction and the extent of interference that can be made. Though the said judgment was rendered in the context of an auction sale conducted in SARFAESI matters, the observations made therein are pertinent. It was held as follows in paragraphs 88 to 92 of the judgment. **88.** This Court in Valji Khimji [Valji Khimji and Co. v. Hindustan Nitro Product (Gujarat) Ltd. (Official Liquidator), (2008) 9 SCC 299] held that once an auction is confirmed the same can be interfered on very limited grounds as otherwise no auction would ever be complete, with the following relevant observations, being reproduced hereunder : (SCC pp. 302 & 305, paras 11 & 29-30) “11. It may be noted that the auction-sale was done after adequate publicity in well-known newspapers. Hence, if anyone wanted to make a bid in the auction he should have participated in the said auction and ``` WP(C)NO.3018OF2023 ``` ``` 8 ``` made his bid. Moreover, even after the auction the sale was confirmed by the High Court only on 30-7-2003, and any objection to the sale could have been filed prior to that date. However, in our opinion, entertaining objections after the sale is confirmed should not ordinarily be allowed, except on very limited grounds like fraud, otherwise no auction-sale will ever be complete. ## *** 29. … It may be mentioned that auctions are of two types — (1) where the auction is not subject to subsequent confirmation, and (2) where the auction is subject to subsequent confirmation by some authority after the auction is held. 30. In the first case mentioned above i.e. where the auction is not subject to confirmation by any authority, the auction is complete on the fall of the hammer, and certain rights accrue in favour of the auction-purchaser. However, where the auction is subject to subsequent confirmation by some authority (under a statute or terms of the auction) the auction is not complete and no rights accrue until the sale is confirmed by the said authority. Once, however, the sale is confirmed by that authority, certain rights accrue in favour of the auction-purchaser, and these rights cannot be extinguished except in exceptional cases such as fraud.” **89.** In another decision by this Court in K. Kumara Gupta v. Sri Markendaya & Sri Omkareswara Swamy Temple [K. Kumara Gupta v. Sri Markendaya & Sri Omkareswara Swamy Temple, (2022) 5 SCC 710 : (2022) 3 SCC (Civ) 178] , it was held that repeated interferences with public auction would frustrate the sanctity and purpose of holding auctions. The relevant observations made in it are given below : (SCC pp. 724-26, paras 14 & 16-17) “14. Once the appellant was found to be the highest bidder in a public auction in which 45 persons had participated and thereafter when the sale was confirmed in his favour and even the sale deed was executed, unless and until it was found that there was any material irregularity and/or illegality in holding the public auction and/or auction-sale was vitiated by any fraud or collusion, it is not open to set aside the auction or sale in favour of a highest bidder on the basis of some representations made by third parties, who did not even participate in the auction proceedings and did not make any offer. ``` WP(C)NO.3018OF2023 ``` ``` 9 ``` *** 16. It is also required to be noted that the sale was confirmed in favour of the appellant by the Commissioner, Endowments Department after obtaining the report of the Assistant Commissioner. Therefore, we are of the opinion that in the aforesaid facts and circumstances of the case, the High Court ought not to have ordered [Sri Markendaya and Sri Omkareswra Swamy Temple v. K. Kumara Gupta, 2019 SCC OnLine AP 201] re-auction of the land in question after a period of 23 years of confirmation of the sale and execution of the sale deed in favour of the auction-purchaser by observing that the value of the property might have been much more, otherwise, the object and purpose of holding the public auction and the sanctity of the public auction will be frustrated. Unless there is concrete material and it is established that there was any fraud and/or collusion or the land in question was sold at a throwaway price, the sale pursuant to the public auction cannot be set aside at the instance of strangers to the auction proceeding. 