1. The Review petition has been filed with a prayer to review the order dated 04.12.2009 passed in O.J.C. No.872 of 2000 and for de novo hearing of O.J.C. No.872 of 2000 along with O.J.C. No.1545 of 1999 filed by the review petitioner.
2. While the Review petition was being heard, learned counsel for the parties appearing in the writ petitions were directed to make submission on merits, as the prima facie case for review of the order passed in O.J.C. No.872 of 2000 was made out by the petitioner.
3. The fact of this case in a nutshell is that the petitioner-Nakula Charan Gochhayat, who belongs to Scheduled Caste community, applied for a loan in the year 1986-87 to Jagatsinghpur House Building Cooperative Society Ltd., Jagatsinghpur (for short, ‘Society’) and availed a loan of Rs.38,000/- by mortgaging his homestead land and building constructed thereon. In order to avail the loan, he executed a mortgage deed dated 23.05.1986 in favour of the Society. As he defaulted in payment of instalment towards the loan amount, as per the terms of the agreement executed between the petitioner and the Secretary of the Society (O.P. No.1), the latter filed Dispute Case No.1353/87 before O.P. No.3-Assistant Registrar, Cooperative Societies, Jagatsinghpur (for short, ‘ARCS’) for realization of the defaulted amount and an award was passed against the petitioner. Since the petitioner did not make any payment pursuant to award, Execution Proceeding No.567/88-89 was initiated for realization of Rs.46,254.10. During pendency of the aforesaid Execution Proceeding, the petitioner filed a petition before the Grievance Cell of the Hon’ble Chief Minister of Orissa which was forwarded to O.P. No.3, before whom the said Execution Proceeding was pending. The E.P. Case was disposed of on 20.06.1992 with a direction to the petitioner to pay O.D. loan for Rs.10,560/- in monthly instalment of Rs.300/-. Assailing the said order, the petitioner preferred Revision Case No.26/94 under Section 112 of the Orissa Cooperative Societies Act, 1962 (for short, ‘Act’) which was also dismissed on 31.12.1996 on the ground of non-maintainability of the same. Being aggrieved, the petitioner again agitated the self-same grievance before the Registrar of the Societies in Revision Case No.3/97, which was also dismissed directing him to approach the appropriate forum. The petitioner thereafter moved the Orissa Cooperative Tribunal (for short, ‘Tribunal’) in T.A. No.10/97 and the same was dismissed vide order dated 07.01.1999. Due to the default of the petitioner in repayment of loan, the Society published an advertisement on 30.07.1994 in Oriya Daily ‘Dharitri” for sale of the property in question in public auction. Since no buyer came forward, the Society itself purchased the property of the petitioner at a valuation of Rs.90,205/- on 19.09.1994. Thereafter, on negotiation, the Secretary of the Society sold the property in question to O.P. No.4-Arendra Jena for a consideration of Rs.93,000/- and executed a registered sale deed in favour of O.P. No.4 on 11.10.1996.
4. Further case of the petitioner is that he has filed O.J.C. No.1545 of 1999 with a prayer to set aside the demand of the Society, auction dated 19.09.1994, confirmation of the said auction dated 01.07.1995 and sale certificate issued on 19.09.1995 and to set aside the order of the Tribunal dated 07.01.1999 passed in T.A. No.10 of 1997. While the said writ petition filed by the petitioner was pending, O.P. No.4-third party purchaser filed O.J.C. No.872 of 2000, with a prayer to direct the Society to handover vacant possession of the property in question in his favour free from all encumbrances within a stipulated period. This Court by an order dated 04.12.2009 directed O.P. No.3- ARCS to issue necessary writ of delivery of possession of the property and also directed the Superintendent of Police, Jagatsinghpur to grant necessary police assistance in order to avoid breach of law and order situation at the time of taking delivery of possession of the property. After knowing about the order dated 04.12.2009, on 28.01.2010, the petitioner requested the O.P.- authorities to wait for a month and also filed Misc. Case No.54 of 2010 on 09.02.2010 along with Misc. Case Nos.57 and 58 of 2010 for condonation of delay in filing Misc. Case No.54 of 2010 and stay of the order dated 04.12.2009 respectively. However, this Court vide order dated 16.02.2010, dismissed the said Misc. Case No.54 of 2010 granting liberty to the petitioner to work out his remedies in accordance with law. Hence, the present Review Petition.
5. Learned counsel for the review petitioner, Mr.Dash vehemently argued that the petitioner being a ‘Doma’ belongs to Scheduled Caste community. He availed the loan of Rs.38,000/-. The first instalment of the loan amounting to Rs.7,600/- was disbursed to the petitioner on 28.06.1986 and Rs.30,400/- was disbursed on 01.08.1986 towards 2 nd and 3 rd instalment with 13.5% interest per annum repayable in forty consecutive half-yearly instalments at the rate of Rs.950/-. Thus, twenty years time was allowed to clear up the loan which was to complete in the year 2006. Against the said loan, the petitioner mortgaged his homestead land and building by executing a bond on 23.05.1986. With the loan amount, he has constructed the building over an area of 1000 Sqft. However, due to petitioner’s misfortune, he could not repay the installments regularly. His misfortune started with the death of his mother on 14.02.1987. Though he gave marriage of his daughter on 23.06.1988, she was drove out of by her husband and divorced in the year 1989. On 18.04.1989 elder son of the petitioner fell down in the well and expired. On the next day, i.e. 19.04.1989 due to insect bite to the eyes of the petitioner, he became sick and admitted into S.C.B. Medical College and Hospital, Cuttack. Due to the serious illness of his wife she was bedridden from 1987 to 1992. On 10.02.1993, his minor daughter was kidnapped from School at Alana hat. These are all matters of record. Due to set fire to his house on 08.02.1993, the kitchen and store rooms were completely burnt and other portion of the house was damaged. Further, due to the massive flood occurred on 14.07.1994 the entire area including the residential house of the petitioner was submerged.
