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PETITIONER: SETH BANARSI DASS (DEAD) BY LRS.

       Vs.

RESPONDENT: THE DISTRICT MAGISTRATE AND COLLECTOR, MEERUT AND ORS.

DATE OF JUDGMENT:       08/02/1996

BENCH: MANOHAR SUJATA V. (J) BENCH: MANOHAR SUJATA V. (J) PUNCHHI, M.M.

CITATION:  1996 SCC  (2) 689        JT 1996 (3)     1  1996 SCALE  (1)740

ACT:

HEADNOTE:

JUDGMENT:                     J U D G M E N T Mrs. Sujata V.Manohar, J.      The original  appellant Seth Banarasi Dass was the lessee of  S.B. Sugar  Mills, Bijnor  in the  State  of Uttar Pradesh.  In respect  of sugarcane cess, purchase tax and  other Government  dues of  S.B.  Sugar  Mills, Bijnor,  the   Collector,  Bijnor   issued  a  recovery certificate for  Rs. 61,48,674.21 against the appellant in his  personal capacity.  The appellant was the owner of 94,320  equity shares  of the  face value of Rs.10/- each and  2,260 preference  shares of the face value of Rs.100/- each  in M/s.Jaswant Sugar Mills Ltd., Meerut. The  Company   Secretary  of  M/s.Jaswant  Sugar  Mills received   a   prohibitory   order   dated   21.12.1970 restraining him  from permitting any transfer of 94,320 equity shares  and 2,260  preference shares held by the appellant in  the said  company. The Company Secretary, by his  letter dated 6th of February, 1971 addressed to the Collector,  informed him  that on  the date  of the receipt of  the prohibitory  order, that  is to say, on 14th of  January, 1971  only 25,150  equity shares  and 2,260 preference  shares  stood  in  the  name  of  the appellant. He  further informed  the Collector  by  the said letter that these shares had been received by them from Oriental  Bank of Commerce Ltd., Meerut Cantonment for transfer  in their name, and that these shares were already pledged  with the  said  bank.  Copies  of  the letters received  by M/s.Jaswant  Sugar Mills  from the Oriental Bank  of Commerce Ltd. were also enclosed with the said letter.      Thereafter, on  31.7.1972 a citation was issued by the Tehsildar,  Meerut on  the appellant  under Section 280 of  the U.P.  Zamindari Abolition  and Land Reforms Act,  1950   calling  upon   him  to   pay  a   sum  of Rs.50,42,523/- failing  which his property, inter alia,