17. The sale pursuant to the public auction can be set aside in an eventuality where it is found on the basis of material on record that the property had been sold away at a throwaway price and/or on a wholly inadequate consideration because of the fraud and/or collusion and/or after any material irregularity and/or illegality is found in conducing/holding the public auction. After the public auction is held and the highest bid is received and the property is sold in a public auction in favour of the highest bidder, such a sale cannot be set aside on the basis of some offer made by third parties subsequently and that too when they did not participate in the auction proceedings and made any offer and/or the offer is made only for the sake of making it and without any serious intent. In the present case, as observed hereinabove, though Shri Jagat Kumar immediately after finalising the auction stated that he is ready and willing to pay a higher price, however, subsequently, he backed out. If the auction-sale pursuant to the public auction is set aside on the basis of such frivolous and irresponsible representations made by such persons then the sanctity of a public auction would be frustrated and the rights of a genuine bidder would be adversely affected.” ## (emphasis supplied) **90.** In a recent decision by this Court in Eva Agro Feeds (P) Ltd. v. Punjab National Bank [Eva Agro Feeds (P) Ltd. v. Punjab National Bank, (2023) 10 SCC 189] , the following relevant observations were made, being ``` WP(C)NO.3018OF2023 ``` ``` 10 ``` ## reproduced as under : (SCC p. 220, para 79) “ 79. … mere expectation of the Liquidator that a still higher price may be obtained can be no goodground to cancel an otherwise valid auction and go for another round of auction. Such a cause of action would not only lead to incurring of avoidable expenses but also erode credibility of the auction process itself. That apart, post auction it is not open to the Liquidator to act on third-party communication and cancel an auction, unless it is found that fraud or collusion had vitiated the auction. The necessary corollary that follows therefrom is that there can be no absolute or unfettered discretion on the part of the Liquidator to cancel an auction which is otherwise valid. As it is in an administrative frameworkgoverned by the rule of law there can be no absolute or unfettered discretion of the Liquidator. Further, upon a thorough analysis of all the provisions concerning the Liquidator it is evident that the Liquidator is vested with a host of duties, functions and powers to oversee the liquidation process in which he is not to act in any adversarial manner while ensuring that the auction process is carried out in accordance with law and to the benefit of all the stakeholders. Merely because the Liquidator has the discretion of carrying out multiple auction it does not necessarily imply that he would abandon or cancel a valid auction fetching a reasonable price and opt for another round of auction process with the expectation of a better price. Tribunal had rightly held that there were no objective materials before the Liquidator to cancel the auction process and to opt for another round of auction.” ## (emphasis supplied) **91.** Thus, what is discernible from above is that, it is the duty of the courts to zealously protect the sanctity of any auction conducted. The courts ought to be loath in interfering with auctions, otherwise it would frustrate the very object and purpose behind auctions and deter public confidence and participation in the same. **92.** Any other interpretation of the amended Section 13(8) will lead to a situation where multiple redemption offers would be encouraged by a mischievous borrower, the members of the public would be dissuaded and discouraged from in participating in the auction process and the overall sanctity of the auction process would be frustrated thereby defeating the very purpose of the SARFAESI Act. Thus, it is in the larger public interest to maintain the sanctity of the auction process under the SARFAESI Act. ``` WP(C)NO.3018OF2023 ``` ``` 11 ``` 13. In view of the principles laid down above, I am of the view that the petitioner has not made any case for interference. The interim order dated 3.2.2023 is vacated and this writ petition will stand dismissed. The respondent Bank shall refund the sum of Rs.3 Lakhs paid by the petitioner together with Bank interest at the prevalent rate. Sd/- **RAJA VIJAYARAGHAVAN V JUDGE** ``` Sru ``` ``` WP(C)NO.3018OF2023 ``` ``` 12 ``` ## **`APPENDIX OF WP(C) 3018/2023`** ``` PETITIONEREXHIBITS ExhibitP1TRUECOPYOFTHESALEPROCLAMATIONDATED 22.12.2022ISSUEDBYTHE2NDRESPONDENT. ExhibitP2ATRUECOPYOFTHEAPPLICATIONDATEDNIL SUBMITTEDTOTHE1STRESPONDENTSOCIETY. ExhibitP3ATRUECOPYOFTHEAPPLICATIONDATED11.8.2023. RESPONDENTSEXHIBITS: ExhibitR1(a)Truecopyoftheletterdated29.03.2023was forwardedtothefirstrespondent ```