Seth Banarsi
Dass Vs. The District Magistrate and Collector, Meerut & Ors [1996] INSC
219 (8 February 1996)
Manohar
Sujata V. (J) Manohar Sujata V. (J) Punchhi, M.M. Mrs. Sujata V.Manohar, J.
CITATION:
1996 SCC (2) 689 JT 1996 (3) 1 1996 SCALE (1)740
ACT:
HEAD NOTE:
The
original appellant Seth Banarasi Dass was the lessee of S.B. Sugar Mills, Bijnor
in the State of Uttar
Pradesh. In respect
of sugarcane cess, purchase tax and other Government dues of S.B. Sugar Mills, Bijnor,
the Collector, Bijnor issued a recovery certificate for Rs. 61,48,674.21
against the appellant in his personal capacity. The appellant was the owner of
94,320 equity shares of the face value of Rs.10/- each and 2,260 preference
shares of the face value of Rs.100/- each in M/s.Jaswant Sugar Mills Ltd., Meerut.
The
Company Secretary of M/s.Jaswant Sugar Mills received a prohibitory order dated
21.12.1970 restraining him from permitting any transfer of 94,320 equity shares
and 2,260 preference shares held by the appellant in the said company. The
Company Secretary, by his letter dated 6th of February, 1971 addressed to the
Collector, informed him that on the date of the receipt of the prohibitory
order, that is to say, on 14th of January, 1971 only 25,150 equity shares and
2,260 preference shares stood in the name of the appellant. He further informed
the Collector by the said letter that these shares had been received by them
from Oriental Bank of Commerce Ltd., Meerut Cantonment for transfer in their
name, and that these shares were already pledged with the said bank. Copies of
the letters received by M/s.Jaswant Sugar Mills from the Oriental Bank of
Commerce Ltd. were also enclosed with the said letter.
Thereafter,
on 31.7.1972 a citation was issued by the Tehsildar, Meerut on the appellant
under Section 280 of the U.P. Zamindari Abolition and Land Reforms Act, 1950
calling upon him to pay a sum of Rs.50,42,523/- failing which his property,
inter alia, would be attached and sold. Thereafter, the appellant filed his
objections dated 8.11.1972 before the Sale Officer raising various objections
to the amount claimed and also pointing out that the shares for which notice of
auction was given were already pledged with the Oriental Bank of Commerce Ltd.,
Meerut and the Punjab Co-operative Bank, New Delhi. Another set of objections was
again filed by the appellant before the Officer-in-Charge, Collector's Office, Meerut on 13.8.1973. These objections,
inter alia, stated that the amount of Rs.61,48,674.21 mentioned in the recovery
certificate of the Collector of Bijnor was not outstanding; that a sum of
Rs.49,67,101.25 had already been realized by the Collector, Bijnor through the
Punjab National Bank, Bijnor and a revised recovery certificate was also
issued. He claimed that full recovery had been effected by then. He also
reiterated his objections to the sale of the said shares. None of these
objections were decided by the Collector and/or Sale Officer. In the meanwhile,
several attempts had been made to sell the said shares by public auction.
None of
these attempts, however, succeeded as nobody came forward to buy these shares.
On
24.11.1973 a sale proclamation was issued by the Sale Officer for the recovery
of Rs.61,48,674.21, fixing 2nd of January, 1974 as the date of the auction
sale. Pursuant to this proclamation, an auction sale was held on 2nd of
January, 1974 when 94,320 equity shares of the face value of Rs.10/- each and
2,260 preference shares of the face value of Rs.100/- each in M/s.Jaswant Sugar
Mills, Ltd. held by the appellant were auctioned for Rs.2,90,000/-. The highest
bid of Rs.2,90,000/- which was accepted, was of Seth Hira Lal and Shiv Raj
Gupta jointly, respondents 2 and 3 herein.
Out of
the total auction amount, a sum of Rs.75,000/- was deposited by the auction
purchasers with the Tehsildar, Meerut on the
date of the auction. On 5th of January, 1974 the auction purchasers wrote a
letter to the Sale Officer asking where they should deposit the balance amount.
As per the directions of the Sale Officer the auction purchasers deposited the
balance amount of Rs.2,15,000/- with the Tehsildar, Meerut on 7th of January, 1974.
On
11th of January, 1974 the appellant filed objections to the auction sale before
the Collector, Meerut. On 14th of January, 1974 the
Oriental Bank of Commerce also filed objections to the auction sale before the
Collector, Meerut. On 16th of January, 1974, the
District Magistrate, Meerut, passed an order declaring the
auction sale as invalid and setting aside the same. Thereupon, the auction
purchasers filed Writ Petition No.879 of 1974 before the High Court of
Allahabad challenging the order of the District Magistrate dated 16th of
January, 1974. The Collector, in the meanwhile, apparently having realised the
mistake committed by him, issued a notice to the appellant as well as to the
auction purchasers to appear before him on 13th of March, 1974. Thereafter, the
Collector heard the parties on various dates in August, 1974. Before he could
pass final orders, however, the appellant filed a writ petition being Writ Petition
No.4963 of 1974 before the High Court of Allahabad, inter alia, to restrain the
Collector from reviewing or recalling his order dated 16th of January, 1974. An
interim order to that effect was issued by the High Court. Both these petitions
were heard together and disposed of by a common judgment. The High Court has
upheld the validity of the auction sale held on 2nd of January, 1974. The
present appeals are from the judgment and order of the High Court in these two
writ petitions.
