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M/s. Om Construction & Infrastructures v/s State of Maharashtra & Others

    Writ Petition No. 4612 of 2022

    Decided On, 06 May 2022

    At, High Court of Judicature at Bombay

    By, THE HONOURABLE MRS. JUSTICE REVATI MOHITE DERE & THE HONOURABLE MR. JUSTICE MADHAV J. JAMDAR

    For the Petitioner: Niranjan Mogre, Advocate. For the Respondents: R3, P.N. Joshi, Advocate, R1 & R2, A.I. Patel, Addl. GP a/w. R.P. Kadam, AGP.



Judgment Text

Madhav J. Jamdar, J.

1. The Petitioner is registered partnership firm and is in the business of construction and real estate development. The Petitioner by the present Writ Petition is seeking following reliefs:-

* Proceedings bearing Upset Price Fixation Application No.5/2021 be declared as illegal.

* The act of the Respondent No.3 in proceeding to auction/sale the Petitioner’s immovable property without complying with the provisions of Rule 107 (11) (d-1) of the Maharashtra Cooperative Societies Rules, 1961 (hereinafter referred to as “the said Rules”) is bad in law and liable to be set aside.

* Order dated 31st March 2022 passed in Upset Price Fixation Proceeding No.5-21/2022 be quashed and set aside.

* The auction notices dated 16th April 2022 and 3rd May 2022 be quashed and set aside.

2. The factual position necessary for the determination of the dispute between the parties is set out hereinbelow:-

(i) The Petitioner had availed loan amounting to Rs.1 Crore from the Respondent No.3-NDVS Bank Ltd., Nashik Road in the year 2014. For securing the said loan Petitioner has mortgaged certain properties. The Petitioner failed to pay due installments.

(ii) On 20th August 2018, Respondent No.3-bank filed recovery application under Section 101 of the Maharashtra Cooperative Societies Act, 1960 (hereinafter referred to as “the said Act”) for recovery of dues amounting to Rs.1,04,07,785/-.

(iii) Recovery Certificate dated 13th March 2019 was issued in favour of the Respondent No.3 by the Deputy Registrar Co-opeartive Societies (Parseva, Nashik).

(iv) Notice prior to attachment dated 30th March 2019 issued by the Special Recovery Officer of the Respondent No.3 was served on the Petitioner regarding attachment of the mortgaged properties of the Petitioner.

(v) On 14th May 2019, the mortgaged properties of the Petitioner were attached and accordingly public notice regarding attachment of said properties was published in news papers.

(vi) On 21st May 2019, the Respondent No. 3 filed Upset Price Fixation Application No.32/2019 with the Respondent No.2-District Deputy Registrar. By order dated 26th February 2020, the Respondent No.2 rejected said Upset Price Fixation Application No.32/2019 on the ground that there was huge difference in the valuation of the immovable properties in question submitted by the Respondent No.3 and the Petitioner.

(vii) Fresh Upset Price Fixation Application No.5/2021 was filed by the Respondent No.3-bank before the Respondent No.2. The Petitioner has raised contention in the petition that without taking into consideration, the factors mentioned in the order dated 26th February 2020 passed by the Respondent No.2 the fresh application was filed. The valuation of immovable properties was shown lesser to great extent as compared to the valuation mentioned in the Upset Price Fixation Application No.32/2019.

(viii) By order dated 31st March 2022, the Respondent No.2- District Deputy Registrar, Co-opeartive Societies, Nashik allowed the Upset Price Fixation Application No.5- 21/2022.

(ix) On 4th April 2022, notice before auction was issued by mentioning total dues as Rs.1,04,07,785/- plus Rs.96,87,836/- plus 15% interest from 21st April 2018.

(x) The auction notices dated 16th April 2022 and 3rd May 2022 were issued by the Respondent No.3-bank. The auction is scheduled on 17th May 2022 at 1.00 pm.

3. The affidavit-in-reply dated 6th May 2022 of Namdeo Sukhdeo Borade, Special Recovery Officer was filed on behalf of the Respondent No.3. In the said affidavit-in-reply following contentions are raised:-

i. The Petitioner is wilful defaulter and has been in arrears of large amount.

ii. This Writ Petition can be heard only by Single Judge and not by the Division Bench in view of the challenge raised in the Writ Petition. The Writ Petition challenging fixation of upset price is only an intermediate step for the purpose of deciding immediate amount for holding auction. By the said order no substantive rights are decided. It is only after the auction is held, the auction purchasers would indicate the offer. Therefore, the Writ Petition is not maintainable.

iii. While considering the upset price, adequate opportunity has been given to the Petitioner.

