Nerpu Gundappa Poojary vs The State of Karnataka and Others

Jayant M. Patel, J.—1. The present appeal is directed against the order dated 27.06.2012 passed by the learned Single Judge of this Court in W.P. No. 1306/2007, whereby the learned Single Judge for the reasons stated in the said order has not interfered with the action under the writ jurisdiction.

We have heard Mr. A. Keshava Bhat, learned Counsel for the appellant, Mr. Y.D. Harsha, learned AGA for respondent Nos. 1 to 3, Mr. N. Sukumar Jain, learned Counsel for respondent No. 5 and Sri K. Ravishankar, learned Counsel for respondent Nos. 6 and 7.

The contentions raised on behalf of the appellant mainly were on three limbs:

"One was that the appellant as original petitioner being son of the lady who was conferred with the occupancy rights, had interest in the property and therefore, the original petitioner could not be non-suited by the learned Single Judge on the ground that he had no right to pursue the proceedings and only mother of the petitioner could pursue the proceedings.

The second limb of argument was that the mandatory procedure of Rule 38(5) read with Rule 38(2)(d) of The Karnataka Co-operative Societies Rules, 1960 (hereinafter referred to as the ''Rules'') was not followed.

The third contention was that the sale of the property is vitiated for the reason that it has been sold at a throw-away price and the property has been sold to one of the relatives of the former Secretary of the Society."

It was submitted that whether the petitioner is ready and willing to pay any amount towards the outstanding dues or towards the decree is irrelevant when it is enjoined upon the Recovery Officer to sell the property so as to fetch the maximum price and such could be ensured only if the procedure as provided under the rule of keeping time gap between the date of publication and auction is maintained.

The learned Counsel submitted that all such aspects are not considered and therefore the matter may deserve consideration. The learned Counsel has also relied upon the decision to which we shall be referring to at the later stage at the appropriate place.

Before we consider the submissions made by the learned Counsel for the appellant, it would not be out of place to mention that the occupancy rights of the land in question were conferred upon the mother of the original petitioner Smt. Poovamma Poojarthi, as per the certificate dated 20.03.1976 and as stated by the learned Counsel for the appellant, the age of the petitioner at the relevant point of time was 23. It is also undisputed position that the awards were passed against the appellant as well as the mother of the appellant and the wife of the appellant and in the transactions of loan, the properties in question were mortgaged. On 04.03.1996, the properties of the mother of the appellant were attached for the alleged non-payment of the loan. On 13.01.1998 the objections were filed by the mother of the appellant-petitioner. In the year 2000-2001, the awards were passed. The perusal of the order passed by the revisional authority, a copy of whereby is produced at Annexure ''A'' shows that the notices were given to the judgment debtor-mother of the appellant to pay the amount, but the amount was not paid. The public advertisement was given in the newspaper and thereafter the auction was held. It is true that the notices were dated 16.03.2002 and 21.03.2002 and the date of auction sale was fixed on 28.03.2002 at the different convenient times specified.

In the another advertisement dated 24.05.2002 issued in the daily newspaper Vijaya Karnataka'', auction sale was fixed on 30.05.2002 at different convenient times specified. It has also come on record that the valuation of the property was undertaken and as per the report of the valuer dated 28.05.2002, the property was valued at Rs. 5,15,000/-, whereas the auction amount for the sale of the property was realized at Rs. 5,85,000/-. After this auction sale, the objections were raised by the appellant under Rule 38(5)(a) of the Rules, claiming to have interest in the property, but the Recovery Officer had rejected the objections and the sale was ultimately confirmed. The appellant challenged the said action before the competent forum and ultimately upto the revisional authority and also before the learned Single Judge. The appellant did not succeed to get the sale set aside and under the circumstances, the present appeal.

We may record that it is not the case of the appellant that the appellant was ready and willing to pay the amount or the mother of the appellant was ready and willing to pay the amount by avoiding the sale of the property in question. On the contrary, at one point of time, the mother of the appellant gave in writing permitting sale of the property.

