1. Recovery of debt from a society under liquidation — Challenge to auction sale of immovable property for alleged undervaluation and procedural irregularities under the Maharashtra Cooperative Societies Act. (Para 1 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 )
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2024 Supreme(SC) 836
SUPREME COURT OF INDIA
DIPANKAR DATTA, PRASHANT KUMAR MISHRA, JJ.
The Ahmednagar District Central Cooperative Bank Ltd. – Appellant
Versus
The State of Maharashtra and Others – Respondents
Civil Appeal No. 8343 of 2024 [Arising Out of SLP (C) No. 16901 of 2024]
Decided On : 27-09-2024
IMPORTANT POINT
Writ court does not encourage petitions from indolent, tardy and lethargic litigants – Writ court comes to aid of a litigant who approaches it with promptitude and before accrual of third-party rights.
Headnote:
Constitution of India – Articles 142 and 226 – Banking and Finance – Auction sale of attached immovable property – Undervaluation of property – Explanation that appellant was busy in obtaining information after auction sale was conducted for launching attack on process of sale could be correct on facts but by that, precious time was lost – Writ court does not encourage petitions from indolent, tardy and lethargic litigants – Writ court comes to aid of a litigant who approaches it with promptitude and before accrual of third-party rights – Not having approached High Court before accrual of a right in favour of respondent, on facts and in circumstances, it was not open to appellant to question auction sale process in question after finalisation of sale in favour of respondent – That possession of property had not been taken by appellant or that its name was not entered in revenue records are of no significance having regard to discernible conduct of appellant in allowing things to drift to its detriment – Matters which have settled for long ought not to be unsettled – Impugned Judgment of High Court is upheld – Invoking power under Article 142 of Constitution of India and with a view to do complete justice between parties, respondent directed to pay to appellant a sum of Rs.1,05,98,710/- (without interest) towards full and final settlement of dues of appellant from society. (Paras 30, 33 and 34)
Facts of the case:
Ahmednagar District Central Cooperative Bank Limited is in appeal, challenging judgment and order dated 23rd November, 2017 of High Court of Judicature at Bombay, Bench at Aurangabad dismissing its writ petition. Under challenge in the writ petition was an auction sale pertaining to the immovable property of Mula Sahakari Soot Girni Ltd., Rahuri.
Findings of Court:
As on 29th July, 2024, after clearing dues of creditors, amount of Rs.29,78,499/- is reportedly balance amount. Liquidator may disburse such amount to other creditors, excluding appellant, as per priority. However, if all other creditors have been paid their dues and none else remains to be paid, said sum of Rs.29,78,499/- or any part of it may be disbursed in favour of appellant.
Result : Civil appeal disposed of with directions.
Legal Category Hierarchy
Table of Contents
2. Alleged gross undervaluation of property — Non-compliance with auction publication procedures — Lack of minimum bidder participation — Mala fide intent to favor a specific purchaser. (Para 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 )
3. Appellant's failure to object to valuation promptly — Accrual of third-party rights — Undue benefit gained by purchaser through significantly lowered upset price. (Para 29 , 30 , 31 , 32 )
4. Writ jurisdiction is not available to indolent litigants who fail to challenge proceedings before third-party rights accrue, despite potential procedural irregularities or undervaluation. (Para 30 )
5. Auction sale upheld — Article 142 invoked directing the purchaser to pay the appellant the principal debt amount as full and final settlement. (Para 33 , 34 , 35 , 36 )
6. Can a party challenge an auction sale after the sale is finalized if they were aware of the valuation?
No. Writ courts do not encourage petitions from indolent or lethargic litigants. If a party is aware of the upset price and fails to seek immediate legal remedy before third-party rights accrue, they cannot later question the process. (Para 30 )
7. Do procedural irregularities in an auction sale automatically entitle a party to set aside the sale after a third party has purchased the property?