4. Heard Mr. Niranjan Mogre, the learned counsel appearing for the Petitioner, Mr. A. I. Patel, Additional G.P. alongwith Mr. R. P. Kadam, AGP for the Respondent Nos. 1 and 2 and Mr. P. N. Joshi, learned counsel appearing for the Respondent No.3-Bank.

5. Mr. Mogre, learned counsel appearing for the Petitioner raised three contentions:

(i) He submitted that the Respondent No.2 has fixed the upset price by the impugned order dated 31st March 2022 without taking into consideration earlier order dated 26th February 2022. He submitted that the Respondent No.2 while passing the impugned order dated 31st March 2022 has not taken into consideration all relevant factors and therefore, the said order is perverse.

(ii) He relied on the Rule 107 (11) (d-1) of the said Rules and contented that entire action of the Respondent No.3 in proceeding to auction/sale Petitioner’s immovable property is without complying with the said Rule and therefore, the same is bad in law.

(iii) He submitted that an amount of Rs.96,87,836/- mentioned in the auction notice is not the amount for which recovery certificate is issued and therefore cannot be included in auction notice.

6. Mr. Joshi, the learned counsel appearing for the Respondent No.3 submitted that in view of the reliefs sought in the Writ Petition, the same is required to be heard by Single Judge. He submitted that there is alternate remedy available to the Petitioner for challenging the impugned order. He submitted that for filing Revision under Section 154 of the said Act, the Petitioner has to make deposit of 50% of the amount with the society. He submitted that the bank has obtained a Recovery Certificate and therefore, no relief be granted. He submitted that Rule 107 (11) (d-1) of the said Rules is substantially complied with and therefore, the Petitioner is not entitled for any relief. As far as the order passed in upset price fixation proceeding is concerned, Mr. Joshi submitted that in view of the COVID- 19 pandemic, upset price fixation is at lower rate. He submitted that properties will be sold by public auction and therefore, the auction will fetch the maximum market price. As far as the amount of Rs.96,87,836/- mentioned in auction notice, he submitted that admittedly the petitioner has availed the said loan and has not yet repaid the same. He therefore, prayed that Writ Petition be dismissed.

7. We will first consider the submissions of Mr. Joshi, the learned counsel appearing for the Petitioner that the matter pertains to the assignment of learned Single Judge. For considering this aspect it is necessary to examine the nature of reliefs sought. For considering the said submission, the prayer clause (a) and prayer clause (aa) are important and they are set out hereinbelow for ready reference:

“a) This Hon’ble Court may be pleased to call for record and proceedings in respect of the matter filed by Respondent No. 3 before Respondent No. 2, the Hon’ble District Deputy Registrar Co-operative Societies, Nashik being proceedings bearing Upset Price Fixation Application No. 5/2021 and after going through the legality, propriety and validity of entire proceedings, be pleased to declare that the said proceedings filed by Respondent No. 3 are illegal and be further pleased to quash and set aside the same;

aa) That this Hon’ble Court may be pleased to declare that the act of Respondent No. 3 in proceeding to auction/ sale the Petitioner’s immovable property mentioned in notice dated 14.05.2019 (Exhibit-G hereto) to the petition without complying with provisions of Rule 107 (11)(d-1) of Maharashtra Co-operative Societies Rules is bad in law and liable to be set aside;”

8. It is clear that the above prayers can be considered only by the Division Bench and not by Single Judge. A bare perusal of Rule 18 of Chapter XVII of the Bombay High Court Appellate Side Rules, 1960 shows that the applications under Articles 226 or under Article 227 of the Constitution of India or applications filed as applications under Article 227 of the Constitution of India read with Article 226 of the Constitution of India are to be placed before the Single Judge where the order passed by the Authorities/ Tribunals or Courts are challenged. It is true that the Petitioner has also challenged order dated 31st March 2022 passed by the Respondent No.2- District Deputy Registrar in Upset Price Fixation Proceeding No.5-21/2022, however, the Petitioner has sought above reliefs i.e. prayer clauses (a) and (aa), which cannot be considered by learned Single Judge. Thus, we reject the said contention advanced by Mr. Joshi, learned counsel for the Respondent No. 3.

9. We will now consider the contention of both the parties regarding order passed with respect to Upset Price Fixation Application. The Respondent No.3- bank applied to the Respondent No.2-District Deputy Registrar, Co-operative Societies by filing Upset Price Fixation Application No.32/2019 seeking fixation of upset price with respect to following three properties.

i. Land admeasuring 0 hector 20 R i.e. 2000 sq.mtrs. alongwith construction thereon out of Survey No.165(2/2) 5 of Tarwala, Dindori Road, Nashik.

ii. Land admeasuring 0 hector 27 R out of Survey No.305/1/A/1 of Pathardi, District-Nashik.

iii. Land admeasuring 0 hector 01 R out of Survey No.305/2 of Pathardi, District-Nashik.

