Bindu Dileep & Anr. vs State Of Kerala & Ors.

Johnson John, J.

This intra-court appeal is filed by the petitioners in W.P.(C) No. 6719 of 2026 challenging the dismissal of the writ petition by the learned single Judge as per judgment dated 18.05.2026.

Heard Sri. George Mathew, the learned counsel for the appellants, Sri. Saneej E.S., the learned Government Pleader for respondents 1 to 5, Sri. P.C. Sasidharan, the learned Standing Counsel for respondents 6 and 7 and Smt. Daisy Philipose, the learned counsel for the 8^th respondent.

In connection with two separate loans availed by the appellants from the 6^th respondent Service Co-operative Bank in the year 2013, the Bank initiated arbitration proceedings under Section 69 of the Kerala Co-operative Societies Act, 1969 (‘Act, 1969’ for short) as ARC Nos. 150 and 151 of 2014. As per Exhibit P1 award dated 19.11.2014, the 6^th respondent Bank is allowed to recover the balance amount of Rs.20,01,029/- (Rupees Twenty Lakhs One Thousand and Twenty Nine only) as follows:-

As per Exhibit P2 award dated 19.11.2014, the Bank is allowed to recover Rs.21,77,298/- (Rupees Twenty One Lakhs Seventy Seven Thousand Two Hundred and Ninety Eight only) along with future interest and costs, from the defendants/appellants herein and all their movable and immovable properties as follows:

The appellants also filed two revision petitions about 10 years after the above awards before the Kerala Co-operative Tribunal alleging that they have not received summons in the arbitration proceedings. But, the Tribunal found no reason to entertain the revision petitions owing to the inordinate delay.

Thereafter, the appellants filed W.P.(C) No. 33019 of 2024 against the award in ARC No. 150 of 2014 and in the meantime, the 8^th respondent purchased the properties in the auction conducted on 30.01.2024. The 8^th respondent filed W.P.(C) No. 39576 of 2024 against the inordinate delay in confirming the auction sale and registration of the sale deed in his favour.

The appellants filed another writ petition as W.P.(C) No. 26659 of 2025 challenging the award in ARC No. 151 of 2014. As per Exhibit P12 common judgment dated 06.08.2025, the two writ petitions filed by the appellants herein as W.P.(C) Nos. 33019 of 2024 and 26659 of 2025 were dismissed on the ground that the maxim ‘vigilantibus non dormientibus jura subveniunt’ squarely applies to the conduct of the appellants.

As per the said common judgment dated 06.08.2025, W.P.(C) No. 39576 of 2024 filed by the auction purchaser was disposed of directing respondents 1 to 3 to complete the process of registration of sale deed and delivery of possession of property to the auction purchaser. Even though the appellants herein field review petitions against the said common judgment, the same were dismissed as per the order dated 21.10.2025.

Subsequently, the auction sale in favour of the 8^th respondent herein was confirmed as per order dated 30.08.2025 and against the same, the appellants herein filed W.P.(C) No. 367 of 2025 and as per judgment dated 23.10.2025, the said writ petition was disposed of with liberty to the appellants to file appeal under Section 83(1)(j) of the Act, 1969 and also directed to maintain status quo till the disposal of the appeal.

In W.A. No. 2742 of 2025 filed by the 8^th respondent against the said judgment, the Division Bench vacated the order of status quo on the ground that if at all any such relief is to be granted, the same shall be considered by the appellate authority. Subsequently, the appellate authority dismissed the appeal as per Exhibit P20 order dated 09.02.2026. Thereafter, the present writ petition—W.P.(C) No. 6719 of 2026 was filed to set aside the sale and the order confirming the sale on the ground of material irregularity and fraud.

The learned counsel for the appellants argued that the reserve price fixed is too low compared to the market value prevailing in the locality and the auction purchaser also failed to deposit the balance sale amount within the specified time. There was no sufficient notice and the learned single Judge ought to have taken note of the illegality committed in fixing upset price, issuing notice and conducting sale. It is also argued that two items of properties were sold at a price as desired by the 8 ^th respondent auction purchaser for a paltry sum and that respondents 1 to 6 failed to verify the entire aspects before passing the order confirming the sale.

The learned counsel for respondents 6 and 7 argued that the sale was conducted on 30.01.2024 after complying with all the procedural formalities and the sale was confirmed on 30.08.2025. It is argued that admittedly, the appellants have not filed any application to set aside the sale under Rule 82 or 83 of the Kerala Co-operative Societies Rules, 1969 (‘Rules, 1969’ for short) within the time limit and Exhibit P16 appeal filed under Section 83(1)(j) of the Act, 1969 against the order confirming the sale is not legally sustainable in the absence of any application to set aside the sale within the prescribed period.

It is also argued that the appellants did not file objections at the time of settlement of sale proclamation or at the time of conducting the auction. It is pointed out that there was no objection from the side of the appellants that the properties are far more valuable or that only a part of the property is required to be auctioned and it is an admitted fact that at various stages of the execution proceedings, the appellants failed to do what was required to be done and therefore, considering the deliberate inaction on the part of the appellants, the appeal is liable to be dismissed.

The learned counsel for the 8^th respondent—auction purchaser argued that the 8^th respondent is a bona fide purchaser for value in auction sale and that the property purchased by a third party auction purchaser is to be treated differently from a decree holder purchasing such properties. It is further argued that the third party auction purchaser’s interest in the auctioned property continues to be protected, notwithstanding that underlying decree is subsequently set aside or otherwise, inasmuch as he is not connected with the decree.

