Case Note & Summary
The petitioners, a cooperative bank and its Special Recovery Officer, challenged the order dated 19th January 2013 passed by the Divisional Joint Registrar, Cooperative Societies, Aurangabad, which set aside an auction sale of agricultural land conducted for recovery of a loan. The first respondent, a partnership firm, had obtained a cash credit loan from the bank; the account became a non-performing asset. The bank obtained a recovery certificate under Section 101 of the Maharashtra Cooperative Societies Act, 1960 for Rs. 1,30,75,236.71 with interest. A public auction was held on 14th March 2011 for land bearing gut No. 21. The second respondent was declared the highest bidder at Rs. 2,15,00,000. As per auction terms, 15% of the bid amount (Rs. 32,25,000) was to be deposited immediately. The bidder had already deposited Rs. 5,00,000 as earnest money and paid the balance Rs. 27,25,000 by demand draft on the same day, requesting that the earnest money be adjusted. The full balance was paid within 15 days. The defaulting borrower first filed a revision (No. 8 of 2011) and the Divisional Joint Registrar directed the Recovery Officer to decide the objections, which were rejected on 11th November 2011. The borrower then filed Revision No. 13 of 2012, and the Divisional Joint Registrar allowed it solely on the ground that the 15% deposit was not validly made because the earnest money could not be included; the auction was set aside and fresh auction ordered. In the writ petition, the court examined the terms of auction and the government circular permitting the Recovery Officer to act as Sale Officer. It held that adjusting the earnest money towards the 15% deposit was both logical and consistent with commercial practice; the mandatory character of Clause 7 did not exclude such adjustment. The court rejected the borrower's other objections, noting that the earlier circular quashed in Adarsh Mahila Nagari Sahakari Bank's case was distinguishable because that circular had attempted to divest the Recovery Officer of statutory power, whereas the present circular did not. It further observed that the defaulting borrower was raising technical pleas with unclean hands. The court allowed the writ petition, set aside the revisional order dated 19.01.2013, and upheld the auction sale. The auction purchaser’s subsequent disinterest and request for refund were to be considered separately in the connected writ petition.
Headnote
A) Cooperative Societies - Recovery of Debts - Maharashtra Cooperative Societies Act, 1960, Section 101 - Auction Sale - 15% Deposit - The Recovery Officer conducted auction of agricultural land pursuant to a recovery certificate; the successful bidder had paid Rs.5,00,000/- as earnest money and later deposited Rs.27,25,000/-, asserting that the total complied with the 15% requirement - Held, the earnest money paid by the bidder could be counted towards the 15% deposit, and the Divisional Joint Registrar's order setting aside the auction on that technical ground was erroneous (Paras 13-15, 19). B) Cooperative Societies - Recovery of Debts - Maharashtra Cooperative Societies Act, 1960 - Recovery Officer as Sale Officer - Government Circular dated 10.08.2011 permitted the Recovery Officer to act as Sale Officer; this was challenged by the defaulting borrower - Held, the circular did not take away any statutory powers of the Recovery Officer and its validity was not in question; earlier judgment in Adarsh Mahila Nagari Sahakari Bank case quashed a different circular that sought to usurp Recovery Officer's power, and that ratio does not apply here (Paras 20-22). C) Cooperative Societies - Recovery Proceedings - Defaulting Borrower's Objections - The defaulting borrower attempted to raise multiple objections including dual capacity of Recovery Officer and alleged non-compliance with auction terms - Held, a borrower who defaulted on loan repayment and approached the court with unclean hands should not be permitted to succeed on hyper-technical objections, especially when the auction was otherwise valid and the impugned order was not separately challenged (Paras 15-16, 19).
Issue of Consideration
Whether the Divisional Joint Registrar was justified in setting aside the auction on the ground that 15% of the bid amount was not deposited, as the earnest money of Rs. 5,00,000 was adjusted towards the 15% requirement.
Final Decision
The High Court allowed Writ Petition No. 1455 of 2013. It held that the Divisional Joint Registrar erred in setting aside the auction on the ground of imperfect 15% deposit, as the earnest money was rightly adjusted. The objections regarding the Recovery Officer's dual capacity and the validity of the circular were rejected. The impugned order dated 19.01.2013 was set aside and the auction sale was upheld. The request of respondent No. 2 for refund was kept for consideration in the connected Writ Petition No. 1461 of 2013.
Law Points
- earnest money deposit can be adjusted towards 15% purchase money
- mandatory and directory provisions
- auction conditions
- government circular cannot override statutory powers
- defaulting borrower cannot raise technical objections
- Recovery Officer can act as Sale Officer