10. The Respondent No.2 by order dated 26th February 2020 dismissed the said Upset Price Fixation Application No.32-19/2020. In the said order it is specifically observed that there is vast difference between the valuation by the bank and by the Petitioner. Another aspect taken into consideration by the Respondent No.2 is as follows:-

“The law laid down by the Hon’ble Supreme Court in the case of Ambati Narasayya V/s M. Subba Rao held that :In all execution proceedings, the Court has to first decide whether it is necessary to bring entire attached property to sale or such portion, thereof as may seem necessary to satisfy the decree-only such portion of the property should be sold, the consideration of which is sufficient to meet the claim in the execution petition-therefore, the impugned sale cannot be sustained.”

11. The Respondent No.3-bank filed fresh Upset Price Fixation Application No.5/2021. The said upset price fixation application was allowed by order dated 31st March 2022. The relevant portion of the said order dated 31st March 2022 is reproduced hereinbelow for ready reference:-

“LANGUAGE”

(Emphasis added)

12. A bare perusal of the said order clearly shows that the valuation arrived at by the Government Approved Valuer and produced by the Petitioner before Respondent No.2 is Rs.6,22,94,000/- for property at Sr. No.1 and for properties at Sr. No.2 and 3 is Rs.5,08,20,000/-. The impugned order clearly shows that the same is completely ignored by the Respondent No.2 while passing the impugned order dated 31st March 2022. Thus, the impugned order is perverse and liable to be quashed and set aside. There is vast difference between the upset price fixed by the Respondent No.2 and the valuation of the Government Approved Valuer as produced by the Petitioner. As per the valuation arrived at by the Government Approved Valuer as produced by the petitioner, the same is Rs.6,22,94,000/- (property No.1) and Rs.5,08,20,000/- (property Nos. 2 and 3) whereas the upset price as fixed by the Respondent No.2 is Rs.5,36,34,400/- (property No.1) and Rs.3,54,20,000/- (property Nos. 2 and 3). The said valuation arrived at by the Government approved valuer is not at all taken into consideration by the respondent no.2. There is vast difference between the same and upset price determined by the respondent no.2. The upset price plays very important role in the auction sale. Thus, the impugned order dated 31st March 2022 passed by the Respondent No.2 in Upset Price Fixation Application No.5-21/2022 deserves to be quashed and set aside.

13. The second contention raised by Mr. Mogre, the learned counsel appearing for the Petitioner is that the auction being conducted is contrary to the Rule 107 (11) (d-1) (i). The said Rule is reproduced hereinbelow for ready reference:-

“(d-1) (i) No sale of immovable property under these rules shall take place unless possession of the property is taken or caused to be taken.”

14. A perusal of the said Rule shows that no sale of immovable property shall take place unless the possession of the property is taken or caused to be taken. In the petition, it is specifically stated that notice prior to attachment dated 30th March 2019 was issued and thereafter the said properties are attached on 14th May 2019. Section 156 of the said Act is regarding Registrar’s power to recover certain sums by attachment and sale of property. Rule 107 is regarding procedure for attachment and sale of property under Section 156. Perusal of Section 156 r/w. Rule 107 clearly show that attachment of the property, sale of the property etc. are various steps contemplated in recovery proceedings. It is significant to note that Rule 107 (11) (d-1) do not contemplate that actual possession of the immovable property has mandatorily to be taken and thereafter, only sale to be conducted. What is contemplated is no sale of immovable property shall take place unless possession of the property is taken or caused to be taken. The various steps taken by the Respondent No.3-bank clearly show that they are in furtherance of taking actual possession of the mortgaged properties of the Petitioner and for sale of the same and therefore, the requirement of said Rule that no sale of immovable property shall take place “unless possession of the property is taken or caused to be taken” is complied with.

15. Section 156 of the said Act inter alia contemplates that to recover the due amount as more particularly set out in the said Section the property can be subjected to the attachment and sale or by sale without attachment of the property in question. Rule 107 (11) (d-1) on which Mr. Mogre, the learned counsel appearing for the Petitioner has heavily relied is reproduced hereinbelow for ready reference:-

“107 (11) In the attachment and sale or sale without attachment of immovable property, the following rules shall be observed:-….

[(d-1) (i) No sale of immovable property under these rules shall take place unless possession of the property is taken or caused to be taken.

