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Wins Over Government Dues: Quashes Land Auction Sale
In a significant ruling reinforcing the primacy of secured creditors under the , the has quashed a state-conducted auction of land that was already mortgaged to . The Division Bench of Justices Manish Pitale and Shreeram V. Shirsat held that merely attaching property for government dues without following the required does not give the State over a .
A Battle of Priorities: vs. State
The case pitted the , which had extended financial facilities to a borrower in 2007 secured by of land bearing old Survey No. 46/1/2 (renumbered as Survey No. 43/1/B), against the . The State sought to recover ₹2.68 crore owed by the borrower to the , as . The Tahsildar conducted an auction on , and when no third-party bids came in, the Talathi purchased the land on behalf of the Government for Re. 1, with a later recording the Government as occupant.
The bank, which had already initiated — issuing a Section 13(2) notice on , and a on — challenged the auction. It argued that as a , it held a prior and that gave it over all government dues. The bank also noted that the relied upon by the State did not even describe the specific property as having been attached.
The Borrower’s Default and Dual Recovery Actions
The borrower’s account was classified as a on . The bank proceeded under the , eventually selling the property to and in . However, when it came to handing over possession, the bank discovered that the State had already auctioned the land and mutated it in its own name.
The State authorities argued that they had followed due process under the and the . They claimed that after notice and seizure, the property was put to auction. The Tahsildar’s affidavit, however, was conspicuously silent on whether the claim had been registered with or whether the required proclamation — including beating of drum and affixing notices — had been carried out.
Court’s Scrutiny: Without Proclamation
Relying heavily on the Full Bench decision in , the court examined the procedural requirements for recovery under the MLR Code. The Full Bench had held that simply ordering an is not enough; a proclamation must be issued in the prescribed form and made public before any sale.
In the present case, the court observed that the State’s affidavit did not indicate any steps beyond . “The affidavit is conspicuously silent about any registration. The affidavit in reply also does not indicate any further action taken beyond the of the property, like beating of drum or other customary mode or its copy being affixed on some conspicuous part of the secured asset and also on the notice board of the concerned Talathi office,” the judgment noted.
Key Observations from the Bench
The court crystallized its reasoning in a crucial passage:
“By simply attaching the property and taking no steps towards proclamation in the manner as required, for recovery of dues, would not give to the said dues over the dues of the like the petitioner under the provisions of the .”
It further held that the or shown by the State could not prevail over the bank’s secured , and that the benefit of the Full Bench judgment squarely applied to the petitioner.
Final Verdict: Auction Quashed, Title Restored
The court allowed the in terms of prayer clauses (a) and (b), quashing the auction sale and directing the State authorities to restore control and possession of the land to the bank. It also directed the deletion of No. 1959 dated , which recorded the in the occupant’s column, within four weeks.
Importantly, the court clarified that its ruling does not bar the State from recovering its dues through other means. If any surplus remains after the bank’s dues are satisfied, the bank must notify the State, which can then claim the residual proceeds. The State is also free to proceed against other assets of the borrower in accordance with law.
The judgment underscores that for a government claim to prevail over a ’s , mere is insufficient — the full must be followed, and registration with remains a critical safeguard.
