Procedural compliance in auction sales is mandatory, and non-compliance renders such sales void.

ORDER

(per Justice Sanjay Kumar)

Challenge in this writ petition is to the order dated 22.05.2013 passed by the Debts Recovery Appellate Tribunal, Mumbai, in M.A.No.142 of 2010, holding for the Debts Recovery Appellate Tribunal, Chennai. A consequential direction is sought to uphold the auction sale in favour of the petitioner.

By order dated 20.09.2013, this Court directed the parties to maintain status quo with regard to the property in question. This direction was continued until further orders on 04.02.2014.

Heard Sri Vedula Venkata Ramana, learned senior counsel representing Sri Poosarla Vikram, learned counsel for the petitioner; Sri D.V.Seetharama Murthy, learned senior counsel appearing for Sri K.Mohan, learned counsel for the first respondent; and Sri M.Narender Reddy, learned senior counsel appearing for Sri M.Srikanth Reddy, learned counsel for the State Bank of India, the sixth respondent.

The facts, to the extent relevant, are as follows: The second respondent company obtained a working capital loan to the tune of Rs.3,79,00,000/- from the State Bank of India. Pursuant to the guarantee offered by him for this loan, the first respondent mortgaged Plot No.623/3 admeasuring 1593 square yards in Survey No.40/1 of Shaikpet Village, presently Jubilee Hills, Hyderabad, as security therefor. Default having been committed in repayment of this loan, recovery proceedings in O.A.No.123 of 1997 were initiated by the bank before the Debts Recovery Tribunal, Hyderabad, for recovery of Rs.1,78,48,687.80 ps., with interest thereon, against, amongst others, the third, fourth and fifth respondents, directors of the second respondent company, and also the guarantor for the loan, the first respondent herein. Despite service of notice, respondents 1 to 5 herein failed to contest the said O.A. By ex parte final order dated 14.05.1999, the Tribunal allowed the O.A. and Recovery Certificate dated 20.03.2002 was issued pursuant thereto, for a sum of Rs.4,69,51,295.80 ps. R.P.No.33 of 2002 was then filed by the bank for realization of these dues and a proclamation of sale, under Rule 52(2) of the Second Schedule to the Income Tax Act , 1961 (for brevity, ‘the Act of 1961’), was published in the newspaper on 05.12.2002. In terms of this proclamation, the auction was conducted on 09.01.2003, wherein the petitioner was declared the highest bidder at Rs.82,00,000/- for the first respondent’s plot of land. On the same day, the petitioner paid 25% of the sale consideration along with 1% poundage, aggregating to Rs.21,32,000/-, to the Recovery Officer.

The petitioner claims that he and his family members visited the subject plot on 10.01.2003 and found that a board had been erected thereon, purportedly by the Hyderabad District Collector, claiming that title to the land was in dispute in Land Grabbing Case No.1 of 2003. The petitioner thereupon addressed letter dated 15.01.2003 to the Recovery Officer and requested him to issue appropriate clarification as to whether there was a cloud on the title to the said plot. The Recovery Officer failed to give a clarification and the petitioner issued reminder letter dated 23.05.2003 requesting him again to give a clarification in terms of the earlier letter dated 15.01.2003. It was only on 05.08.2003 that the Recovery Officer issued a notice calling upon the petitioner to pay the balance sale consideration, failing which the sale would be cancelled. On 18.09.2003, the Recovery Officer suo motu directed the petitioner to pay the balance sale consideration of Rs.61,50,000/- on or before 16.10.2003. The petitioner then paid the said amount, duly acknowledged by the Recovery Officer under receipt dated 13.10.2003. This amount was accepted by the Recovery Officer subject to the outcome of L.G.C.No.1 of 2003 pending before the Special Court constituted under the Andhra Pradesh Land Grabbing (Prohibition) Act, 1982. Further, by order dated 23.06.2004, the Recovery Officer accepted the request of the petitioner and per