6. The petitioner raised his grievance in Dispute Case No.1353 of 1987 in the Court of the ARCS but in that case an ex parte award was passed and the Society filed E.P. Case No.567 of 1988-89. Annual income of the petitioner was Rs.4,500/- against the loan of Rs.38,000/-. He has repaid about Rs.90,000/- in 20 years. Filing of Dispute Case No.1353 of 1987 was not maintainable as the petitioner was not a defaulter in the year 1987. When the petitioner approached the Grievance Cell of the Hon’ble Chief Minister, direction was given to the ARCS to reconsider the case of the petitioner and accordingly the ARCS passed an order to pay Rs.10,560/- in 36 monthly installments at the rate of Rs.300/- per month. The petitioner thereafter started to pay the said installments in spite of his misfortunes. After the order dated 20.06.1992, the petitioner arranged a cash of Rs.600/- and when wanted to pay, the Secretary of the Society refused to accept the same. Finding no other alternative, the petitioner sent an amount of Rs.600/- by way of money order vide receipt No.1827 dated 11.07.1994, but the same was not accepted. Similarly, a Demand Draft of Rs.600/- was sent by regd. post which the Secretary of the Society also returned to him by post. Thereafter, the petitioner received a demand notice from the Society on 31.03.1994 for Rs.83,342/- as calculated on 01.01.1994 and the petitioner was intimated that if the said amount would not be paid his house will be auctioned. On receiving said demand notice, petitioner filed Revision Case No.26/94. The said Revision Case was dismissed on 31.12.1996 on the ground of maintainability. Thereafter, the petitioner filed T.A. No.10/97 in the Tribunal on 20.03.1997. On 07.01.99, the Tribunal dismissed the Appeal No.10/97 without appreciating the facts of the case in proper perspective, upheld the order of the Sale Officer as well as sale conducted and confirmed by the Principal Officer, ARCS on 01.07.1995 and the sale certificate issued on 19.09.1995 in favour of the decree-holder Society for Rs.90,805/- as no other bidder came up to participate in the auction to purchase the mortgaged property. Subsequently, the said property was sold to O.P. No.4-Arendra Kumar Jena for Rs.93,000/-.
7. It is further submitted by the petitioner’s counsel that no reasonable opportunity of hearing was afforded to the petitioner and the procedures laid down in Rule 123 and Rule 124 of the Orissa Co-operative Societies Rules (hereinafter called as the “Rules” in short) were not followed before selling the property of the petitioner to O.P. No.4. Therefore, it is contented that sale confirmed in favour of O.P. No.4-Arendra Kumar Jena is illegal and void. The Secretary of the Society has committed an error in refusing to receive the money order and bank draft. While the ARCS being the Principal Officer vide order dated 20.06.1992 allowed the petitioner to pay the balance amount of Rs.10,560/- in 36 installments at the rate of Rs.300/- per month, it is very surprising how the said balance of Rs.10,560/- was inflated to Rs.83,342/- on 01.01.1994 within a period of one and half years. This conduct of the O.P.-Society is enough to show how it has harassed the petitioner.
In support of his contention, learned counsel for petitioner relied upon a judgment of this Court in Kartika Kissan v. State of Orissa & Ors., 2010 (I) OLR 947. When a loan of Rs.38,000/- was taken in the year 1986 and repayment time was allowed 20 years with 13.5% interest per annum the O.P.-Society has committed an error in filing the dispute case in the year 1987, though the petitioner was not in default. Though the payments were made, same were not taken into account and the amount of outstanding dues the same was not reduced. With a mala fide intention, the petitioner’s land and building was sold to O.P. No.4 without any public auction. The Tribunal’s finding in its order that there was proper compliance of all procedure in conducting the public auction for sale of the property is an error of law, as the same relates to movable property. The market value of the property of the petitioner is worth Rs.8 to 9 lakhs as per Annexure-10, which has been illegally given to the said Society at Rs.90,805/-. Sale of the petitioner’s property to O.P. No.4 on negotiation by the Society at Rs.93,000/- speaks volumes of illegal activities of the O.P.- Society. The confirmation of sale of the property in favour of opposite party No.4 is the outcome of fraud and collusion and therefore, it being illegal and void is liable to be set aside.
8. Mr.Mishra, learned counsel appearing for O.P.-Society submitted that the petitioner is a chronic defaulter in repaying the loan advanced to him by the Society. Secretary of the Society proceeded with the E.P. Case against the loanee. When the bidder did not turn up due to various reasons, the sale of the mortgaged property was adjourned from time to time and in compliance of the provisions of Rule 108 of the Rules fresh proclamation has been issued and ultimately, when no bidder turn up on 19.09.1994, the mortgaged land and building was sold to the decreeholder Society for Rs.90,805/-. The sale of the property of the petitioner has been confirmed by Principal Officer-ARCS on 01.07.1995.
Subsequently, the Society sold the property to one Arendra Kumar Jenaopp. party No.4. It is the case of the Society that in spite of opportunities given to the petitioner, he did not avail the same to settle the loan amount and therefore, the Society was compelled to put the property to sale.
Therefore, it cannot be said that no notice was given to the Review petitioner in E.P. Case. Relying upon Section 103(4) of the Act read with Schedule ‘I’ attached to the Act, Mr.Mishra vehemently argued that if the petitioner was in any way aggrieved with the action of the Society in selling his immovable property within 30 days of such sale, he could have applied to the Auditor General to set aside the sale of the property on the ground of material irregularity, or mistake or fraud. According to Mr.Mishra, there is no infirmity and illegality in the action of Society in selling the property of the petitioner to the 3 rd party, opposite party No.4-Arendra Kumar Jena as well as in the order passed by the Tribunal and therefore, there is no need to quash the same as prayed by the petitioner.
9. Opposite party No.3-Asst. Registrar, Co-operative Societies, Jagatsinghpur Circle, Jagatsinghpur in his affidavit dated 10.11.2000 stated that on 19.09.1994, the auction was held for sale of the property of the loanee-petitioner. Since, no bidder came forward to take part in the auction for the immovable property along with building of the petitioner, opposite party No.3-Asst. Registrar as the Principal Officer issued sale confirmation certificate under Section 114(1) of the Act, 1962 in favour of opposite party No.1-Secretary of the Society for Rs.90,805/-. The third party purchaser purchased the said land and building from opposite party No.1-Secretary on 11.10.1996 for Rs.93,000/- vide Registered Deed No.1367 dated 11.10.1996 in the Sub-Registrar Office, Devidol.
