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2012 Supreme(SC) 405

Supreme Court of India
B.S. CHAUHAN & DIPAK MISRA
Ram Kishun & Others
Versus
State of U.P. & Others
Civil Appeal No.6204 of 2009
Decided on : 24-05-2012

Advocates appeared:
For the Appellants:Dinesh Kumar Garg, B.S. Billowria, Dhanjay Garg, Advocates.
For the Respondents:T.N. Singh, V.K. Singh, Umang Tripathi, Janendra Lal & Co., Vikrant Yadav, Vinay Garg, Advocates.

Headnote:(A) Indian Contract Act, 1872, Sec. 128 — Loan — Repayment — Liability of guarantor/surety — Extent — Co-extensive with that of the debtor — Liability of a surety is immediate and is not deferred until the creditor exhausts his remedies against the principal debtor.

        (Para 23)

       (B) Indian Contract Act, 1872, Sec. 146 — Co-sureties/co-guarantors — Extent of — Where there are more than one surety/guarantor — They have to share the liability equally unless the agreement of contract provides otherwise. (Para 7)

       (C) Public Dues — Recovery — Manner — Undoubtedly public money should be recovered and recovery should be made expeditiously — But it does not mean that financial institutions which are concerned only with recovery, their loans may be permitted to behave like property dealers and be permitted further to dispose of the secured assets in any unreasonable or arbitrary manner in flagrant violation of statutory provisions — In the matter of sale of public property by way of public auction, the dominant consideration is to secure the best price for the property to be sold — Essential ingredients of such sale remain a correct valuation and fixing the reserve price. (Paras 15 to 19 and 23)

       (D) Auction sale — “Reserve price” — Meaning of — The price with which the public auction starts — The auction bidders are not permitted to give bids below this price, i.e. the minimum bid at auction.

        (Paras 14 and 19)

       (E) Decree — Small sum— But, sale of whole property for Rs. 17,000/- — Improper — Thus, a duty is cast upon the Court to sell only such property or a portion thereof as necessary to satisfy the decree. (Paras 18 and 26)

       (F) Auction sale — Confirmation — Consideration — A valuer’s report should be as good as the actual offer — And unless the Court is satisfied about the adequacy of the price — Such act of confirmation of the sale, not a proper exercise of judicial discretion. (Para 20)

       (G) Confirmed sale — Setting aside — Grounds — A confirmed sale can be set aside on the ground of material irregularity or fraud — Court does not become functus officio after the sale is confirmed — Held involvement of any kind of fraud vitiates the auction sale.

        (Paras 20 to 23 and 29)

Judgment :

Dr. B.S. Chauhan, J.

This appeal has been preferred against the judgment and order dated 20.1.2004 in C.M.W.P. No. 22420 of 2001 passed by the High Court of Judicature at Allahabad, by which it has affirmed the judgment and orders passed by the Board of Revenue and other revenue officials in respect of the recovery of bank dues from the appellants as their predecessor-in-interest was the guarantor of bank loan.

2. Facts and circumstances giving rise to this case are that:

A. One Ganga Prasad had taken an agricultural loan to the tune of Rs.8,425/- from the Union Bank of India (Banda Branch) on 20.3.1982 and Chuni Lal, father of the appellants stood guarantor. Ganga Prasad, debtor died in 1985 and Chuni Lal died in 1986. Chuni Lal could not pay the loan during his life time. Therefore, the bank initiated the proceedings for recovery and ultimately sent the matter to the District Collector, Banda for realisation of the loan amount as an arrear of land revenue.

B. The Collector issued citation/recovery certificate on 13.1.19986 for an amount of Rs.10,574.45 plus 10% collection charges against Ganga Prasad.

C. In order to make the recovery, land measuring 3 bigha 2 biswas belonging to said Ganga Prasad was put to auction and it could fetch only a sum of Rs.6,000/-. In order to recover the balance amount the proceedings were initiated against the appellants as their father stood guarantor. It is evident from the record that the appellants raised objections that instead of putting their property to auction, the loan amount be recovered from legal heirs of Ganga Prasad as he had left movable/immovable properties and livestocks and other assets to meet the recovery of the bank loan. Their objections were not accepted and the land of the appellants measuring 1 bigha and 10 biswas was put to auction on 15.3.1993. Respondent No. 4 purchased the said land for Rs.25,000/-. In respect of the same, sale was confirmed and sale certificate was issued by the Collector in favour of respondent No.4 and he was put in possession.

D. Appellants raised various objections under the provisions of U.P. Zamindari Abolition and Land Reforms Act, 1952 before the Commissioner, Jhansi, but their objections stood rejected vide order dated 27.7.1992 only on the ground of delay as the objections were not filed within limitation and no sufficient cause could be shown for inordinate delay.

E. Aggrieved, the appellants approached the Board of Revenue, U.P. by filing Revision No. 2 Cell/92-93. However, the same was dismissed vide order dated 20.3.2001 as the Revisional Authority did not accept the explanation for condonation of delay.

F. Aggrieved, the appellants approached the High Court challenging the said revisional order of the Commissioner by filing Writ Petition No. 22420 of 2001 which has been dismissed vide impugned judgment dated 20.1.2004.

Hence, this appeal.

3. Shri D.K. Garg, learned counsel appearing for the appellants has submitted that no recovery could have been made from the appellants as Ganga Prasad debtor had left huge movable/immovable properties and other livestocks which could satisfy the demand of the bank loan. More so, there were two guarantors and father of the appellants was not the only guarantor. Thus, the entire liability of the remaining unpaid amount could not have been fastened upon them. The properties of the appellants were worth rupees two lakhs which had been sold in auction at a throw-away price of Rs.25,000/- only, that too, without following procedure prescribed by law. For recovery of the balance amount of loan, only a part of the suit land could be sold. The objections filed by the appellants had been rejected by all the authorities/courts below on the ground of delay without considering the same on merit. Hence, the said orders are liable to be set aside and appeal deserves to be allowed.

4. Per contra, Mr. T.N. Singh, learned counsel appearing for respondent No.4 has submitted that the grievance of th








































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