Jit Ram and Others vs Khusia Ram and Others

G.S. Singhvi, J.—The facts necessary for deciding this Letters Patent Appeal, which is directed against the order dated 14.7.1989 passed by the learned Single Judge, are that the respondent-Khusia Ram, who is a displaced person from West Pakistan filed a claim in his capacity as Karta of Joint Hindu Family for the rural properties abandoned in West Pakistan. His claim was assessed for Rs. 24, 475/-. By an ex parte order dated 24.9.1966, the Settlement Officer rejected the claim of Khusia Ram under Rule 65 of the Displaced Persons (Compensation and Rehabilitation) Rules, 1955 (hereinafter referred to as ''the Rules of 1955'')- The appeal filed by him u/s 23 of the Displaced Persons (Compensation and Rehabilitation) Act, 1954 was accepted on 13.7.1967 by the Settlement Commissioner (exercising the powers of Chief Settlement Commissioner). The appellate authority directed the Processing Officer to pass necessary orders after hearing Khusia Ram. After keeping the matter pending for almost six years the Processing Officer passed the order dated 19.5.1973 and accepted the claim of Khusia Ram. In the meantime, the petitioner purchased 10 pieces of evacuee properties including properties No. 404-D and 407-D situated in Dadri, District Mahindergarh in the open auction held on 19.5.1959. Shri Khusia Ram submitted indemnity bond in lieu of the earnest money equivalent of the 10 per cent of the total auction price. This he did in terms of Rule 90(8) of the Rules of 1973. After about seven years of the submission of indemnify bond by the respondent No. 1, the Managing Officer (Sales) (Urban Land), Jalandhar, issued notice dated 30.9.1966 under Rule 65 of the Rules of 1955 requiring him to deposit the entire sale price of the disputed properties. The respondent No. 1 contested the notice on the ground that the appeal filed by him against the order cancelling his claim was pending. However, vide his order dated 17.11.1966, the Managing Officer rejected the respondents'' plea and ordered resale of the properties. On 13.2.1971 the disputed properties were re-auctioned and the highest bid given by the appellant was accepted. The writ petitioners (respondent No. 1 herein) filed objection petitions which were dismissed by the Settlement Officer (Sale) and the Assistant Settlement Commissioner. The Chief Settlement Commissioner rejected the second appeal filed by the respondent No. 1. However, in the revision petition filed by him, the Commissioner and Secretary to Government, Haryana, Rehabilitation Department, reversed the order passed by the Chief Settlement Commissioner and remanded the case to him for fresh decision. After remand, the Chief Settlement Commissioner decided the appeal filed by the respondent No. 1 afresh. Vide his order dated 13.11.1973 the Chief Settlement Commissioner again rejected the appeal of respondent No. 1 but at the same time he held that the auction purchasers i.e. appellants should file a revision petition before the Commissioner. That order was challenged by the appellant No. 1 in C.W.P. No. 4266 of 1973. The learned Single Judge accepted the writ petition and directed that the petition filed by the respondent No. 1 u/s 33 shall be decided afresh by the competent authority. In compliance of the direction given by the High Court, the Financial Commissioner heard the matter afresh and dismissed the appeal filed by the respondent No. 1 on 6.11.1986.

The learned Single Judge who heard the writ petition filed by the respondent No. 1 expressed the view that the order dated 17.11.1966 passed by the Managing Officer (Sales), Jalandhar, was void and as the other orders were based on the order of Managing Officer, the same were also liable to be nullified. He further held that, subsequent auction held 13.2.1971 was illegal and without jurisdiction. The learned Single Judge further held that the acceptance of the highest bid given by Khusia Ram in respect of the disputed properties became final as soon as he filed indemnity bond in form Appendix-XXX-A. The learned Single Judge concluded his order by making the following observations:-

"A valid sale of the properties in dispute having already taken place in favour of the petitioner 12 years earlier on 19th May, 1959, the properties in dispute were obviously not available for sale a second time on 13th February, 1971. It does not stand to reason how could the Rehabilitation Authorities order the properties to be resold without setting aside the previous sale in respect of the petitioner or any of the grounds set out in Rule 92 of the Displaced Persons (Compensation and Rehabilitation) Rules, 1955. Illegally or wholly without jurisdiction, second re-auction sale, conducted on 13th February, 1971 cannot be termed either as legal or legally enforceable because respondents 5 and 6 were the highest bidders at it and have thereafter deposited the entire sale price. Nullity would remain a nullity for all times to come, in spite of their alleged bona fide auction aforesaid.

Highest bid of the petitioner in respect of properties in dispute having been accepted by the Rehabilitation Authorities concerned vide their letters Annexures P- l and.P-2 and the petitioners having deposited earnest money equivalent to 10% of the bid amount through indemnity bonds in form Appendix XXI-A in respect of the properties in dispute in favour of the petitioner was complete in all respects and could legally be avoided (if at all) only in terms of Rule 92 of the Rules aforesaid.

