The auction of mortgaged property for a nominal price without proper valuation and participation is illegal, and the right of redemption persists until a registered sale is completed.

JUDGMENT :

ALOK MATHUR, J.

1. Heard Shri Vivek Kumar Singh, learned counsel for the petitioners, learned Standing Counsel for the State, learned counsel for respondent-Bank and perused the material available on record.

2. By means of the present writ petition, the petitioners have challenged the auction proceedings conducted at the behest of the Collector/District Magistrate, District Hardoi whereby the agricultural land of the petitioners situated at Village Janwar, Pargana-Godwa, Tehsil-Sandila, District Hardoi in Gata (Khasra) Nos/area (in Hectare), 1411/4-18-5-0, 1378/0-7-0-0, 1427/0-10-0-0 and 1422/3-12-11-0 have been auctioned and purchased by the State in lieu of the outstanding amount due to respondent no. 4 i.e. State Bank of India.

3. It has been submitted by learned counsel for petitioners that the petitioners had taken an agricultural loan of Rs.8,500/- on 08.01.1983 from the State Bank of India, Branch Sandila, District Hardoi. It is stated that against the said loan, the petitioners had deposited the loan amount of Rs.11,000/- till 28.05.1992 and also an amount of Rs.14,000/- on 22.12.2008 as demanded by the respondent-Bank. It has been stated that some government officials went to the petitioners’ land and started measuring the same and it is then the petitioners came to know that the land of the petitioners has been sold by the State Government in an auction and even subsequently, they were able to obtain the records pertaining to the said auction. The petitioners stated that the auction was held by the State Government where no bids were made and no one had participated in the said auction. It seems that the State had purchased the land for Rs.1/- and name of the State Government had also mutated in the revenue record on 03.04.1993. It has been stated that after depositing the full and final amount of the said loan, the Branch Manager of the State Bank of India has given ‘No Dues Certificate’ to the petitioners on 16.07.2009 and recovery proceedings were initiated and land of the petitioners were auctioned in Rs.1/-.

4. In support of his submissions, learned counsel for the petitioners has relied upon the judgment of Supreme Court in the case of Surendra Pal Singh Vs. Vijaya Bank passed in Civil Appeal No. 6843 of 2023 as well as Narandas Karsondas Vs. S.A. Kamtam, 1976 CJ (SC) 287 to canvass his plea that his right to redemption of the mortgaged property existed even subsequent to confirmation of the auction and consequently he may be permitted to deposit the outstanding amount of loan and the impugned orders may be set aside directing the respondents to hand over the property back to the petitioner.

5. In the counter affidavit filed by the State, it has been stated that the petitioners did not repay the said amount and subsequently the loan was put for auction but the auction proceedings could not take place and consequently, it is stated that the land vested in the State Government and mutation in this respect was also undertaken by the order dated 30.03.1993. It has further been stated in the counter affidavit that on failure in auction, the land was vested in the State Government. In the aforesaid circumstances, the question which falls for consideration is as to whether where either no one has participated in the said auction or auction has not been conducted by the State, can the land, which is mortgaged with the Bank as security towards the loan taken by the farmers, vest in the State Government.

6. Before dealing with rival contentions of parties, it would be useful to refer some decisions of the Apex Court, having material bearing on the question in controversy involved in the case, hereinafter.

7. In the case of Union Bank of India Vs. Official Liquidator, 2000 (5) SCC 274, the Apex Court has observed as under:

“In auction-sale of the property of the company which is ordered to be wound up, the Company Court acts as a custodian for the interest of the Company and its creditors. It is the duty of the Company