The
first contention of the appellant is to the effect that the auction sale is
invalid because the auction purchasers did not deposit the full purchase price
on the date of the auction sale. The auction sale was held under the provisions
of the U.P. Zamindari Abolition and Land Reforms Act, 1950. Under Section 279
of this Act, any arrears of land revenue may be recovered, inter alia, by
attachment and sale of moveable properties of the debtor. Under Section 282,
every attachment and sale of moveable property shall be made according to the
law in force for the time being for the attachment and sale of moveable
property in execution of a decree of a civil court. Under Section 341, unless
otherwise expressly provided, the provisions, inter alia, of the Code of Civil
Procedure, 1908 shall apply to the proceedings under this Act. It is not in
dispute that the attachment and sale of the appellant's shares had to be in
accordance with the provisions of the Civil Procedure Code. Order XXI Rule 77
provides for sale of moveable property by public auction. It provides:
"(1)
Where moveable property is sold by public auction the price of each lot shall
be paid at the time of sale or as soon after as the officer or other person
holding the sale directs, and in default of payment the property shall
forthwith be resold.
2. On
payment of the purchase money, the officer or other person holding the sale
shall grant a receipt for the same, and the sale shall become absolute."
Therefore, the officer conducting the sale has the power to grant time to pay
the price. In the absence of such facility being given, the auction purchaser
must pay the full price at the time of the sale, otherwise the property is
liable to be resold. Respondents 2 and 3 have produced the order of the Sale
Officer dated 2nd of January, 1974 where he has directed respondents 2 and 3 to
deposit one-fourth of the sale price, approximately, in the treasury forthwith.
This clearly implies that he has given time to the purchasers to pay the
balance amount. Respondents 2 and 3 accordingly deposited Rs.75,000/- on 2nd January, 1974. On 5th of January, 1974, the
Sub-Divisional Officer/Sale Officer directed the auction purchasers to deposit
the remaining amount in the treasury. 6th of January, 1974 was a Sunday.
On 7th
of January, 1974 the auction purchasers deposited the balance amount of sale
price in the sub-treasury of the Tehsil Meerut and a receipt was issued to them
by the Sub- Divisional Officer/Sale Officer. Therefore, the auction purchasers
have deposited the purchase price as directed by the officer holding the sale
and have also been issued a receipt for the same. The auction sale, therefore,
cannot be faulted on this ground.
The
second objection of the appellant, however, deserves to be accepted. It is
contended by him that two sets of objections were raised by him to the proposed
auction sale when the shares were attached. These objections to the sale were
pending when the auction sale took place.
These
objections go to the root of the liability of the appellant to pay the amounts
under the recovery certificate as well as to the saleability of the shares
proposed to be sold. These objections ought to have been adjudicated upon
before the auction sale. An auction which is held without deciding objections
to it is bad in law. Recovery proceedings are equivalent to execution
proceedings under the Civil Procedure Code. The objections to the attachment
and sale of the said shares were raised by the debtor. Under Section 47 of the
Civil Procedure Code, all questions arising between the parties relating to
execution, discharge or satisfaction of the claim were required to be
determined by the officer in charge of execution before proceeding with
execution by way of sale. The objections, for example, related to the amount
which is claimed in the recovery certificate. According to the appellant the
amount mentioned in the recovery certificate was not correct because subsequent
citation was for a different amount. The appellant had also claimed repayment
of various amounts. It was also pointed out by the appellant that the shares
were already pledged with the Oriental Bank of Commerce. Yet no notice was
given to the Oriental Bank of Commerce and the shares were purported to be sold
ignoring the pledge of the shares in favour of the Oriental Bank of Commerce.
We need not examine the merits of the objections raised by the appellant. But
it is important to notice that these objections were not decided prior to the
holding of the auction sale. The first respondent has given no explanation for
not deciding these objections earlier. In our view the High Court was not right
in observing that the objections could be decided at a later date even after
the sale of the shares to which the objections pertained. Proceeding with the
auction sale without adjudicating upon the objections is a material
irregularity which vitiates the sale. The appellant has thereby lost his
valuable right to have his objections adjudicated upon in accordance with law.
The objections were raised much prior to the auction sale and they ought to
have been decided before the auction sale took place. Failure to do so vitiated
the sale.
The
appellant has also contended that on 3.7.1971 Ordinance No.23 of 1971 known as
the U.P. Sugar Undertakings (Acquisition) Ordinance, 1971 was issued. As a
result, S.B. Sugar Mills was acquired and the appointed date for vesting of the
undertaking was 2nd of July, 1971. This Ordinance was replaced by U.P. Act
No.23 of 1971. The appellant contends that in view of the provisions of the
said Ordinance and the said Act, namely, the Uttar Pradesh Sugar Undertakings
(Acquisition) Act, 1971, the debts and encumbrances attached to the undertaking
are liable to be adjusted against the compensation determined in accordance
with Section 7 of the said Act. Reliance is placed on the first proviso to
Section 3 of this Act in this connection. It is the contention of the appellant
that the total compensation payable would be much larger than the revenue dues
of the undertaking in respect of which the shares of the appellant were
purported to be sold by public auction. Hence there was no necessity for
auction sale. This contention is raised for the first time before us. It was
not raised before the High Court. Nor is there any factual data in the records
before us which would go to show the quantum of compensation to which S.B.
Sugar
Mills would be entitled under the said Act. We, therefore, decline to examine
this submission which is raised before us for the first time.
However,
in view of our findings above, the appeals are allowed and the auction sale
held on 2nd of January, 1974 is set aside. Respondents 2 and 3 will be at
liberty to withdraw the purchase price deposited by them which, we are
informed, is invested in fixed deposits together with accrued interest thereon.
In the circumstances, there will be no order as to costs.
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