Amongst the Rehabilitation heirarchy also Assistant Settlement Officer, Ambala, in his order dated 16th January, 1963 (Annexure P-6) Managing Officer (Sales) Jalandhar in his order dated 12th May, 1969 (Annexure P-7) and the Commissioner and Secretary to Government Haryana, in the Rehabilitation Department in his order dated 19th June, 1973 (Annexure P-11) tried to see reason and act in conformity with law but it so appears that the higher echelons therein overruled them by placing reliance upon Annexure P-5 as due authority permitting resale of the properties in dispute on 13th February, 1971. The basis of their findings in Annexures P-8, P-9 and P.14 having fallen through on account of being a nullity and also the resale held on 13th February, 1971 are all quashed. In result the writ succeeds and is allowed with costs."

First contention of Shri Hemant Kumar is that the learned Single Judge has seriously erred in invoking Rule 92 of 1955 Rules to sustain the allotment made in favour of respondent No. 1. He submitted that the offer of purchase made by the respondent No. 1 came to an end because he failed to pay the earnest money. The second contention urged by Shri Hemant Kumar is that the learned Single Judge has committed a patent illegality by setting aside the impugned orders ignoring the fact that the order dated 17.11.1966 was not under challenge. On the other hand, Shri P.C. Mehta argued that the learned Single Judge has rightly invoked Rule 92 for holding the order dated 17.11.1966 passed by the Managing Officer (Sales) was voidab-initio and, therefore, the cancellation of the bid given by the respondent No. 1 was not legally sustainable.

After having given our serious thought to the rival contentions, we agree with the learned Single Judge that the order dated 17.11.1966 passed by the Managing Officer (Sales) (Urban Land), Jalandhar cancelling the sale of properties in favour of the respondent No. 1 was liable to be declared as nullity and the learned single judge has not erred in upholding the claim made by the respondent No. 1.

Sub-rule (1), (8), (11), (12), (13) and (14) of Rule 90 of 1955 Rules which lays down the procedure for sale of property by public auction and Rule 92 which prescribes the procedure for setting aside a sale read as under :-

"90. Procedure for sale of property by public auction :- (1) Where any property is to be sold by public auction.

(a) The property shall be sold through firms of repute who have been approved as auctioneer by the Chief Settlement Commissioner or through the Officers appointed by the Central Government in this behalf.

(b) the terms and conditions on which auctioneers may be appointed shall, from time to time be determined by the Chief Settlement Officer.

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(8) The person declared to be the highest bidder for the property at the public auction shall pay in cash or by a cheque drawn on a scheduled bank and endorsed "good for payment upto six months" or in such other form as may be required by the Settlement Commissioner, immediately on the fall of hammer a deposit not exceeding 20 per cent of the amount of his bid to the officer conducting the sale and in default of such deposit the property may be resold.

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(11) Intimation of the approval of the bid or its rejection shall be given to the highest bidder (hereinafter referred to as auction purchaser) by registered post acknowledgement due and the auction purchaser shall where the bid has been accepted be required within fifteen days of the receipt of such intimation to send by the registered post acknowledgement due or to produce before the Settlement Commissioner or any other Officer appointed by him for the purpose a treasury challan in respect of the deposit of the balance of the purchase money :

Provided that the Settlement Commissioner or other Officer appointed by him in this behalf may, for reasons to be recorded in writing, extend the aforesaid period of fifteen days by such period, not exceeding fifteen days, as the Settlement Commissioner or such other officer may think fit:

Provided further that the period extended under the preceding proviso may further be extended (without any limit of time) by the Chief Settlement Commissioner.

(12) The balance of the purchase money may, subject to the other provisions of these rules, be adjusted against the compensation payable to the auction purchaser in respect of any verified claim held by him. In any such case the auction purchaser shall be required to furnish within seven days of the receipt of intimation about the approval of bid, particulars of the compensation application filed by him;

Provided that the Settlement Commissioner or any officer appointed by him in this behalf may, for reasons to be recorded in writing, extend the aforesaid period of seven days by such further period not exceeding fifteen days as the Settlement Commissioner or such other officer may deem fit:

Provided further that the period extended under the preceding provisions may further be extended (without any limit of time) by the Chief Settlement Commissioner;

(13) If the Regional Settlement Commissioner, on scrutiny of the compensation application of the auction purchaser finds that a further sum is due to make up the purchase price, he shall send an intimation to that effect to the auction purchaser calling upon him to deposit the balance in cash within fifteen days of the receipt of such intimation;

(14) If the auction purchaser does not deposit the balance of the purchase money within the period specified in sub-rule (11), or does not furnish particulars of his compensation application as specified in sub rule (12), or if the net compensation admissible to the auction purchaser is found to be less than the balance of the money and the auction purchaser does not make up the deficiency as provided in sub-rule (13), the initial deposit made by the auction purchaser in sub-rule (8) shall be liable to forfeiture and he shall not have any claim to the property.

xx xx xx xx xx 92. Procedure for setting aside a sale:- Where a person desires that the sale of any property made under Rule 90 or 91 should be set aside because of any alleged irregularity or fraud in the conduct of sale (including in the case of a sale by public auction in the notice of the sale) he may make an application to that effect to the Settlement Commissioner or any officer, authorised by him in this behalf to approve the acceptance of the bid or tender, as the case may be.

