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CASE NO.: Appeal (civil)  2406 of 2007

PETITIONER: Laxmikant Chhotelal Gupta & Ors

RESPONDENT: State of Maharashtra & Ors

DATE OF JUDGMENT: 09/05/2007

BENCH: S.B. Sinha & Markandey Katju

JUDGMENT: J U D G M E N T

CIVIL APPEAL NO.    2406        OF 2007 (Arising out of SLP (C) No.  2615 of 2006)  

S.B. Sinha, J.

1.      Leave granted.

2.      Respondent Nos. 5 to 7 herein were partners of a firm known as M/s.  Somras Distillers.    It ran into arrears inter alia in payment of sales tax.

3.      The properties of the partners were attached.  A Writ Petition came to  be filed by the respondent nos. 5 to 7 inter alia praying for a direction to the  sales tax authorities to recover the dues in respect of the said firm from the  appellants alone and not from them.

4.      As Respondent Nos. 1 to 4 intended to put the properties of the  partnership firm on auction, the High Court in terms of an Order dated  28.4.2003 directed:- "In so far as item No. 4, namely Plant Machinery of  the firm is concerned, we are informed that the upset  price fixed is rupees twenty-five lacs and no bidders  are coming forward.  It will be appropriate if  advertisement of auction in relation to this item is  given in the national dailies which are widely  circulated. The cost of auction as also advertisement  shall be payable out of the auction sale proceeds.  The auction be conducted within a period of 45 days  from today and report of auction in respect of the  above mentioned properties be filed before the  Court, S.O. to eight weeks."

        5.      Pursuant to the said direction, an auction was held on 6.6.2003 of the  factory premises of the firm; the highest bid being Rs. 65 lakhs.

6.      Public auction in such matters are governed by the provisions of  Maharashtra Land Revenue Code, 1966, the relevant provisions of which  read as under:- "Purchase money when to be paid. 202.  The full amount of purchase-money shall be  paid by the purchaser before the expiration of two  months from the date on which sale of the  immovable property took place or before the  expiration of fifteen days from the date on which  the intimation of confirmation of the sale is

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received by the purchaser, whichever is earlier;

Provided that, if the last date on which the  purchase-money is to be paid happens to be a  Sunday or other authorised holiday, then the  payment shall be made before the sunset of the  first office day after such date."

"Effect of default.

203.  In default of payment within the prescribed  period of the full amount of purchase-money  whether of movable or immovable property, the  deposit after defraying thereout the expenses of the  sale, shall be forfeited to the State Government,  and the property shall be resold, and the defaulting  purchaser shall forfeit all claims to the property or  to any part of the sum for which it may be  subsequently sold."

7.      A question arose as to whether the auction purchaser had deposited  the amounts in terms of the said provision.   By an order dated 29.4.2004,  despite the High Court’s notice having been drawn thereto, a learned Single  Judge directed:- "I am unable to find any substance in this  argument.  It may be noted that despite the order of  the Court that the auction shall be held strictly in  accordance with law, it has confirmed the auction  by order dated 09.12.2003 and now the petitioners  cannot take recourse to contempt proceedings.    They should have brought this fact to the notice of  the Court in Writ Petition No. 2530/2001.   In this  view of the matter the petition is dismissed.   Needless to say that the petitioners are at liberty to  move the Court in Writ Petition No. 2530/2001."

8.      A similar application for recalling the said order was dismissed  directing; "In view of the above referred observations, it is  evident that auction sale was confirmed subject to  result of this petition.  Therefore, grievance of any  party to the proceedings would be considered at  the time of final hearing.  The earlier orders have  been passed by us in the petition from time to time  keeping in view the necessary recovery to be  effected by the Department towards sales tax  dues."

9.      It was further directed:

"In view of the above referred facts and  circumstances, we see no justification whatsoever  for respondent Nos. 5 to 7 to oppose handing over  of possession particularly when auction of sale is  already confirmed by this Court and huge amount  has already been observed in the earlier order  dated 9.12.2003 that auction sale is subject to  result of the petition.   In the circumstances, we  direct respondent Nos. 5 to 7 to hand over  possession of the property in question to the  Department without any obstacle within fifteen  days from today."

10.     The matter was brought before this Court thereagainst by the

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appellants herein which was marked as Civil Appeal No. 6631 of 2005.   Upon hearing the counsel for the parties, this Court opined:- ...In that view of the matter, it was obligatory on  the part of the High Court to consider the effect of  non-compliance of the provisions of Section 202 &  203 of the Maharashtra Land Revenue Code itself.   Before confirming the sale, the High Court  otherwise also could have directed the parties to  take recourse to the said Code.  Had such an order  been passed by the High Court, it would have been  open to the appellants herein to file appropriate  application before respondent no. 3, who was the  appropriate authority to hold such auction.

