2016 (9) TMI 1612 - SC - Indian Laws

Auction - execution of an order of the Assistant Registrar of Cooperative Societies - Section 76 of the Multi State Cooperative Societies Act 1984 - HELD THAT - The scheme of the 2002 Act which replaces the 1984 Act is a little different. Section 84 of the 2002 Act corresponds to Section 74 and 76 of the 1984 Act. With this difference-that disputes that have been referred to arbitration are now to be settled or decided by the Arbitrator to be appointed by the Central Registrar and the provisions therefore of the 1996 Arbitration and Conciliation Act shall apply to such arbitration as if the proceedings for arbitration were referred for settlement or decision under the provisions of the said Act. It can be seen that Section 84(4) and (5) of the new Act provide for a different scheme. Equally Section 94 which provides for execution of certain decisions and orders made under the 2002 Act mentions various Sections but Section 84 is conspicuous by its absence. This is obviously for the reason that the entire proceedings have now to be conducted under the 1996 Act including execution of the arbitration Award made under the said Act. The question before the High Court was whether proceedings initiated under the old Act could continue under the said Act. The proceeding in execution initiated Under Section 85(c) of 1984 Act and pending before the authorities under the said Act prior to 19th August 2002 would continue unhindered by the repeal of the 1984 Act by the 2002 Act. The opportunity to have the sale certificate set aside under Rule 37(13) has not been availed. Ground V of the Writ Petition is in reality a ground relatable to Rule 37(14) as according to the Petitioner there is a material irregularity in conducting the sale. For the Petitioner to make out such a ground he has first to apply to the recovery officer within 30 days from the date of sale. And further the Appellant has to make out a case that he has sustained substantial injury by reason of such irregularity. Ground V of the Writ Petition does not even refer to substantial injury for the reason that is not the appellant s case that the property has been sold at a gross undervalue. No relief can be given in the Writ Petition so as to circumvent the statutory provisions contained in Rule 37(13) and (14). Ground VI is totally vague and lacking in particulars. A charge of malafides has to be made out with great clarity and particularity. Also the Appellant cannot claim to be in the dark as every auction sale was publicly advertised in newspapers. Application allowed.

Summary

Issues Involved:
1. Validity of auction sale proceedings under the Multi-State Cooperative Societies Act, 1984 and 2002.
2. Applicability of the Arbitration and Conciliation Act, 1996 for execution of awards under the 2002 Act.
3. Continuation of legal proceedings initiated under the 1984 Act post its repeal by the 2002 Act.
4. Compliance with procedural rules for auction sales under the Multi-State Cooperative Societies Rules, 2002.
5. Allegations of malafide actions and procedural irregularities in the auction process.

Detailed Analysis:

1. Validity of Auction Sale Proceedings:
The appellant, a successful purchaser at an auction held in execution of an order dated 5.10.2010 by the Assistant Registrar of Cooperative Societies under Section 76 of the Multi-State Cooperative Societies Act, 1984, challenged the High Court's judgment which set aside the auction proceedings. The High Court held that the award passed by the Assistant Registrar under the repealed 1984 Act should be executed under the Arbitration and Conciliation Act, 1996, as per the new 2002 Act. The Supreme Court examined whether the proceedings initiated under the 1984 Act could continue under the 2002 Act.

2. Applicability of the Arbitration and Conciliation Act, 1996:
The Supreme Court noted that the 2002 Act introduced a different scheme where disputes are referred to arbitration to be settled by an arbitrator appointed by the Central Registrar, and the provisions of the 1996 Act apply to such arbitrations. Section 94 of the 2002 Act, which provides for execution of certain decisions and orders, does not include Section 84, indicating that arbitration awards under the 2002 Act are to be executed under the 1996 Act.

3. Continuation of Legal Proceedings Post-Repeal:
The Supreme Court highlighted Section 126(6) of the 2002 Act, which states that any legal proceeding pending before any authority at the commencement of the 2002 Act shall continue as if the Act had not been passed. The Court referred to legal precedents to interpret "legal proceeding" broadly, encompassing execution proceedings initiated under the 1984 Act. Thus, the execution proceedings initiated before the repeal of the 1984 Act would continue under the provisions of the 1984 Act.

4. Compliance with Procedural Rules for Auction Sales:
The borrower argued that the auction sale was void due to non-compliance with Rule 36 of the Multi-State Cooperative Societies Rules, 2002, which mandates a 15-day notice period for auctions. The Supreme Court found that after six failed attempts to sell the property, the procedural irregularity claim was not substantial enough to invalidate the sale, especially since the borrower did not attempt to set aside the sale certificate under Rule 37(13) or (14) within the stipulated time.

5. Allegations of Malafide Actions and Procedural Irregularities:
The borrower also alleged malafide actions by the Recovery Officer and procedural irregularities in the auction process. The Supreme Court dismissed these claims as vague and lacking in particulars. The Court emphasized that charges of malafides must be made with great clarity and particularity, which was not done in this case. Furthermore, the borrower had opportunities to challenge the sale but failed to do so within the legal framework provided.

Conclusion:
The Supreme Court set aside the High Court's judgment, holding that the execution proceedings initiated under the 1984 Act could continue under that Act despite its repeal by the 2002 Act. The Court ordered the bank to pay the borrower the balance amount of ?74,688.25 with interest. The Court also declined to remit the remaining grounds of the Writ Petition to the High Court for further consideration, finding no substantial basis for the claims of procedural irregularities and malafides.