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would be  attached and  sold. Thereafter, the appellant filed his  objections dated  8.11.1972 before  the Sale Officer  raising   various  objections  to  the  amount claimed and also pointing out that the shares for which notice of  auction was  given were already pledged with the Oriental  Bank of  Commerce Ltd.,  Meerut  and  the Punjab Co-operative  Bank, New  Delhi. Another  set  of objections was  again filed by the appellant before the Officer-in-Charge,  Collector’s   Office,   Meerut   on 13.8.1973. These  objections, inter  alia, stated  that the amount of Rs.61,48,674.21 mentioned in the recovery certificate  of   the  Collector   of  Bijnor  was  not outstanding; that  a sum of Rs.49,67,101.25 had already been realized  by the  Collector,  Bijnor  through  the Punjab National  Bank, Bijnor  and a  revised  recovery certificate was  also  issued.  He  claimed  that  full recovery had  been effected by then. He also reiterated his objections  to the sale of the said shares. None of these objections  were decided  by the Collector and/or Sale Officer.  In the  meanwhile, several  attempts had been made  to sell  the said  shares by public auction. None of  these attempts,  however, succeeded  as nobody came forward to buy these shares.      On 24.11.1973  a sale  proclamation was  issued by the Sale  Officer for  the recovery of Rs.61,48,674.21, fixing 2nd  of January, 1974 as the date of the auction sale. Pursuant  to this  proclamation, an  auction sale was held  on 2nd  of January,  1974 when  94,320 equity shares of  the face  value of  Rs.10/- each  and  2,260 preference shares of the face value of Rs.100/- each in M/s.Jaswant Sugar  Mills, Ltd.  held by  the  appellant were auctioned  for Rs.2,90,000/-.  The highest  bid of Rs.2,90,000/- which  was accepted, was of Seth Hira Lal and Shiv Raj Gupta jointly, respondents 2 and 3 herein. Out of  the total  auction amount, a sum of Rs.75,000/- was  deposited  by  the  auction  purchasers  with  the Tehsildar, Meerut on the date of the auction. On 5th of January, 1974  the auction purchasers wrote a letter to the Sale  Officer asking  where they should deposit the balance amount.  As per  the  directions  of  the  Sale Officer the  auction purchasers  deposited the  balance amount of  Rs.2,15,000/- with  the Tehsildar, Meerut on 7th of January, 1974.      On 11th  of  January,  1974  the  appellant  filed objections to  the auction  sale before  the Collector, Meerut. On  14th of  January, 1974 the Oriental Bank of Commerce also  filed objections  to  the  auction  sale before the Collector, Meerut. On 16th of January, 1974, the  District   Magistrate,  Meerut,  passed  an  order declaring the auction sale as invalid and setting aside the same.  Thereupon, the auction purchasers filed Writ Petition No.879  of  1974  before  the  High  Court  of Allahabad  challenging   the  order   of  the  District Magistrate dated  16th of January, 1974. The Collector, in  the   meanwhile,  apparently  having  realised  the mistake committed  by  him,  issued  a  notice  to  the appellant as  well as  to  the  auction  purchasers  to appear before  him on  13th of March, 1974. Thereafter, the Collector  heard the  parties on  various dates  in August,  1974.  Before  he  could  pass  final  orders, however, the appellant filed a writ petition being Writ Petition No.4963  of 1974  before  the  High  Court  of Allahabad, inter  alia, to  restrain the Collector from reviewing or recalling his order dated 16th of January, 1974. An interim order to that effect was issued by the

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High Court.  Both these  petitions were  heard together and disposed  of by  a common  judgment. The High Court has upheld the validity of the auction sale held on 2nd of January,  1974. The  present appeals  are  from  the judgment and  order of the High Court in these two writ petitions.      The first  contention of  the appellant  is to the effect that  the auction  sale is  invalid because  the auction purchasers  did not  deposit the  full purchase price on the date of the auction sale. The auction sale was held  under the  provisions of  the U.P.  Zamindari Abolition and Land Reforms Act, 1950. Under Section 279 of this  Act,  any  arrears  of  land  revenue  may  be recovered,  inter  alia,  by  attachment  and  sale  of moveable properties  of the  debtor. Under Section 282, every attachment and sale of moveable property shall be made according  to the  law in force for the time being for the  attachment and  sale of  moveable property  in execution of  a decree  of a civil court. Under Section 341,   unless   otherwise   expressly   provided,   the provisions, inter alia, of the Code of Civil Procedure, 1908 shall  apply to the proceedings under this Act. It is not  in dispute  that the attachment and sale of the appellant’s shares  had to  be in  accordance with  the provisions of  the Civil Procedure Code. Order XXI Rule 77 provides  for sale  of moveable  property by  public auction. It provides:      "(1)  Where  moveable  property  is      sold by public auction the price of      each lot  shall be paid at the time      of sale  or as  soon after  as  the      officer or other person holding the      sale directs,  and  in  default  of      payment    the    property    shall      forthwith be resold.      2.   On  payment  of  the  purchase      money, the  officer or other person      holding  the  sale  shall  grant  a      receipt for  the same, and the sale      shall become absolute." Therefore, the  officer conducting the sale has the power to grant time to pay the price. In the absence of such facility being given,  the auction  purchaser must pay the full price at the time of the sale, otherwise the property is liable to be resold.  Respondents 2  and 3  have produced the order of the Sale  Officer dated  2nd of  January, 1974  where he has directed respondents  2 and  3 to  deposit one-fourth of the sale price,  approximately, in  the treasury forthwith. This clearly implies  that he has given time to the purchasers to pay the  balance amount.  Respondents 2  and  3  accordingly deposited Rs.75,000/-  on  2nd  January,  1974.  On  5th  of January,  1974,   the  Sub-Divisional  Officer/Sale  Officer directed the  auction purchasers  to deposit  the  remaining amount in  the treasury.  6th of January, 1974 was a Sunday. On 7th of January, 1974 the auction purchasers deposited the balance amount  of sale  price in  the sub-treasury  of  the Tehsil Meerut  and a  receipt was issued to them by the Sub- Divisional  Officer/Sale  Officer.  Therefore,  the  auction purchasers have  deposited the purchase price as directed by the officer  holding the  sale and  have also  been issued a receipt for the same. The auction sale, therefore, cannot be faulted on this ground.      The  second   objection  of   the  appellant,  however, deserves to  be accepted.  It is  contended by  him that two sets of  objections were  raised  by  him  to  the  proposed