10. Mr. K.R.Mohapatra, learned counsel appearing for the 3 rd party purchaser-A.K.Jena supported the stand taken by the Society and vehemently argued that there is no illegality or infirmity in the action taken by the Society in selling the property of the petitioner to opposite party No.4. Pursuant to sale, he has taken delivery of possession of the property. Since the sale has been completed and possession of the property has been taken by the 3 rd party purchaser, this Court should not set aside such sale by exercising its discretionary and supervisory power under Articles 226 and 227 of the Constitution of India.
11. On the rival factual and legal contentions urged on behalf of the parties, the questions that fall for consideration by this Court are as follows:-
(i) Whether in the facts and circumstances, a case for review of order dated 04.12.2009 passed in OJC No. 872 of 2009 is made out?
(ii) Whether before selling the property of the petitionerloanee to opposite party No.4-3 rd party purchaserArendra Kumar Jena, the statutory provisions of the Act and Rules were duly complied with?
(iii) Whether the action of opposite party No.1-Secretary, Jagatsinghpur Sub-Divisional House Building Cooperative Society Ltd. in retaining the property in its favour for the reason that no bidder came forward in the public auction and further in entering into an agreement with the 3 rd party purchaser on 20.09.1994 to sell the property of the petitioner without putting the property in question to public auction and also before issuance of the sale certificate by opposite party No.3 in favour of opposite party No.1 is collusive and fraudulent?
(iv) Whether noncompliance of statutory provisions and adoption of fraud and collusion by opposite party No.1- Secretary while dealing with the property of the petitioner vitiate the confirmation of the sale made in favour of opposite party No.4-3 rd party-purchaser?
(v) What order?
12. Question No.(i) relates to review of order dated 04.12.2009 passed in OJC No. 872 of 2009. Though the scope of review of an order passed by this Court is limited, in the instant case, we find that the impugned order was passed ex parte against the review petitioner in OJC No.872 of 2009 in which various material facts were suppressed. In course hearing, we found that the property of the review-petitioner has been sold in flagrant violation of the statutory provisions and contrary to the settled position of law. It is further noticed that opp. party-authorities have sold the property of the petitioner in collusion with third party purchaser by committing fraud without putting the same in public auction, the details of which will dealt hereinafter.
In view of the above, the Review Petition is allowed as a case for review is clearly made out.
13. Question No.(ii) is as to whether the statutory provisions are complied with before selling of the property of the petitioner to the 3 rd party purchaser, Arendra Kumar Jena. In this connection, the relevant provisions of Rules 123 and 124 of the Orissa Co-operative Societies Rules, 1965 (in short, “Rules”) are extracted below:-
“123. Proclamation before Sale -- Proclamation of sale shall be published by affixing a notice in the office of the Principal Officer of the area at least 30 days before the date fixed for the sale and also by beat of drum or other customary mode in the said village on the date previous to the date of sale and on the date of the sale prior to the commencement of the sale. A copy of the proclamation may also be sent to the nearest Revenue Officer having jurisdiction over the village for affixing the same in the Notice Board. The proclamation shall state the time and place of sale and specify as fairly and as accurately as possible–
(i) the property to be sold;
(ii) any liability to which the property is subject;
(iii) the amount of the recovery of which the sale is ordered; and
(iv) any other particulars which the Sale Officer considers material for a purchaser to know in order to judge of the nature and value of the property
124. Sale to be by public auction – (1) When any immovable property is sold under the rules the sale shall be subject to the prior encumbrances of the property, if any. The sale shall be by public auction to the highest bidder provided that it shall be upon to the Sale Officer to decline to accept highest bid where the price offered appears to be unduly low or for other reasons to be recorded in writing and provided also that the Principal Officer or the Sale Officer may in his discretion, adjourn the sale to a specified day and hour, recording his reasons for such adjournment. Where a sale is so adjourned for a longer period than 15 days or where there is a service of short adjournments which taken in aggregate, amount to more than 15 days, a fresh proclamation under Rule 123 shall be made unless the defaulter consents to waive it in writing in the presence of two witnesses. The time of sale shall be fixed by the Principal Officer and the sale shall be held after the expiry of not less than 30 days calculated from the date on which notice of the proclamation was affixed in the office of the Principal Officer and the place of sale shall be the village where the property to be sold is situated or such adjoining prominent place of public resort as may be fixed by the Principal Officer of the area.
(2) The Sale Officer shall have the power to divide the property into lots if he thinks it necessary in the interests of the defaulter or the decree-holder. Where the property is divided into lot for purpose of being sold separately, it shall not be necessary to make a separate proclamation for each lot. When in the proclamation of sale, the separate lot are mentioned and the order of sale of each lot is mentioned, the Sale Officer shall not vary the lots in the sale and shall not make any departure in the order of the sale in the lots unless the decree-holder and defaulter give their consent in writing in the presence of two witnesses.”
14. Under the Orissa Co-operative Societies Rules, 1965 the interest of the defaulter is well protected. Rule 123 of the said Rules provides wide publication of proclamation of sale. As per the said Rules, proclamation of sale of the property shall be published by affixing a notice in the office of the Principal Officer of the area at least 30 days before the date fixed for sale and also by beat of drums or other customary mode in the said village on the date previous to the date of sale and on the date of sale prior to the commencement of the sale. It also further provides that a copy of the proclamation should be sent to the nearest Revenue Officer having jurisdiction over the village for affixing the same in the notice board to bring to the notice of the public that the property will be sold in public auction. The proclamation shall state the time and place of sale and other particulars about the property decided to be put in public auction. Rule 124 of the said Rules, 1965 provides, that where the price offered by the highest bidder appears to be low, the Principal Officer or the Sale Officer shall adjourn the date of sale to some other date and in case where the sale is adjourned for a period of more than 15 days, a fresh proclamation under Rule 123 shall be made unless the defaulter waives it in writing in the presence of two witnesses. Rule 124(2) empowers the Sale Officer to divide the property in lots in the interest of the defaulter and decree holder.