       Having regard to the peculiar facts and  circumstances of this case we are of the opinion  that it was a fit case wherein the High Court should  have exercised its jurisdiction in entertaining the  appeal filed by the appellants herein, so as to  enable the parties to know as to where they stand.   Mr. Lalit, is right in his submission that if the  possession of factory premise is handed over to the  auction purchaser of the land and building where  the factory is situated, the appellants herein may be  put to irreparable and irretrievable injury.  What  would be the fate of the machineries installed in  the factory premises is also not known.  We are  informed at the Bar that another auction may take  place in respect of the plant and machineries but in  relation thereto there may be another auction  purchaser and so long as such auction sale in  relation thereto is not confirmed and the plant and  machinery are not handed over to the said auction  purchaser, the same would remain in possession of  the auction purchaser.

11.     When, however,  the matter was placed before the High Court  pursuant thereto, it again failed to examine the effect of the provisions of  Sections 202 and 203 of the Maharashtra Land Revenue Code, and disposed  of all objections including the one for recalling its Order dated 9.12.2003  filed by the appellants being Civil Application No. 3730 of 2004 directing ;         "The present state is that some of the properties  which are already put to auction and purchased by  auction purchasers could not be handed over to them  for various objections raised by respondent nos. 5 to  7 who are the main contestants.  This includes the  factory and plant of M/s. Somras Distillers.

       We, therefore, propose to dispose of this  petition by directing respondent nos. 1 to 4 to take  further steps in the matter in accordance with law  and after giving fair opportunity to all concerned,  including the petitioners and respondent nos. 5 to 7  and the auction purchasers so as to enable them to  lodge their objections to the procedure adopted by  the sales-tax department in conducting auction sale  of the property and after hearing all concerned pass  appropriate orders in accordance with law."

12.     Appellants are, thus, before us.

13.     It is unfortunate that the High Court did not address itself to a vital  aspect of the matter despite its attention having been drawn thereto. It

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purported to have disposed of all the pending applications directing only the  respondent Nos. 1 to 4 to take further steps in the matter in accordance with  law, but what those other or further steps in the matter would be, have not  been spelt out.   Such a direction was wholly unwarranted.          14.     There cannot be any doubt or dispute that the dues of the revenue  should be recovered wherefor properties of the defaulters inter alia can be  put to auction, but there cannot also be any doubt or dispute that procedures  laid down therefor must be complied with.  This Court has noticed in its  Order dated 28.10.2005 passed in Civil Appeal No. 6631 of 2005 that the  High Court resorted to a wrong procedure.   The issues involved in the writ  petition filed by the respondent Nos. 5 to 7 was limited.   The High Court  unjustly expanded its jurisdiction.

15.     Even when an auction takes place under orders of the competent civil  court, the procedures laid down in the Code of Civil Procedure are required  to be complied with.  Objections to the validity of sale at the instance of one  party or the other are required to be considered and determined.  Even an  appeal lies against such an Order in terms of Order XLIII Rule 1(u) of the  Code of Civil Procedure.

16.     Provisions of a statute whether directory or mandatory necessitating   strict or substantial compliance are questions which must be determined by  the courts.  This Court thought that the High Court would do so.    Presumably the effect and purport of this Court’s Order having not been  brought to its notice, we, therefore, are of the opinion that the matter should  be directed to be considered afresh by the competent authority.  We are  informed at the bar that Respondent No. 4 being Assistant Commissioner of  Sales Tax is the competent authority therefor.  We, therefore, while  setting  aside the Order of the High Court would direct the said authority to consider  the contentions raised by the appellants herein on their own merits.

17.     Before parting with this case, we may however, notice the  submissions of Mr. P.S. Mishra, the learned senior counsel appearing on  behalf of the auction purchaser, that the requirement of Section 202 and  203  of the Code had been complied with.    Learned counsel appearing on behalf  of the writ petitioners/ respondents submit that the intention of the appellants  herein is to delay the disposal of the matter.   We need not go into the  correctness or otherwise of the said contentions, as Respondent No. 4  indisputably would have to take into consideration facts and aspect of the  matter also.

18.     Mr. Satyajit A. Desai, learned counsel appearing on behalf of  respondent Nos. 1 to 4 submitted that it may be possible for Respondent    No. 4 to dispose of the objections within a period of two weeks from the  date of filing of the documents by the parties.

19.     Original records in respect of the auctions held must be with the  respondent No. 4.  Even otherwise, the same should be produced before him.   Appellant herein would file their written objections as also a copy of Civil  Application No. 3730 of 2004  before respondent No. 4 within two weeks  from date.  Writ Petitioners/respondents as also the auction purchaser having  regard to the fact that they are aware of the contentions raised by appellants  herein may file replies thereto within the said period.  Respondent No. 4  thereupon may proceed to determine the matter in accordance with law  within a period of four weeks’ thereafter, upon giving an opportunity of oral  hearing to the parties after fixing a date of hearing.

20.     We make it clear that all contentions of the parties shall remain open.   The impugned judgment is set aside. This Appeal is allowed with the  aforementioned directions. In the facts and circumstances of this case,  however, there shall be no order as to costs.