The learned Counsel contended that the mother of the appellant being illiterate, such should not go against her for waiver of the rights or otherwise. Even if we consider the said aspects leniently, then also, the factum of no money to be tendered cannot be disputed either by the mother of the appellant or the appellant himself. The same is coupled with the aspect that in the proceedings in which the sale was challenged, interim orders were passed on condition that the appellant should deposit a particular amount, but the appellant has not deposited the same and resultantly, the action has been taken by the respondents further, as if the sale is given effect to. It is also not the case of the appellant that because of earlier auction or noncompliance of provisions of keeping time gap of 30 days between the date of publication of the notice and the actual auction sale, the other buyers were available ready to offer higher price and they have been deprived of nor the appellant has come forward with a specific case that any person was ready to offer the higher price but for a shorter period of time or in any case, the period of time less than 30 days is offered, he has been deprived off as his offer for higher amount could not be considered. It is in this light of the facts and circumstances of the case coupled with the aspects as referred to hereinabove that the property which was valued as per the valuation report of the expert at Rs. 5,15,000/- is sold at Rs. 5,85,000/-, we need to further consider the matter.

Rule 38(5)(a) of the Rules, for ready reference read as under:

"38. Attachment and sale of immovable property:

5(a) At any time within 30 days from the date of the sale of an immovable property, the decree-holder or any person entitled to share in a rateable distribution of the assets or whose interests are affected by the sale, may apply to the Recovery Officer to set aside the sale on the ground of a material irregularity or mistake or fraud in publishing or conducting it.

Provided that no sale shall be set aside on the ground of irregularity or mistake or fraud unless the said Recovery Officer is satisfied that the applicant has sustained substantial injury by reason of such irregularity, mistake or fraud:

[Provided further where the purchaser is Government the sale will be confirmed,-

(a) after the expiration of sixty days where no application to have sale set aside is made under sub-rule (4); or

(b) after the expiration of ninety days where an application to set aside under sub-rule (4) is made but the balance of the amount due under the decree is not deposited within ninety days from the date of sale.]

(b) If the application be allowed, the said Recovery Officer shall set aside the sale and may direct a fresh one."

As per Rule 38(5)(a) of the Rules, the time has been given to apply to the Recovery Officer to set aside the sale to the decree holder or the person entitled for a share in the rateable distribution or the person who has interest and to be affected by the sale. But the ground of setting aside of the sale should be (1) a material irregularity or (2) mistake or (3) fraud in publishing or conducting it.

The proviso further makes it clear that no sale is to be set aside on the ground of irregularity or mistake or fraud unless the Recovery Officer is satisfied that the applicant (the objector) has sustained substantial injury by reasons of such irregularity or mistake or fraud. There is further proviso added which states that where the purchaser is Government, the sale will be confirmed after the expiration of the period of 60 days where no application to set aside the sale has been made or after expiry of the period of 90 days where the application has been made but the balance of the amount due under the decree is not deposited within 90 days from the date of the sale. It further provides that if the application is allowed, the Recovery Officer shall set aside the sale and may direct a fresh one.

The proviso casts out an exception and controls the power to set aside the sale by further clarifying that even if the ground of material irregularity or mistake or fraud is found but unless the Recovery Officer is satisfied that a substantial injury by the reasons of such irregularity or mistake or fraud is sustained by the objector, the sale shall not be set aside. Hence, we find that in every application when the sale is to be set aside, the condition by way of sine qua non would be that of sustaining of substantial injury by the reason of such irregularity or mistake or fraud.

Examining the facts of the case further, it is not the case of the appellant-petitioner that on account of the curtailment of the period between publication of the notice and the auction sale, any buyer who was otherwise available and ready to offer higher price than the auction price could not submit the offer. Further as recorded by us hereinabove, as against valuation of the property made by the expert-valuer at Rs. 5,15,000/- the property sold was at Rs. 5,85,000/-. If the aforesaid two aspects are considered, it cannot be said that any substantial injury is sustained by the appellant or any prejudice is caused substantially or financially to the appellant.

In view of the aforesaid circumstances, we find that the second limb of argument and rather principal contention based on Rule 38(5) of the Rules, cannot be accepted.

We may now refer to the decision upon which the reliance has been placed by the learned Counsel for the appellant during the course of the hearing. In case of A. Umesh S/o B. Monappa, being W.P. No. 23536/2005 decided by the learned Single Judge dated 12.01.2006, the question did not come up for consideration for considering the scope and ambit of the word "substantial injury" to be considered by the Recovery Officer as to the proviso to Rule 38 (5)(a). Further, in the facts of the said case, the property worth Rs. 30 lakhs was sold at Rs. 12,25,000/-. Such are not the fact situation in the present case and rather the property was sold at a higher price than the valuation made by the expert-valuer. Under these circumstances, we find that the said decision is of no help to the learned Counsel for the appellant.