15. A conjoint reading of Rules 123 and 124 of the Rules make it amply clear that the legislative intent is to protect the interest of the defaulter, whose property is decided to be sold by all possible means. In other words, the Society must see that maximum price, should be fetched to the property which can be achieved only through wide publicity of the intended sale. Needless to say that all possible steps should be taken by the Sale Officer before depriving the defaulter of his right to the property, which is a constitutional right.
16. Needless to say that public money has to be recovered from the defaulters, who do not repay the loan amount to the financial institutions. This does not mean that financial institutions including the Society are at liberty to dispose of the secured asset of the defaulters either in an unreasonable or arbitrary manner and in flagrant violation of the statutory provisions of the Act and Rules and principles of natural justice.
17. In Lachhman Dass v. Jagat Ram & Ors., (2007) 10 SCC 448, the apex Court held that a right to hold property is a constitutional right as well as human right. A person cannot be deprived of his property except in accordance with provisions of the statute. (Also see Chairman, Indore Vikas pradhakaran v. Pure Industrial Coke and Chemicals Ltd. & Ors, AIR 2007 SC 2458 and Commissioner of Municipal Corporation, Shimla v. Prem Lata Sood & Ors., (2007) 11 SCC 40)
18. In Gajadhar Prasad & Ors., vs. Babu Bhakta Ratan & Ors., AIR 1973 SC 2593, it had been held that the estimated value of the property to be sold, must not accept merely the ipse dixit of one side and a fair valuation has to be made. More so, the judgment debtor is to be given a reasonable opportunity in regard to the valuation of his property sought to be sold, in absence thereof the sale of the mortgaged property would suffer from material irregularity and illegality where the judgment-debtor suffers substantial injury by the sale.
19. The apex Court in Chairman and Managing Director, SPICOT vs. Contromix (P) Ltd., AIR 1995 SC 1632 held as under:
“in the matter of sale of public property, the dominant consideration is to secure the best price for the property to be sold. This can be achieved only when there is maximum public participation in the process of sale and everybody has an opportunity of making an offer. Public auction after adequate publicity ensures participation of every person who is interested in purchasing the property and generally secures the best price. But many times it may not be possible to secure the best price by public auction when the bidders join together so as to depress the bid or the nature of the property to be sold is such that suitable bid may not be received at a public auction. In that event, any other suitable mode for selling of property can be by inviting tenders. In order to ensure that such sale by calling tenders does not escape attention of an intending participant, it is essential that every endeavour should be made to give wide publicity so as to get the maximum price”.
Thus, the condition precedent for taking away someone’s property or disposing of the secured asset is that the authority must ensure compliance of the statutory provisions of the Act and Rules. In the present case, nothing has been stated in the affidavit filed by opposite parties that the provisions of Rules 123 and 124 have been strictly complied.
20. In course of hearing of these petitions, we summoned the original records from the Society and ARCS. Order sheet entry dated 16.12.1991 reveals that the date of sale of the property was fixed to that date, but the sale was adjourned to 31.12.1991 at 11 A.M. at Jagatsinghpur Sub-Division Office of the Society due to want of bidder. There is nothing on record to show that prior to 16.12.1991 any step was taken to publish the proclamation of the sale of the property in terms of Rule 123 of the Orissa Cooperative Societies Rules. Again, the sale was fixed to 20.07.1994. The order sheet entry of 20.07.1994 reveals that several persons made application that they were not able to appear for bidding due to heavy flood and prayed one month’s time and on the same date the sale was adjourned to 19.08.1994 and direction was given to issue fresh notice. There is nothing on the record to show that any such fresh auction notice was issued and published as directed on that date. The entry of the order sheet of 19.08.1994 shows that since no bidder appeared the sale was adjourned to 19.09.1994 and direction was given to issue notice. The order sheet entry of 19.09.1994 shows that wide publication as to sale of the immovable property of the judgment-debtor has been made and despite wide publication, no bidder came forward to take part in the auction sale of the property like previous three dates. Therefore, the immovable property of the judgment-debtor was given to the decree holder Society for an amount of Rs.90,805/-.
21. Schedule of property sold to the Society shows that land in question pertains to Khata No.117, Plot No.367, area AC.0.10 decimal having a pucca building of three rooms with RCC roof. There is nothing on record to show that proclamation of sale has been published in the manner prescribed under Rule 123 of the Rules describing the detailed particulars of the property in question. Copy of the auction notice No.44 dated 19.08.1994 shows that copy of the said auction notice was issued and signed by the Sale Officer of the Society, but below the signature of Sale Officer, the copy of the said sale notice had been directed to be forwarded to Asst. Registrar, Jagatsinghpur/ N.Gochhayat/ Tahasildar, Balikuda/ B.D.O., Naugaon/Secretary, Alana Cooperative Society Ltd. G.P. for his information, with request to affix the notice in their notice board for wide publicity under the signature of Secretary of the Jagatsinghpur Divisional House Building Cooperative Society Ltd. The name of N.Gochhyat, as it appears has been inserted in different ink and handwriting. There is nothing to show that the copy of such auction notice issued by the Sale Officer was received by the authorities to whom copies had been directed to be issued and the said authorities in turn published the same as required under Rule 123. There is also no material to show that copy of the said sale notice was issued to and received by the loanee.
22. Therefore, we are of the view that auction notice fixing date of sale to 19.09.1994 has not been published as required under Rule 123 read with Rule 124 of the Rules. Similarly, from auction notice No.2 dated 20.07.1994 by which the date of sale of the property was adjourned to 19.08.1994 it appears that the name of the loanee N.Gochhayat has been inserted. In the advertisement dated 14.07.1994 in Oriya Daily “Dharitri” (at running page 33 of the record produced), the property of the loanee decided to be sold, only the description in respect of Mouza, Khata number, Plot number and area have been given without disclosing about the existence of pucca building having R.C.C. roof with three rooms and other details. Therefore, we are of the view that no publication or proclamation of the sale of the property was made as required under Rule 123 of the Rules.