(ii) For sale of attached immovable property, the Recovery officer shall take or cause to be taken possession, by delivering a possession notice prepared as nearly as possible in Form "Z" to these rules, to the judgement debtor and by affixing the possession notice on the outer door or at such conspicuous place of the property.

(iii) The possession notice as referred to in sub-rule (2) shall also be published in two leading newspapers, one in vernacular language having sufficient circulation in that locality, by the Recovery officer.

(iv) In the event of possession of immovable property is taken by the Recovery officer, such property shall be kept in his own custody or in the custody of any person authorised or appointed by him, who shall take as much care of the property in his custody as an owner of ordinary prudence would, under the similar circumstances, take care of such property.

(v) The Recovery officer shall take steps for preservation and protection of such property and insure it, if necessary, till it is sold or otherwise disposed of.

(vi) (a) Where the possession of the any property is required to be taken by the Recovery Officer under the provisions of this rule , the Recovery Officer may, for the purpose of taking possession, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction such property is situate to take possession thereof, and the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate shall, on such request being made to him take possession of such property and forward such property to the Recovery Officer.

(b) For the purpose of securing compliance of this sub-rule, the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary.

(c) No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this sub-rule shall be questioned in any court or before any authority.]”

16. The above rule contemplates two different steps namely (i) Attachment and (ii) Possession. Therefore, it is necessary to understand these two concepts. The attachment is defined in Black’s Law Dictionary (Eighth Edition) as the seizing of a person’s property to secure a judgment or to be sold in satisfaction of a judgment. The seizure is defined as the act or an instance of taking possession of a person or property by legal right or process.

17. The Supreme Court in (2006) 10 SCC 709 in the matter between Kerala State Financial Enterprises Ltd. vs. Official Liquidator, High Court of Kerala explained the concept of attachment in paragraphs 10 and 11 as follows:-

“10. The expression `attachment' has no definite connotation. An order of attachment is passed for achieving a limited purpose. It is subject to further orders as also provisions of other statute.

11. The word `attachment' would only mean `taking into the custody of the law the person or property of one already before the court, or of one whom it is sought to bring before it. It is used for two purposes : (i) to compel the appearance of a defendant; and (ii) to seize and hold his property for the payment of the debt. It may also mean prohibition of transfer, conversion, disposition or movement of property by an order issued by the court.”

(Emphasis added)

18. Thus, what is contemplated by “attachment” is taking control of the property in question. In this particular case order of attachment is already passed. Thus, in fact the property is in control of the Recovery Officer. Thus, passing of attachment order by the Recovery Officer of the Respondent No.3-bank completely fulfills the requirement of Rule 107 (11) (d-1) i.e. “possession of the property is taken or caused to be taken.” The further provisions of said rule as set out hereinabove specifying the manner in which possession is to be taken only shows the manner in which attachment order is to be implemented. This is very clear as Rule 107 (11) specifically contemplates attachment and sale or sale without attachment of immovable property. Therefore, there is no substance in the contention raised by Mr. Mogre, learned counsel appearing for the Petitioner that auction is being conducted contrary to Rule 107 (11)(d-i)(i).

19. The third contention raised by Mr. Mogre, the learned counsel appearing for the Petitioner is that an amount of Rs. 96,87,836/- mentioned in the auction notice is not the amount for which recovery certificate is issued and therefore cannot be included in auction notice. The recovery certificate dated 13th March, 2019 issued by the Respondent No. 2-Deputy Registrar, Co-operative Societies is for Rs. 1,04,40,555/-. However, auction notices dated 16th April, 2022 and 3rd May, 2022 in addition to said amount also mentions an amount of Rs. 96,87,836/-. It appears that till date no recovery certificate is issued for the said amount.

20. Mr. Joshi, the learned counsel appearing for Respondent No. 3-Bank submitted that, the Petitioner has also defaulted in repayment of the said amount and therefore, the same is included in the auction notice. He submitted that, the proceedings for issuance of recovery certificate are pending in appeal.

21. Section 156 of the said Act is concerning Registrar’s power to recover certain sums by attachment and sale of property. The relevant portion of Section 156 is reproduced hereinbelow for ready reference.

