IMPORTANT POINT
An auction sale held without deciding objections to it, which go to the root of the liability of the defaulter and saleability of the goods proposed to be sold, is bad in law.

JUDGMENT

Mrs. Sujata V. Manohar, J.-The original appellant Seth Banarasi Dass was the lessee of S.B. Sugar Mills, Bijnor in the State of Uttar Pradesh. In respect of sugarcane cess, purchase tax and other Government dues of S.B. Sugar Mills, Bijnor, the Collector, Bijnor issued a recovery certificate for Rs. 61,48,674.21 against the appellant in his personal capacity. The appellant was the owner of 94,320 equity shares of the face value of Rs. 10/- each and 2,260 preference shares of the face value of Rs. 100 each in M/s. Jaswant Sugar Mills Ltd., Meerut. The Company Secretary of M/s. Jaswant Sugar Mills received a prohibitory order dated 21.12.1970 restraining him from permitting any transfer of 94,320 equity shares and 2,260 perference shares held by the appellant in the said company. The Company Secretary, by his letter dated 6th of February, 1971 addressed to the Collector, informed him that on the date of the receipt of the prohibitory order, that is to say, on 14th of January, 1971 only 25,150 equity shares and 2,260 preference shares stood in the name of the appellant. He further informed the Collector by the said letter that these shares had been received by them from Oriental Bank of Commerce Ltd., Meerut Cantonment for transfer in their name, and that these shares were already pledged with the said bank. Copies of the letters received by M/s. Jaswant Sugar Mills from the Oriental Bank of Commerce Ltd. were also enclosed with the said letter.

2. Thereafter, on 31.7.1972 a citation was issued by the Tehsildar, Meerut on the appellant under Section 280 of the U.P. Zamindari Abolition and Land Reforms Act, 1950 calling upon him to pay a sum of Rs. 50,42,523/- failing which his property, inter alia, would be attached and sold. Thereafter, the appellant filed his objections dated 8.11.1972 before the Sale Officer raising various objections to the amount claimed and also pointing out that the shares for which notice of auction was given were already pledged with the Oriental Bank of Commerce Ltd., Meerut and the Punjab Co-operative Bank, New Delhi. Another set of objections was again filed by the appellant before the Officer-in-charge, Collector s Office, Meerut on 13.8.1973. These objections, inter alia, stated that the amount of Rs. 61,48,674.21 mentioned in the recovery certificate of the Collector of Bijnor was not outstanding ; that a sum of Rs. 49,67,101.25 had already been realised by the Collector, Bijnor through the Punjab National Bank, Bijnor and a revised recovery certificate was also issued. He claimed that full recovery had been effected by then. He also reiterated his objections to the sale of the said shares. None of these objections were decided by the Collector and/or Sale Officer. In the meanwhile, several attempts had been made to sell the said shares by public auction. None of these attempts, however, succeeded as nobody came forward to buy these shares.

3. On 24.11.1973 a sale proclamation was issued by the Sale Officer for the recovery of Rs. 61,48,674.21, fixing 2nd of January, 1974 as the date of the auction sale. Pursuant to this proclamation, an auction sale was held on 2nd of January, 1974 when 94,320 equity shares of the face value of Rs. 10/- each and 2,260 preference shares of the face value of Rs. 100/- each in M/s. Jaswant Sugar Mills Ltd. held by the appellant were auctioned for Rs. 2,90,000/-. The highest bid of Rs. 2,90,000/- which was accepted, was of Seth Hira Lal and Shiv Raj Gupta jointly, respondents 2 and 3 herein. Out of the total auction amount, a sum of Rs. 75,000/- was deposited by the auction purchasers with the Tehsildar, Meerut on the date of the auction. On 5th of January, 1974 the auction purchasers wrote a letter to the Sale Officer asking where they should deposit the balance amount. As per the directions of the Sale Officer the auction purchasers deposited the balance amount of Rs. 2,15,000/- with the Tehsildar, Meerut on 7th of January, 1974.

4. On 11th of January, 1974 t