23. In the instant case, if no bidder participated in the auction process held on 19.09.1994, it is the bounden duty of opposite party No.2- Sale Officer to go for second advertisement and the sale proclamation should have been made in terms of Rule 123 and the property in question should not have been sold to the opposite party No.1-Secretary for Rs.90,805/- as the same is in contravention of the provisions of Rule 124 and opposite party No.1 thereafter should not have sold the said property in favour of third party purchaser without putting the property in public auction which is the legal requirement.
24. Rule 124(2) also empowers the Sale Officer to divide the property in lots in the interest of the defaulter and decree holder. Such a power is vested with the Sale Officer only for the purpose of fetching best price of property. There is nothing on the record produced before us to show that any action has been taken in terms of Rule 124(2) when the land in question is of 0.10 decimals and only on a part of it, a building has been constructed over the plinth area of 1000 sq. ft. There is also nothing stated in the affidavit and also nothing available on the record to show how valuation of the property was made and on what basis the property of the petitioner-defaulter has been sold at Rs.90,800/- to the Society and the Society thereafter sold it for Rs.93,800/- to the 3 rd party purchaser.
25. In Gajraj Jain vs. State of Bihar & others, (2004) 7 SCC 151, the apex Court held that before putting the assets for sale the Financial Corporation must ascertain the market value of the property, assets should be sold on itemized basis or as a whole, whichever found to be more profitable, and bidders should know the details of the assets or itemized value. Property is to be sold for obtaining the market price and not merely for recovering the dues of the Corporation or any other subsequent chargeholder. In such a case auction of the property has to be held to obtain the best possible price for the mortgaged assets and the best possible price must, in the context, mean the fair market price. The authority, while assessing the fair market price, must act in accordance with the statutory rules and cannot be permitted to act unreasonably and arbitrarily. The reasonableness is to be tested against in the dominant consideration to secure the best price.
26. It is the bounden duty of opposite party-society to ensure that the property of the defaulter must be sold in such a manner so that it would fetch the best price.
27. In case the property is disposed of to a private party without adopting any other mode provided under the statutory rules, there may be a possibility of collusion/fraud and even if public auction is held, the possibility of collusion amongst the bidders cannot be ruled out. In State of Orissa & Ors., vs. Harinarayan Jaiswal & Ors., AIR 1972 SC 1816, the apex Court held that a highest bidder in auction cannot have a right to get the property or any privilege, unless the authority confirms the auction sale being fully satisfied that the property has fetched the appropriate price and there has been no collusion between the bidders.
28. The legal position remains that every statutory provision requires strict adherence by the Executing Authority for the reason the statue creates rights in favour of the citizens, and, if any order is passed de hors the same, it cannot be held to be a valid order and cannot be enforced. (See Swastik Agency & 2 Ors.-v-State Bank of India, Main Branch, Bhubaneswar & 3 Ors., 107(2009)CLT 250).
29. Thus, law requires that the valuation of the property decided to be put to sale must be done by application of mind for the purpose of fetching the best value of the property and to avoid the possibility of collusion of the bidders as well as with unscrupulous statutory authorities.
30. In view of the above, we are of the considered view that opposite party No.1-Secretary has sold the property of the petitioner to opposite party No.4 without adhering to and in flagrant violation of the provisions of Rules 123 and 124 of the Orissa Co-operative Societies Rules.
31. Question No.(iii) is as to whether the action of opposite party No.1 in selling the property of the petitioner to opposite party No.4 is the result of fraud and collusion.
Opposite Party No.1-Secretary in his affidavit dated 04.12.2009 stated that due to default in payment of loan, the property of the loaneepetitioner was put to public auction in E.P. Case No.567 of 1988-89 on 19.09.1994 by opposite party No.2-Sale Officer, Jagatsinghpur. It is further stated that the purchaser had written an application on 16.09.1994 under Annexure-A/1 to opposite party No.1-Secretary to purchase the house in question. As no bidder came to participate in the said public auction, opposite party No.1-Secretary purchased the house in question and sale certificate was issued in favour of opposite party No.1-Secretary dated 19.06.1996. On 20.09.1994, the third party purchaser made an agreement under Annexure-B/1 with opposite party no.1-Secretary for purchase of the house in question.
32. The above averments of opp. party No.1-Secretary clearly show how he was interested to sell the property of the petitioner in question in favour of 3 rd party purchaser without putting the same in public auction and much prior to issue of sale certificate in his favour on 19.06.1996 and hurriedly entered into agreement with the purchaser on 20.09.1994, who did not participate in the public auction held on previous date, i.e., 19.09.1994.
33. It is unfortunate to note that opposite party No.1-Secretary entered into an agreement with the 3 rd party auction purchaser on 20.09.1994 on the basis of his application made on 16.09.1994 under Annexure-A/1 to the affidavit dated 04.12.2009. The said application reveals that the 3 rd party purchaser made an application to opposite party No.1- Secretary stating that he had deposited a sum of Rs.93,000/- in Dena Bank, Naya Sarak Branch, Cuttack and he further requested opposite party No.1- Secretary to intimate the Branch Manager, Dena Bank to transfer the money to the account of Secretary, HBCS and only after deposit of the said amount of Rs.93,000/- in their account, opposite party No.1-Secretary would execute a registered sale deed in his favour. It is further shocking that on the basis of the said letter on the same day i.e. 16.09.1994, opposite party No.1- Secretary wrote a letter to the Manager, Dena Bank, Nayasarak, Cuttack to transfer an amount of Rs.93,000/- in favour of the Secretary to enable the Society to transfer the building in favour opposite party no.4-A.K. Jena although the public auction was scheduled to be held on 19.09.1994 in respect of the property in question. In the said letter, the Secretary also solicited an early action by the Bank. We are unable to understand how opposite party No.1-Secretary could write a letter to the bankers of opposite party no.4 on 16.09.1994 to transfer Rs.93,000/- from the account of opposite party No.4-purchaser to the account of the society to enable the society to sell the property of the petitioner to opposite party No.4, particularly when the auction in respect of the property in question had been scheduled to be held on 19.09.1994. Interestingly, only on 19.09.1994, the decree holder Society purchased the mortgaged property and the sale was confirmed by the Principal Officer, ARCS on 01.07.1995, i.e., much after the O.P No.1-Secretary wrote letter to the Banker of purchaser on 16.09.1994 to transfer Rs.93,000/- to the Society to enable the Society to sale the property of the petitioner to O.P. No.4. The above said facts revealed from the record speak volume of illegality/fraud committed by opposite party No.1 for achieving his vested interest in selling the mortgaged property in favour of opposite party No.4.
