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2014 (1) TMI 988 - SC - Indian LawsSetting aside of recovery proceedings of loan given - Held that - For non-repayment of loan the Recovery Officer attached plot No.722, which was in the ownership of Jagmohan Singh, one of the partners in M/s. Amar Timber Works - Harender Singh, brother of Jagmohan Singh, filed an objection petition before the Recovery Officer alleging, that the attached property did not belong to the judgment debtors, but had been purchased by him from his brother Jagmohan Singh, by executing an agreement of sale dated 10.1.1991 - The Recovery Officer ordered the sale of the property - On 22.9.2008, the Recovery Officer, in the absence of any objections, confirmed the sale of the property in favour of Sadashiv Prasad Singh - The High Court set aside the proceedings conducted by the Recovery Officer, including the sale of the property by public auction. In terms of the law declared by the Court, property purchased by a third party auction purchaser, in compliance of a court order, cannot be interfered with on the basis of the success or failure of parties to a proceeding, if auction purchaser had bonafidely purchased the property - Law makes a clear distinction between a stranger who is a bona fide purchaser of the property at an auction-sale and a decree-holder purchaser at a court auction - The strangers to the decree are afforded protection by the court because they are not connected with the decree - Unless the protection is extended to them the court sales would not fetch market value or fair price of the property. The High Court was not justified while setting aside the recovery proceedings and in ignoring the vested right of the appellant in the property in question, after his auction bid was accepted and confirmed, subjected him to grave injustice by depriving him to property which he had genuinely and legitimately purchased at a public auction - Not only did the Division Bench of the High Court in the matter by ignoring the sound, legal and clear principles laid down by this Court in respect of a third party auction purchaser, the High Court also clearly overlooked the equitable rights vested in the auction-purchaser during the pendency of a lis - The High Court also clearly overlooked the equitable rights vested in the auction purchaser while disposing of the matter. The objections raised should be rejected on variety of reasons - Harender Singh had created an unbelievable story with the connivance and help of his brother, so as to save the property in question - The claim in his objection petition, was based on an unregistered agreement to sell dated 10.1.1991Harender Singh, despite his having filed objections before the Recovery Officer, had abandoned the contest raised by him by not appearing - before the Recovery Officer - Having abandoned his claim before the Recovery Officer, it was not open to him to have reagitated the same by filing a writ petition before the High Court - Harender Singh could not be allowed to raise a challenge to the public auction held on 28.8.2008 because he had not raised any objection to the attachment of the property in question or the proclamations and notices issued in newspapers in connection with the auction thereof. The objector had lost all interest in the property in question and had therefore, remained a silent spectator to various orders which came to be passed from time to time - He had no equitable right in his favour to assail the auction-purchase made by Sadashiv Prasad Sinha on 28.8.2008 - The auction purchaser was a bona fide purchaser for consideration, having purchased the property in furtherance of a duly publicized public auction, interference by the High Court even on ground of equity should not be called for - Decided in favour of petitioner.
Issues Involved:
1. Recovery of loan dues by the Bank. 2. Objection to the attachment and sale of property by Harender Singh. 3. Confirmation and validity of the public auction sale. 4. Equitable rights and interests of the auction purchaser. Issue-wise Detailed Analysis: 1. Recovery of loan dues by the Bank: The Allahabad Bank sanctioned a loan of Rs.12.70 lac to M/s. Amar Timber Works, secured by mortgaged properties. Due to non-repayment, the Bank filed Original Application No.107 of 1998 before the Debt Recovery Tribunal, which was allowed on 21.11.2000, directing the recovery of Rs.75,75,564/-. The Bank initiated recovery proceedings on 28.11.2000, and the Recovery Officer attached a property owned by one of the partners, Jagmohan Singh, on 16.4.2004. 2. Objection to the attachment and sale of property by Harender Singh: Harender Singh, brother of Jagmohan Singh, filed an objection petition on 10.6.2004, claiming ownership of the attached property based on an unregistered sale agreement dated 10.1.1991. He pursued the objection until 26.10.2005 but abandoned it thereafter. The Recovery Officer ordered the sale of the property by public auction on 5.5.2008, which was held on 28.8.2008. 3. Confirmation and validity of the public auction sale: The property was sold to the highest bidder, Sadashiv Prasad Singh, for Rs.13.20 lacs. The sale was confirmed on 22.9.2008, and possession was handed over on 11.3.2009. Harender Singh challenged the auction sale in CWJC No.16485 of 2009, which was dismissed by the High Court on 27.11.2010. He then filed Letters Patent Appeal No.844 of 2010, which was also dismissed. 4. Equitable rights and interests of the auction purchaser: The High Court referred to Chapter V of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and Rule 11 of the Income Tax (Certificate Proceedings) Rules, concluding that the Recovery Officer had not complied with Rule 11(2). The High Court set aside the auction sale, directing Harender Singh to compensate the auction purchaser with interest. However, the Supreme Court emphasized that an auction purchaser's rights are protected unless fraud or collusion is proven. The Court found no such evidence and concluded that the High Court erred in setting aside the auction sale. The Supreme Court confirmed the auction purchaser's rights and dismissed Harender Singh's objections. Conclusion: The Supreme Court allowed the appeal of Sadashiv Prasad Singh, confirming his rights to the property and dismissing Harender Singh's appeal. The Court emphasized the protection of third-party auction purchasers and found no grounds of fraud or collusion to invalidate the auction sale.
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