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auction sale when the shares were attached. These objections to the  sale were  pending when the auction sale took place. These objections  go to  the root  of the  liability of  the appellant to  pay the amounts under the recovery certificate as well  as to the  saleability of the shares proposed to be sold. These  objections ought  to have been adjudicated upon before the  auction sale.  An auction  which is held without deciding  objections   to  it   is  bad   in  law.  Recovery proceedings are  equivalent to  execution proceedings  under the Civil  Procedure Code.  The objections to the attachment and sale of the said shares were raised by the debtor. Under Section 47  of  the  Civil  Procedure  Code,  all  questions arising between the parties relating to execution, discharge or satisfaction  of the claim were required to be determined by the officer in charge of execution before proceeding with execution by  way of  sale.  The  objections,  for  example, related to  the amount  which is  claimed  in  the  recovery certificate. According to the appellant the amount mentioned in  the   recovery  certificate   was  not  correct  because subsequent  citation   was  for   a  different  amount.  The appellant had  also claimed repayment of various amounts. It was also  pointed out  by the appellant that the shares were already pledged  with the  Oriental Bank of Commerce. Yet no notice was  given to  the Oriental  Bank of Commerce and the shares were  purported to be sold ignoring the pledge of the shares in  favour of  the Oriental Bank of Commerce. We need not examine  the merits  of the  objections  raised  by  the appellant.  But   it  is  important  to  notice  that  these objections were  not decided  prior to  the holding  of  the auction sale.  The first respondent has given no explanation for not  deciding these  objections earlier. In our view the High Court  was not  right in  observing that the objections could be  decided at a later date even after the sale of the shares to  which the  objections pertained.  Proceeding with the auction sale without adjudicating upon the objections is a  material   irregularity  which  vitiates  the  sale.  The appellant has  thereby lost  his valuable  right to have his objections adjudicated  upon in  accordance  with  law.  The objections were  raised much  prior to  the auction sale and they ought to have been decided before the auction sale took place. Failure to do so vitiated the sale.      The appellant  has  also  contended  that  on  3.7.1971 Ordinance No.23 of 1971 known as the U.P. Sugar Undertakings (Acquisition) Ordinance,  1971 was issued. As a result, S.B. Sugar Mills  was acquired and the appointed date for vesting of the undertaking was 2nd of July, 1971. This Ordinance was replaced by  U.P. Act  No.23 of 1971. The appellant contends that in view of the provisions of the said Ordinance and the said Act,  namely,  the  Uttar  Pradesh  Sugar  Undertakings (Acquisition) Act, 1971, the debts and encumbrances attached to the  undertaking are  liable to  be adjusted  against the compensation determined  in accordance with Section 7 of the said Act. Reliance is placed on the first proviso to Section 3 of  this Act  in this  connection. It is the contention of the appellant  that the  total compensation payable would be much larger  than the  revenue dues  of the  undertaking  in respect of  which the shares of the appellant were purported to be  sold by  public auction. Hence there was no necessity for auction  sale. This  contention is  raised for the first time before us. It was not raised before the High Court. Nor is there  any factual  data in  the records  before us which would go  to show  the quantum of compensation to which S.B. Sugar Mills  would be  entitled  under  the  said  Act.  We, therefore, decline  to  examine  this  submission  which  is raised before us for the first time.

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    However, in view of our findings above, the appeals are allowed and the auction sale held on 2nd of January, 1974 is set aside. Respondents 2 and 3 will be at liberty to withdraw the purchase price deposited by them which, we are informed, is invested in fixed deposits together with accrued interest thereon. In the circumstances, there will be no order as to costs.