34. Admittedly the said applicant i.e. the present 3 rd Party Purchaser did not participate in the auction held on 19.09.1994.
Nevertheless, opposite party No.1-Secretary entered into an agreement under Annexure-B/1 with the said 3 rd party purchaser on 20.09.1994 that on receipt of the auction amount of Rs.89,375/- from the auction purchaser and confirmation from the Principal Officer, Co-operative Department, Jagatsinghpur Circle, the property in question along with the building would be transferred by opposite party No.1-Secretary to the auction purchaser through a registered deed and the possession of the property would be given within two months from the date of receipt of cash, failing which the entire amount would be returned to the auction purchaser.
35. The above sequence of events, the conduct of opposite party No.1-Secretary and the auction purchaser show how the property of the petitioner has been sold to the auction purchaser adopting unfair and fraudulent means without adhering to the statutory provisions. This also shows how opposite party No.1-Secretary was acting hand in glove with the 3 rd party purchaser and sold the property of the petitioner without putting the property in public auction before selling it to the 3 rd party purchaser. The actions of the Society and Executing Authority are certainly in flagrant violation of the statutory provisions of the Act, Rules and law laid down by the Apex Court in the cases referred to supra. No reply came forward from opposite party No.1-Secretary as to why before selling the property to 3 rd party purchaser, it was not put to public auction as statutorily required under Rule 124 of the Rules.
36. We are further shocked to note that the auction purchaserArendra Kumar Jena filed O.J.C. No.872 of 2000 suppressing various material facts including filing of O.J.C. No.1545 of 1999 by the petitionerloanee in which the Asst. Registrar, Co-operative Societies, Jagatsinghpur, the Secretary, Jagatsinghpur House Building Co-operative Societies Ltd. and opposite party No.4-Arendra Kumar Jena, village : Alana , P.S. Nuagaon, Dist: Jagatsinghpur have been arrayed as opposite party Nos.1,2 and 3 respectively. Though on 05.07.1999, O.P. No.3- third party purchaser appeared through Mr. Mishra in O.J.C. No.1545 of 1999, and produced copy of the judgment and order passed by this Court in O.J.C. No.5553 of 1997, the fact of filing and pending of the said O.J.C. No.1545 of 1999 before this Court was not brought by him to the notice of this Court on the date of hearing of O.J.C. No.872 of 2000 on 13.11.2009 and 04.12.2009. Similarly, as per office noting in O.J.C. No.1545 of 1999 M/s. Srinivas Mishra (2), S. Mantri, A.K. Mishra and A.K. Sharma, learned counsel have appeared for opposite party No.2-Secretary of the Jagatsinghpur House Building Co-operative Societies Ltd. by filing power dated 21.09.1999 and Misc. Case No.11255 of 1999 dated 21.09.1999 for orders. In spite of the same, on the date of hearing of O.J.C. No.872 of 2000 on 13.11.2009 and 04.12.2009 neither the 3 rd party purchaser nor the Secretary-Jagatsinghpur Co-operative Society has brought to the notice of this Court that the petitioner-loanee has filed O.J.C. No.1545 of 1999 and the same was pending before this Court. The orders dated 13.11.2009 and 04.12.2009 were passed after hearing learned counsel for the 3 rd party purchaser and Mr. A.K. Mishra, learned counsel appearing for SecretaryJagatsinghpur Co-operative Society but without hearing the petitionerloanee. By the said order, this Court directed the Secretary to take possession of the house from the petitioner-loanee and handover possession of the same to the 3 rd party purchaser. We deprecate such conduct on the part of the learned counsel, who are officers of the Court and required to give proper assistance to Court to pass just order on appreciation of facts and material evidence on record with reference to the law applicable to the case.
37. As stated in paragraph 21, a copy of the auction notice No.44 dated 19.08.1994 had been directed to be forwarded to the Assistant Registrar, Jagatsinghpur/N. Gochhayat/Tahasildar, Balikuda/B.D.O., Naugaon/Secretary, Alana Cooperative Society Ltd. G.P. for his information with request to fix the said notice in their notice board for wide publicity. But it appears that the name of N. Gochhayat-defaulter has been inserted in different ink and handwriting. Similarly in the auction notice No.2 dated 20.07.1994 by which the date of sale was adjourned to 19.08.1994, it appears that the name of loanee N. Gochhayat has been inserted.
38. The above fact situation shows that the sale of the property to 3 rd party purchaser is nothing but out of massive collusion of the Secretary of the Society and Purchaser and the whole transaction is without transparency.
39. Question No. (iv) is as to whether for non-compliance of statutory provisions and adoption of fraud and collusion by opposite party No.1-Secretary while dealing with the property of the petitioner the confirmed sale in favour of the 3 rd Party Purchaser vitiates.
40. It is the settled position of law that when the action of the State or its instrumentalities is not in accordance with the provisions of the Act, Rules or Regulations, the Court must exercise its discretionary and supervisory jurisdiction to declare such action to be illegal and invalid and grant consequential relief to a party for which he or she entitled to in law.
41. In Sirsi Municipality by its President, Sirsi -v- Cecelia Kom Francis Tellis, AIR 1973 S.C.855, the Supreme Court observed that the ratio is that the rules or the regulations are binding on the authorities. Whenever any action of the authority is in violation of the provisions of the statute or Rules the action is constitutionally illegal, it cannot claim any sanctity in law; and there is no obligation on the part of the Court to sanctify such an illegal act. Wherever the statutory provision is ignored, the Court cannot be a silent spectator to such an illegality and it becomes the solemn duty of the Court to deal with the persons violating the law with heavy hands. (See R.N.Nanjundappa v. T.Thimmaiah & Anr., AIR 1972 SC 1767, Sultan Sadik v. Sanjay Raj Subba & Ors., AIR 2004 S.C.1377).