(2) Every application for setting aside a sale under this rule shall be made -

(a) Where the sale is made by public auction, within seven days from the date of the acceptance of the bid;

(b) Where the sale is made by inviting tenders, within seven days from the date when the tenders were opened.

(3) If after consideration of the facts alleged the officer to whom the application is made under this rule is satisfied that any material irregularity or fraud has been committed in the publication or the conduct of the sale, he may make an order that the property be re-auctioned or be resold by inviting fresh tenders, as the case may be;

Provided that no sale can be set aside under this rule unless upon the facts proved such officer is satisfied that the applicant has sustained substantial injury by reason of the irregularity or fraud, as the case may be.

(4) Notwithstanding anything contained in this rule, the Settlement Commissioner may, of his own motion, set aside any sale under this chapter if he is satisfied that any material irregularity or fraud which has resulted in a substantial injury to any person has been committed in the conduct of the sale."

A careful reading of the rules quoted above shows that if a displaced person gives highest bid for the property sold at public auction and he has verified claim to his credit, then he can execute an indemnity bond in the form specified in Appendix XXX-A. If the bid is not to be accepted then the competent authority is required to give an intimation to the highest bidder by registered post. In case the bid is accepted, the balance of the purchase money can be adjusted against the compensation payable to the auction purchaser in respect of any verified claim. In that case the auction purchaser is required to furnish, within seven days of the receipt of intimation about the approval of bid, particulars of the compensation application filed by him. If on scrutiny, the Regional Settlement Commissioner finds that a further sum is due to make up the purchase price then he has to intimate the auction purchaser about the requirement of depositing the balance in cash. Sub-rule (14) of Rule 90 provides for the consequences which ensue if the auction purchaser fails to pay the balance money or to furnish particulars of his compensation application or fails to deposit the balance of the purchase money. Rule 92 lays down the procedure for setting aside the sale on the ground of any alleged irregularity or fraud.

Although, the learned Single Judge has relied on Rule 92 but, in our opinion, that is not of much help because sub-rule (14) of Rule 90 provides for the consequences of non-payment of the balance price etc. and re-auction of the property is the necessary concomitant of the failure of the auction purchaser to fulfil his obligation. However, this cannot lead to the conclusion that the order passed by the learned Single Judge suffers from an error of law requiring interference by the Appellate Bench. A short recapitulation of the facts shows that when the petitioner gave the highest bid for the properties No. 407-D and 404-D i.e. on 19.5.1959 and 7.9.1959 the claim of the respondent No. 1 stood duly accepted. The respondent No. 1 gave indemnity bond representing 10 per cent of the total amount of the auction price. The competent authority did not return the indemnity bond nor did it call upon the respondent No. 1 to deposit the sale price in cash. However, after the passing of ex-parte order dated 7.11.1966 by the Assistant Settlement Officer rejecting the compensation application of the respondent No. 1, the Managing Officer cancelled the bid given by the respondent No. 1. Unfortunately, for the respondent No. 1, the Processing Officer took almost six years to decide afresh the claim application filed by the respondent No. 1. Vide his order dated 9.5.1973, the Processing Officer accepted the application and revived the claim of the respondent No. 1. As a consequence, the disability suffered by the respondent No. 1 in the wake of order dated 7.11.1966 stood removed. Although the respondent No. 1 had brought it to the notice of the Managing Officer that his appeal against the order dated 7.11.1966 was pending but the Managing Officer ignored this fact and passed the order dated 17.11.1966. This, in our opinion, was wholly impermissible and in any case there was no justification for the official respondents to have re-auctioned the property after the Chief Settlement Commissioner had accepted the appeal filed by the respondent No. 1 against the order dated 7.11.1966. The settlement authorities could not have ignored the order passed by the Chief Settlement Commissioner. Thus we do not find any error of law in the order passed by the learned Single Judge.

However, we find merit in the submission made by Shri Hemant Kumar that the respondents No. 2 to 5 should be directed to refund the amount deposited by the appellants with interest. Once the auction held in favour of the appellants has been nullified by the Court, the appellants are entitled to the refund of the amount deposited by them along with interest.

In the result, the appeal is dismissed subject to the direction that the respondents No. 2 to 5 shall, within 3 months of the submission of certified copy of this order, refund the amount deposited by the appellants at the time of auction alongwith interest at the rate of 12% per annum from the date of deposit.