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2016 Supreme(SC) 683
SUPREME COURT OF INDIA
DIPAK MISRA, R.F. NARIMAN, JJ.
Ludovico Sagrado Goveia – Appellant
Versus
Cirila Rosa Maria Pinto and Ors. – Respondents
CIVIL APPEAL NO.8756 OF 2016
Decided On : 06-09-2016
IMPORTANT POINTS
Any legal proceeding pending before any authority at the commencement of the 2002 Act, i.e., on 19.8.2002 shall be continued under the 1984 Act as if the 2002 Act had not been passed.
A charge of malafides has to be made out with great clarity and particularity.
Headnote:(a) Multi-State Co-operative Societies Act, 2002 – Section 126(6) – Saving of pending legal proceeding – Any legal proceeding pending before any authority at the commencement of the 2002 Act, i.e., on 19.8.2002 – Shall be continued under the 1984 Act as if the 2002 Act had not been passed – Any legal proceeding includes the proceeding in execution initiated under Section 85(c) of 1984 Act – Instantly the execution proceeding pending before the authorities under the 1984 Act prior to 19th August, 2002 – Such proceeding would continue unhindered by the repeal of the 1984 Act by the 2002 Act. (Para 14, 19)
AIR 1946 FC 16; (1987) 3 SCC 99 – Relied upon
(b) Multi State Co-operative Society Rules, 2002 – Rule 37(13) and (14) – After six failed attempts to sell the property sealed cover tender adopted – Sale not for undervalue – Borrowers not ready to repay the loan – Not making any attempt to get the certificate of sale set aside – Ought to have approached Recovery officer within 30 days from the date of sale – Not done – Not entitled to any relief. (Para 22)
(c) Mala fides – A charge of malafides has to be made out with great clarity and particularity. (Para 22)
Facts of the case:
Respondent No. 3 in the High Court, as Proprietor of M/s Gable Builders, obtained a loan of Rs. 40 lacs from the Goa State Cooperative Bank Ltd. The said loan was sanctioned for the purpose of construction of a Bungalow. By a deed of mortgage, the said loan was secured by mortgaging the western part of the scheduled property admeasuring 8000 sq. mts.
The principal borrower failed to repay the loan installments.
Recovery proceedings were initiated by the Bank against respondent No. 3 and two sureties of the said loan.
The Assistant Registrar of Cooperative Societies passed an ex-parte award holding all the three opponents jointly and severally liable to pay the loan dues amounting to Rs 55,04,583/-.
3. A demand notice was then issued by the Bank against all the three said persons for a principal amount of Rs. 60,59,646/-together with further interest at 19% per annum from 1.4.2001 till the date of payment.
In spite of receiving the said notice, the defaulters failed to pay any amount towards bank dues, and the bank then referred the said award for execution to the Sale and Recovery Officer, Regional Office at Verem, Goa.
The Recovery Officer issued a proclamation notice for sale by public auction of the mortgaged property. Nobody came forward in response to the said notice.
The Sale and Recovery Officer issued a tender notice calling for sealed tenders.
The bid of Rs. 86,00,000/-received from the appellant in the present appeal was found to be the highest and accordingly, since the appellant paid the entire bid amount of Rs. 86,00,000/-, a Sale Certificate in favour of the appellant was issued on 23.4.2007.
The borrower did not repay at any stage the money borrowed by him and he filed a Writ Petition before the High Court to quash both the award and the certificate of sale accorded in favour of the Appellant.
The High Court has held that the Multi State Co-operative Societies Act, 1984 was repealed by the Multi State Co-operative Societies Act, 2002, which Act came into force on 19.8.2002. According to the High Court, the new Act deems an award passed by the Assistant Registrar as an award in an arbitration case, which is executable only under the Arbitration and Conciliation Act, 1996, and this being the case, the auction proceedings were set aside by the High Court stating that the award dated 5.10.2002 would be liable to be executed only in the manner provided by the 1996 Act.
Finding of the Court:
The judgment under appeal is incorrect, and would have to be set aside.
Result: Appeal allowed.
JUDGMENT
R.F.Nariman, J.
1. The present appeal is filed by the successful purchaser at an auction held in execution of an order dated 5.10.2010 of the Assistant Registrar of Cooperative Societies passed under Section 76 of the Multi State Cooperative Societies Act, 1984 [hereinafter referred to as “the 1984 Act”]. The brief facts of the present appeal are as follows.
2. Respondent No. 3 in the High Court, as Proprietor of M/s Gable Builders, obtained a loan of Rs. 40 lacs from the Mapusa Branch of the Goa State Cooperative Bank Ltd. The said loan was sanctioned for the purpose of construction of a Bungalow. By a deed of mortgage executed on 2.12.1997, the said loan was secured by mortgaging the western part of the scheduled property admeasuring 8000 sq. mts. The principal borrower failed to repay the loan installments. That being so, recovery proceedings were initiated under Sections 74 and 76 of the said Act by the Bank against respondent No. 3 and two sureties of the said loan. The Assistant Registrar of Cooperative Societies, by an Award dated 5.10.2007, noticed that despite being duly served summons by Registered post A.D., all the three opponents remained absent. As a result, an ex-parte award was passed holding all the three opponents jointly and severally liable to pay the loan dues amounting to Rs 55,04,583/-. It may be mentioned that interest was payable at 21% compounded under the said deed of mortgage dated 2.12.1997.
3. A demand notice dated 12.6.2001 was then issued by the Bank under Rule 22 of the Multi State Co-operative Society Rules, 1985 against all the three said persons for a principal amount of Rs. 60,59,646/-together with further interest at 19% per annum from 1.4.2001 till the date of payment.
4. In spite of receiving the said notice, the defaulters failed to pay any amount towards bank dues, and the bank then referred the said award for execution to the Sale and Recovery Officer, Regional Office at Verem, Goa. The said Recovery Officer issued a proclamation notice for sale by public auction of the mortgaged property by publishing a notice dated 2.1.2002 which was duly published in the Daily Herald on 5.1.2002. Nobody came forward in response to the said notice. Between January 2002 and February 2007 several proclamation notices were issued – six in all-to sell the said mortgaged property, but no bidders came forward to purchase the said property. The Bank then decided to sell the said mortgaged property by adopting the mode of selling property by sealed tender. Accordingly, the Sale and Recovery Officer issued a tender notice dated 18.3.2007 calling for sealed tenders. The said notice was published in a local newspaper “The Tarun Bhagat” also of the same date. As per the said tender notice, sealed quotations were invited from the public on or before 23.3.2007.
5. Two sealed tenders were received on 20.3.2007. A bid of Rs. 86,00,000/-received from the appellant in the present appeal was found to be the highest and accordingly, since the appellant paid the entire bid amount of Rs. 86,00,000/-, a Sale Certificate in favour of the appellant was issued on 23.4.2007.
6. Without availing of the procedure provided by Rule 37 (13) of the Multi State Co-operative Society Rules, 2002 by which the defaulter/ borrower could approach the authorities with an amount of 5% to be paid to the auction purchaser together with the full amount of the outstanding loan and expenses of attachment and sale to the decree holder, with interest thereon, within 30 days of confirmation of sale. If this were done, the said sale could have been set aside. Since the borrower did not repay at any stage the money borrowed by him, the borrower filed a Writ Petition being Writ Petition No. 325 of 2007 dated 21.6.2007 before the High Court of Bombay at Goa to quash both the award and the certificate of sale accorded in favour of the Appellant.
7. By the impugned judgment dated 23.12.2013, the High Court has held that the Multi State Co-operat