42. In Navalkha & Sons vs. Sri Ramnya Das & Ors., AIR 1970 SC 2037, the apex Court while dealing with the confirmation of sale by Court held that there must be a proper valuation report, which should be communicated to the judgment debtor and he should file his own valuation report and the sale should be conducted in accordance with law and after confirmation of sale and issuance of sale certificate, Court cannot interfere unless it is found that some material irregularity and illegality in the conduct of sale of the property is committed. The Court further held that it should not be a forged sale.
In Valji Khimji and Company v. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd. & Ors., (2008) 9 SCC 299, the Court held that auction sale of the property should be set aside only if there is a fundamental error in the procedure of auction of the property e.g. not giving wide publication or on evidence that property could have fetched more value or there is somebody to offer substantially higher amount and not only a little over the auction price, that can by itself suggest that any fraud has been done in holding the auction property or involvement of any kind of fraud.
In FCI Software Solutions Ltd. vs. LA Medical Devices Ltd., & Ors., 2008 AIR SCW 5284, the Apex Court considered a case where after confirmation of auction sale it was found that valuation of movable and immovable properties, fixation of reserve price, inventory of Plant and Machineries had not been made in the proclamation of sale, nor disclosed at time of sale notice. Therefore, in such a fact-situation, the sale was set aside after its confirmation.
43. The apex Court in the cases of Dr. Rajbir Singh Dalal vs. Caudhari Devi Lal University, Sirsa & Anr., (2008) 9 SCC 284; and Divya Manufacturing Company (P) Ltd. & Anr., vs. Union of Bank of India & Ors., AIR 2000 SC 2346, and Valji Khimji and Company vs. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd. & Ors., (2008) 9 SCC 299, held that not giving wide publication of the auction notice itself is a good ground for quashing the confirmation of the sale of the property. In such fact situation, the auction purchaser-opposite party No.4 is entitled to refund the amount deposited by him.
44. When the statutory requirement under Rule 124 of the Orissa Co-operative Societies Rules is that the sale shall be by public auction to the highest bidder, opposite party No.1-Secretary cannot ignore such statutory mandate and sell the property to a 3 rd Party Purchaser by entering into an agreement contrary to Rule 124 of the said Rules.
45. Law is also well settled that when the statute provides for a particular procedure, the authority has to follow the same and is not permitted to act in contravention of the prescribed provisions. It has been hitherto uncontroverted legal position that where a statute requires to do a certain thing in a certain way, the thing must be done in that way or not at all. Other methods or mode of performance are impliedly and necessarily forbidden. The aforesaid settled legal proposition is based on a legal maxim “Expressio unius est exclusion alteris”, meaning thereby that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner and following other course is not permissible. (See Taylor v. Taylor, (1876) 1 Ch.D.426; Nazir Ahmed v. King Emperor, AIR 1036 PC 253; Ram Phal Kundu v. Kamal Sharma; and Indian Bank’s Association v. Devkala Consultancy Service, AIR 2004 SC 2615).
If the statute requires that the property of the petitionerdefaulter shall be sold in public auction following the procedure prescribed under Rules 123 and 124 of the Rules, 1965, the same ought not to be sold in any other manner.
46. Thus, before putting the property of a defaulter to auction, the authorities concerned have legal obligation to satisfy that the price fetched is reasonable and the same has been conducted giving strict adherence to the procedure prescribed by the Statute. If there is any material irregularity and illegality in conducting the sale that will vitiate the sale of the property. Therefore, the said sale can be set aside even after confirmation.
47. The apex Court in Shrisht Dhawan (Smt) vs. Shaw Bros., (1992) 1 SCC 534), held as under:-
“Fraud and collusion vitiate even the most solemn proceedings in any civilized system of jurisprudence. It is a concept descriptive of human conduct. Michael Levi likens a fraudster to Milton’s sorcerer, Comus, who exulted in his ability to, ‘wing me into the easy-hearted man and trap him into snares’. It has been defined as an act of trickery or deceit. In Webster’s Third New International Dictionary fraud in equity has been defined as an act or omission to act or concealment by which one person obtains an advantage against conscience over another or which equity or pubic policy forbids as being prejudicial to another. In Black’s Legal Dictionary, ‘fraud’ is defined as an intentional perversion of truth for the purpose of inducing another in reliance upon it to part with some valuable thing belonging to him or surrender a legal right; a false representation of a matter of fact whether by words or by conduct, by false or misleading allegations, or by concealment of that which should have been disclosed, which deceives and is intended to deceive another so that he shall act upon it to his legal injury. In Concise Oxford Dictionary, it has been defined as criminal deception, use of false representation to gain unjust advantage; dishonest artifice or trick. According to Halsbury’s Laws of England, a representation is deemed to have been false, and therefore a misrepresentation, if it was at the material date false in substance and in fact. Section 17 of the Contract Act defines ‘fraud’ as act committed by a party to a contract with intent to deceive another. From dictionary meaning or even otherwise fraud arises out of deliberate active role of representator about a fact which he knows to be untrue yet he succeeds in misleading the representee by making him believe it to be true. The representation to become fraudulent must be of fact with knowledge that it was false.”
48. In a recent decision, the apex Court in State of Orissa and Others vs. Harapriya Bisoi, (2009) 12 SCC 378 scathingly pulled up government officials for their involvement in dealing with government properties in illegal and collusive manner. [also see Kartika Kissan (supra)]
49. The Court cannot be a party to a case founded on massive frauds, illegalities and irregularities as fraud vitiates everything. The Court has a solemn duty to lift the veil to arrive at the truth.
50. In view of the above settled legal proposition laid down by the Apex Court in plethora of cases and that the property of the petitioner has been sold to opposite party No.4-Purchaser without adhering to the statutory provisions of the Rules and law applicable to the facts of the case and practising fraud as stated above on the petitioner, we have to set aside the sale of the property of the petitioner in favour of opposite party No.1- Secretary and in turn in favour of opposite party No.4 as the same is illegal and void ab initio in law.