As the above referred principal decision of learned Single Judge is of no help to the learned Counsel for the appellant, the subsequent decision of the Division Bench in case of K. Devadas Kumar v. A.Umesh and Others reported at ILR 2006 KAR 3076, cannot be applied to the facts of the present case and hence the said decision also would be of no help to the learned Counsel.

In the another decision of the learned Single Judge of this Court in case of Smt. Varijakshi Bhat v. State of Karnataka And Others reported at , 2009(4) KAR. L.J. 419, it is true that certain observations are made by the learned Single Judge at paragraphs 48 and 50 for interpretation of Rule 38(5) and the proviso thereto. With respect to the observations made by the learned Single Judge, we do not agree with respect to the view and the observations made by the learned Single Judge limiting the interpretation of the proviso to Rule 38(5) and the reason being that when proviso controls the power of the Recovery Officer for setting aside of the sale, upon requisite condition of sustaining of substantial injury, the same cannot be read to dilute or nullify its effect as against the other provision or the Rule. But at the same time, when any proviso is made under the statute, it is to be considered as controlling the operation of the principal provision and the restrictions so provided by the proviso is to be given effect to and there is no question of defeating the purpose of any statutory provision. Under these circumstances, we find that the said decision of the another learned Single Judge would be of no help to the learned Counsel for the appellant.

In the decision of another Division Bench of this Court in case of M/s. Doggalli Malkappa And Sons v. Shiva Shankari Bank Ltd., in W.ANo.464/2012, this Court specifically noted and rather took the judicial notice that the market value of the property could be Rs. 25,00,000/- as against auction sale was made for Rs. 11 lakhs. Such being the basic difference of the facts which are unavailable in the present case. As observed earlier in the present case, the market value as assessed by the expert-valuer was Rs. 5,15,000/- whereas the property was sold at Rs. 5,85,000/-. Hence, the said decision is of no help to the learned Counsel for the appellant.

In our view, even if we consider the principles observed by the Apex Court in case of S.J.S. Business Enterprises (P) Ltd., v. State of Bihar And Others reported at , (2004) 7 SCC 166 for exercise of the power in bona fide of the Recovery Officer or the financial institution, the present case is not such where the power could be said to be not exercising bona fide. In the present case, it could not be said that the powers have not been exercised in bona fide, since the property is sold at a higher price than the market value assessed by the expert-valuer. Hence, the said decision is of no help to the appellant.

The third limb of argument for vitiation of the sale also is without substance because the property is sold at a price of Rs. 5,85,000/- as against the market value assessed by the expert-valuer for Rs. 5,15,000/-.

The ground contended for sale of the property to the auction purchaser who is alleged to be the relative of the former Secretary of the Society, cannot be accepted in absence of any sufficient material produced before the lower authority nor specifically contended, except that at one point of time, the appellant wanted to implead the person concerned as the party which ultimately did not materialize. The contention may have some substance, had the property sold at a throw away price or at a much lower price in comparison to the market value. But such are not the fact situation. Hence under these circumstances, it is not possible for us to accept that the sale is vitiated.

In view of the aforesaid observations made by us on the principal and rather second limb of argument and coupled with the third limb of argument, we do not find that on merits there was a case to set aside the sale. Hence even if the contention of the appellant-petitioner which is first limb of argument is considered for the sake of examination that he could be said to be a person having interest in the property and the learned Single Judge could not have non-suited him on the said ground, such aspect would lose its efficacy and the same would be inconsequential. As we have observed earlier, the second and third limb of arguments are considered on the premise that the appellant-petitioner had locus to raise the objection, when even if the objections are considered and entertained, it was not a case where the Recovery Officer ought to have exercised the power to set aside the sale, more particularly when sustaining of the substantial injury by the objector was not satisfactorily demonstrated or is rather not satisfactorily demonstrated before the lower authority as well as before the learned Single Judge of this Court, we find that no useful purpose would be served in examining the question of locus as sought to be canvassed on behalf of the appellant-petitioner and thereafter to consider the merits of the other contention at the later stage.

In view of the above, we find that no case is made out for interference. Hence, appeal lacking merit is dismissed. Considering the facts and circumstances of the case, no order as to costs.

I.A. No. 1/2016 would not survive, in view of disposal of the main writ appeal. Hence, shall stand disposed of.