Not necessarily. Even if procedural formalities are not followed strictly, the court may refuse to unsettle a matter if the challenging party was negligent and allowed the process to finalize, thereby creating third-party rights. (Para 30 )
8. Can the court grant financial relief to a creditor even if it refuses to set aside an auction sale?
Yes. Under Article 142 of the Constitution, the court can invoke its powers to do complete justice between parties, such as directing a purchaser to compensate a creditor to ensure fairness when the property was sold at a throw-away price. (Para 32 , 34 )
JUDGMENT :
DIPANKAR DATTA, J.
THE CHALLENGE
1. Ahmednagar District Central Cooperative Bank Limited1 [appellant, hereafter] is in appeal, challenging the judgment and order dated 23rd November, 20172 [impugned judgment, hereafter] of the High Court of Judicature at Bombay, Bench at Aurangabad3 [High Court, hereafter] dismissing its writ petition.4 [Writ Petition No. 10866 of 2016] Under challenge in the writ petition was an auction sale pertaining to the immovable property of Mula Sahakari Soot Girni Ltd., Rahuri.5 [society, hereafter] The challenge was primarily based on twin grounds: (i) that valuation of the property of the society (under liquidation) and the upset price were fixed on the lower side and (ii) that three bidders had not participated in the auction sale. The High Court did not find substance in any of these two grounds. Incidentally, the High Court recorded that no mala fide could be attributed in respect of the questioned auction sale and that the auction purchaser was not a private individual but a body established under the statute, i.e. the Agricultural Produce Market Committee, Rahuri.6 [respondent no. 6, hereafter]
THE FACTS
2. The basic facts leading to the questioned auction sale before the High Court are not in dispute.
3. The appellant sanctioned cash credit loan of Rs.95 lakh to the society. Default in liquidating the debt having occurred, the appellant lodged a dispute case7 [Dispute Case No. 389 of 2001] on 7th March, 2001 before the Registrar of Cooperative Societies, Maharashtra under section 91 of the Maharashtra Cooperative Societies Act, 19608 [the 1960 Act, hereafter] for recovery of Rs.1,05,98,710/-. The dispute case stood allowed and vide an award dated 24th June, 2011, the appellant was held entitled to recover Rs.1,05,98,710/- with interest @ 17.5% per annum with effect from 1st October, 2000 from the society.
4. In liquidation proceedings which had started in the meanwhile, initially an interim order dated 3rd April, 2002 was passed calling upon the society to submit its say/explanation within the period stipulated as to why an order of dissolution should not be made. Thereafter, a final order dated 31st August, 2005 was passed by the Additional Registrar in terms of section 102 of the 1960 Act read with certain Government notifications referred to therein directing winding up of the society. The District Collector, Ahmednagar was appointed as the Liquidator of the society and he was directed to take action under section 105 of the 1960 Act and the rules framed thereunder. The final report was directed to be filed within a year to the Directorate of Textile Industry for acceptance.
5. The appellant had attached the immovable property of the society and obtained a valuation of a Government approved valuer on 21st January, 2012. The property of the society was valued at Rs.4.10 crore as on 21st January, 2012.
6. Auction sale notice dated 24th August, 2013 was issued by the appellant for sale of the property with upset price of Rs.4.10 crore. The respondent no. 6 expressed interest and submitted its bid together with earnest money of Rs.25 lakh. The sale process, however, could not materialize since no other bid was received. This resulted in the respondent no. 6 backing out from the auction process and requesting the appellant to return the earnest money of Rs.25 lakh.
7. Because of the failure of the appellant to sell the property by an auction, it submitted a claim before the Liquidator by letters dated 30th June, 2015, 5th September, 2015 and 2nd March, 2016. By July, 2016, the amount recoverable by the appellant from the debtor had swelled to Rs.3,95,08,840/-. However, allegedly, no response was received.
8. While the events as aforesaid were unfolding, a pending writ petition9 [Writ Petition No. 610 of 2001] before the High Court in respect of the liquidation process of the society and for directions to pay the employees thereof their legitimate dues had come up for consideration. On such writ