156 - Registrar's powers to recover certain sums by attachment and sale of property

(1) The Registrar or any officer subordinate to him and empowered by him in this behalf [or an officer of such society as may be notified by the State Government, who is empowered by the Registrar in this behalf] may, subject to such rules as may be made by the State Government, but without prejudice, to any other mode of recovery provided by or under this Act, recover—

(a) any amount due under a decree or order of a Civil Court obtained by a society;

(b) any amount due under a decision, award or order of the Registrar, [Co-operative Court] or Liquidator or [Co-operative Appellate Court];

(c) any sum awarded by way of costs under this Act,

(d) any sum ordered to be paid under this Act as a contribution to the assets of the Society;

[(e) any amount due under a certificate granted by the Registrar under sub section (1) or (2) of Section 101 or under sub-section (1) of Section 137 [or Section 154B-29];]

together with interest, if any, due on such amount or sum and the costs of process [according to the scales of fees laid down by the Registrar, from time to time,] by the attachment and sale or by sale without attachment of the property of the person against whom such decree, decision, award or order has been obtained or passed.

(Emphasis added)

The impugned auction notices are issued as per rules 107(11)(e) of the said Rules. Rule 107 lays down procedure for attachment and sale of property under Section 156. Section 156 gives power to the Registrar to recover the amount by the attachment and sale or by sale without attachment of the property of the person against whom such decree, decision, award or order has been obtained or passed as contemplated under Section 156 of the said Act. Admittedly, as far as said amount of Rs.96,87,836/- is concerned, no such decree, decision, award or order has been obtained or passed against the petitioner. Therefore, the said amount cannot be the subject matter of the auction.

22. As discussed hereinabove while passing the impugned order dated 31st March 2022 regarding fixation of upset price, the Respondent No.2 has not taken into consideration all the aspects and therefore, as the impugned order passed suffers from perversity as well as there is violation of principles of natural justice as all the factors/documents are not taken into consideration, we are setting aside the same and remanding the matter afresh to the Respondent No.2 for fixation of upset price.

23. The factual position on record clearly demonstrates that Recovery Certificate under Section 101 of the said Act has been issued against the Petitioner and the same is in force till date as regards said amount of Rs.1,04,07,785/-, Mr. Mogre, learned counsel appearing for the Petitioner has specifically stated that Petitioner is not in a position to deposit any amount whatsoever. In these circumstances, when we made it clear that we would entertain the petition only if the Petitioner hands-over the possession of the mortgaged properties at Sr. Nos.1 to 3 to the Respondent No.3, the Petitioner through his Advocate has agreed to handover the possession of the same. The Petitioner to handover the actual physical possession of all the properties at Sr. Nos. 1, 2 and 3 to the Respondent No.3-bank on or before 11.00 a.m. of 17th May 2022. On this condition only we are granting the reliefs in the manner as set out in the operative order. Admittedly recovery certificate is issued

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against the petitioner and the said amount is outstanding. 24. It is further significant to note that at this stage the amount to be recovered is Rs.1,04,07,785/- and interest on the same. Thus, it is clear that even if the upset price fixed by the impugned order dated 31st March 2022 is also taken into consideration then the property at Sr. No.1 is more than sufficient to satisfy the dues of bank. The judgment of the Supreme on which the Respondent No.2 has relied on while passing order dated 26th February 2022 in Upset Price Fixation Proceeding No.32/2019 shows that Supreme Court has clearly held that in all execution proceedings, the Court has to first decide whether it is necessary to bring entire attached property to sale or such portion, thereof as may seem necessary to satisfy the decree-only such portion of the property should be sold, the consideration of which is sufficient to meet the claim in the execution petition. Therefore, it is absolutely essential that respondent No.3-bank should only auction the property at Serial No.1 and after receipt of market price of the same, if any short fall is there then only property at Serial Nos. 2 and 3 can be auctioned. 25. In the light of the above discussion, we pass the following order:- ORDER i. This order is passed in view of the specific statement made by the Petitioner that the Petitioner will handover the actual physical possession of all the mortgaged properties to the Respondent No.3-bank as set out in para 9 on or before 11.00 a.m. of 17th May 2022. ii. The impugned order dated 31st March 2022 passed in Upset Price Fixation Application No.5-21/2022 is quashed and set aside and the said application is restored to file before the Respondent No.2. Both the parties to appear before the Respondent No.2 on 23rd May 2022 for deciding the schedule of hearing. The Respondent No.2 to decide said application as early as possible and in any case, within one month from 23rd May 2022. iii. The Respondent No.3-bank to take steps to auction the property of the Petitioner namely land admeasuring 0 hector 20 R alongwith construction thereon out of Survey No.165(2/2) 5 of Tarwala, Dindori Road, Nashik after the upset price is fixed by the Respondent No.2. If the auction sale of the said property fails to satisfy the dues of the Respondent No.3-bank as contemplated by Section 156 of the said Act then the Respondent No.3-bank is at liberty to auction other properties. iv. The auction notices dated 16th April 2022 and 3rd May 2022 are quashed and set aside. v. The Writ Petition is allowed in the above terms and disposed of accordingly.
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