51. Question No.(v) is what order? Law is well settled that the writ jurisdiction is discretionary in nature and must be exercised in furtherance of justice. The Court has to keep in mind that its order should not defeat the interest of justice nor it should permit an order to secure dishonest advantage or perpetuate an unjust gain or approve an order which has been passed in contravention of the statutory provisions. (See Champalal Binani v. CIT, West Bengal, AIR 1970 SC 645; K.D. Sharma v. Steel Authority of India Ltd. & Ors., (2008) 12 SCC 481.
In Jamshed Hormusji Wadia v. Board of Trusteees, Port of Mumbai & Anr., AIR 2004 S.C.1815, the apex Court observed that the Court is concerned with substantial justice and prevent to perpetuate grave injustice to parties and whenever the order is one which shocks the conscience of the Court or suffers on account of disregard to the form of legal process or violation of the principles of natural justice provided by the statutory provisions, the Court must interfere. The Court would never do injustice nor allow injustice being perpetuated just for the sake of upholding technicalities.
In Ashutosh v. State of Rajasthan & Ors., AIR 2005 SC 3434, the apex Court held that substantial justice must be given preference over technicalities and Court must do justice at all costs and at the same time the Court should not forget that justice should be tempered with mercy.
52. Law is well settled that every action of the State and its instrumentality should be fair, legitimate and above board and without any affection or aversion. (See Haji T.M. Hassan Rawther v. Kerala Finance Corporation, AIR 1988 SC 157; E.P. Royappa v. State of Tamil Nadu, AIR 1974 SC 555 and State of Andhra Pradesh & Anr., -vs- Nalla Raja Reddy, AIR 1967 SC 1458).
53. For the reasons stated above, all the proceedings initiated to put the property of the petitioner in public auction are liable to be quashed being in flagrant violation of the statutory provisions and we, accordingly, do so.
The sale of petitioner’s property by opposite party No.1 in favour of opposite party No.4-3 rd party purchaser is hereby set aside.
54. It would be appropriate for the concerned authority of the State to make a detailed inquiry into the matter as to who are those officers involved in selling the property of the petitioner in question to the third party purchaser without adhering to the statutory provisions and adopting fraud and unfair means and take necessary action against those persons.
55. The petitioner, who was illegally deprived of enjoying his property is entitled for rent and damages from both the Society and opposite party No.4. The rent for the period of deprivation should be calculated on the basis of rate prevailing in the market. We award Rs.50,000/- (rupees fifty thousand) only towards the damages. The amount of rent and damages shall be paid equally by the Society and opposite party No.4. The said amount shall be adjusted towards the loan amount due from the petitioner.
56. In the above premises, we allow the Writ Petition bearing O.J.C. No.1545 of 1999 with the following directions:-
(i) The 3 rd party purchaser is entitled to get refund of the amount deposited by him. Opposite party-society shall refund the amount deposited by the 3 rd party purchaser with interest @7% per annum within a period of four weeks from today as from the date of deposit of the said amount, it has been enjoying the benefit of amount deposited by the 3 rd party purchaser after deducting fifty percent of rent, damage as indicated in paragraph 55 above.
(ii) Opposite party-Society shall recalculate the amount due from the loanee including interest thereon taking into account the order dated 20.06.1992 of the Asst. Registrar, Co-operative Societies, Jagatsinghpur-cum-Principal Officer by which the petitioner was allowed to pay Rs.10,560/- in 36 installments @ Rs.300/- per month by 20.06.1995 and Rs.50,000/- awarded towards damage.
The fresh demand notice shall be served upon the petitioner-loanee within a period of four weeks from today.
(iii) It is further directed that as opposite party No.1-Secretary proceeded illegally, the Society is not entitled to raise any claim for legal expenses from the petitioner-loanee.
(iv) On receipt of the recomputed demand notice from the opposite party-Society, the petitioner-loanee shall deposit the same within a period of four weeks from the date of receipt of such fresh demand, failing which the Society shall be at liberty to proceed against the petitioner for full recovery of the outstanding dues on the basis of fresh demand notice in accordance with law. However, if the petitioner-loanee deposits the amount as per the fresh demand, the opposite party-Secretary, Jagatsinghpur Sub-Divisional House Building Cooperative Society is directed to take over possession of the house in question from opposite party No.4-third party purchaser and hand over the same to the petitioner within four weeks from the date of deposit as per the fresh demand notice. On his failure to do so, suitable action shall be taken against him.
(v) This Court also directs the Superintendent of Police, Jagatsinghpur to provide necessary police assistance in order to avoid law and order situation at the time of taking delivery of possession of the property in question from O.P. No.4
57. The writ petition bearing O.J.C. No.872 of 2000 is dismissed with a cost of Rs.10,000/-. Further a cost of Rs.10,000/- is imposed on the Secretary of the Society, who wrote the letter dated 16.09.1994, to the Manager, Dena Bank, Nayasarak, Cuttack, the banker of opposite party No.4, to transfer Rs.93,000/- to the account of opposite party no.1 to enable him to sell the petitioner’s property to opposite party No.4 and entered into an agreement on 20.09.1994 with opposite party No.4 and sold the property of the petitioner to opposite party no.4. The said Secretary is personally liable to pay the cost of Rs.10,000/-. Rs.20,000/- shall be paid to the loanee whose property has been sold to opposite party No.4-3 rd party purchaser by the Secretary fraudulently in flagrant violation of law within four weeks from today. Property of the loanee was sold illegally because of connivance of opposite party no.1-Secretary with opposite party No.4-3 rd party purchaser at the relevant time. The cost of Rs.10,000/-, so far as 3 rd party purchaser is concerned, shall be deducted from the amount refundable to him as directed in paragraph 56(i).
58. In the result, Review Petition No.25 of 2010 is allowed. O.J.C. No.1545 of 1999 filed by the petitioner-loanee succeeds and the same is allowed. O.J.C. No.872 of 2000 filed by the third party purchaser-Arendra Kumar Jena is dismissed with cost of Rs.10,000/- (rupees ten thousand).