The learned Government Pleader appearing for respondents 1 to 5 supported the contentions of respondents 6 to 8 by pointing out that a mere statement that fraud has been played is not enough and that when fraud is alleged, the party making the allegation must place on record precise and specific details of the said allegation and there is no such specific averments either in the writ petition or in the statutory appeal filed under Section 83(1)(j) of the Act, 1969.

The points that arise for consideration are the following:-

Whether the appellants have succeeded in establishing sufficient grounds to set aside the sale?

Is there any justifiable grounds to interfere with the findings in the impugned judgment ?

There is significant difference between material irregularity and fraud in the context of auction sale. Material irregularity refers to a significant procedural error or mistake or failure to follow the rules in connection with the publication or conduct of the auction sale. But, fraud involves intentional deception, collusion or dishonesty designed to cheat a party with the design of securing some unfair or undeserved benefit and therefore, when fraud is committed, one gains at the loss of another.

Rule 74 of the Rules, 1969 provides the procedure for execution of an arbitration award. As per Rule 81(a), an application under sub-rule (2) of Rule 74 shall contain the description of the immovable property and as per Rule 81(b), the demand notice issued under sub-rule (3) of Rule 74 shall contain the name of the defaulter, the amount due, including the expenses and the said notice is also required to be served on the defaulter. Rule 81(e) provides the procedure for publication of the proclamation of sale and the same reads thus:

Rule 82 enables any person, either owning such property or holding an interest, to have the sale set aside on deposit and Rule 83 provides for filing application to set aside sale on the ground of irregularity or fraud at any time within thirty days from the date of sale of the property.

In this case, Exhibits P1 and P2 awards are dated 19.11.2014 and the auction sale was conducted on 30.01.2024. Admittedly, the appellants have not filed any objection to the notice or sale proclamation and they have also not filed any application under Rule 82 or Rule 83 of the Rules, 1969 to set aside the sale. Exhibit P16 appeal under Section 83(1)(j) of the Act, 1969 against the order confirming the sale was filed only on 28.10.2025. In the common judgment dated 06.08.2025 in W.P. (C) Nos. 33019, 39576 of 2024 and 26659 of 2025, the learned single Judge found that the writ petitions filed by the judgment debtors (appellants herein) smack of calculated delay and that they are not entitled to revive the cause of action by preferring a writ petition.

In the said common judgment, there was also a direction to complete the process of sale which had been initiated and delivery of the possession of the property to the auction purchaser. The subsequent review petitions filed by the appellants herein against the common judgment were also dismissed.

In paragraphs 9 and 10 of the impugned judgment, it is found that W.P.(C) Nos. 33019 of 2024 and 26659 of 2025 were filed after the sale was conducted on 30.01.2024, without raising any challenge to the sale proceedings and that the failure of the appellants herein to raise any challenge to the sale which took place on 30.01.2024 in the previous writ petitions filed on 17.07.2024 and 13.09.2024 respectively, disentitles them from raising any contention in the present writ petition challenging the sale.

In paragraph 11 of the impugned judgment, it is found that the writ petitioners are not entitled to any relief in exercise of discretionary jurisdiction under Article 226 of the Constitution of India, in as much as the petitioners have slept over their rights for a considerable time and did not even avail the opportunity to have the sale set aside on deposit and that they have approached the court only with the intention of delaying the proceedings further.

A perusal of Exhibit P10 auction diary would show that the fair value of the property was obtained from the Village Office and the bidding commenced at the total due amount of Rs.94,20,723/- and since no bidder was willing to accept the property at this amount, the bidding continued from the fair value of the property and the 8^th respondent–-Anish M.J., was the highest bidder for Rs.75,00,000/-.

Order XXI Rule 90 is the corresponding provision in the Civil Procedure Code to set aside sale on the ground of irregularity or fraud. Order XXI Rule 90(3) provides that no application to set aside sale under the said Rule shall be entertained upon any ground which the applicant could have taken on or before the date on which the proclamation of sale was drawn up.

As noticed earlier, in this case, the appellants have no case that they filed any objection at any stage of the auction proceedings before the confirmation of the sale and therefore, we find that the principles under Order XXI Rule 90(3) of the CPC are applicable to a property sold in auction in an application for execution of an award under Rule 74 of the Rules, 1969. The Honourable Supreme Court in Jagan Singh & Co. v. Ludhiana Improvement Trust [(2024) 3 SCC 308 ], held thus in paragraphs 35 and 36:

In Sadashiv Prasad Singh v. Harendar Singh [(2015) 5 SCC 574], it was held that a bona fide purchaser for value in an auction sale is treated differently than a decree holder purchasing such properties and that the property purchased by a third party auction purchaser, in compliance with a court order, cannot be interfered with on the basis of the success or failure of parties, if the auction purchaser had bona fide purchased the property.

In Sanjay Sharma v. Kotak Mahindra Bank Ltd.[2025 KHC OnLine 7019], the Honourable Supreme Court held that a sale by way of public auction, already confirmed or concluded, ought not to be set aside or interfered with lightly except on grounds that go to the core of such sale process and that mere irregularity or deviation from a rule that does not have any fundamental procedural error cannot be accepted as a ground to set aside the sale. Therefore, we find that the contention of the appellants that sale is to be set aside on the ground of material irregularity, is not legally sustainable, especially in view of the fact that the appellants have not filed any objection during various stages of the execution proceedings initiated under Rule 74 of the Rules, 1969 and that the statutory appeal against the confirmation of sale conducted on 30.01.2024 was filed under Section 83(1)(j) of the Act, 1969 only on 28.10.2025.

The learned counsel for the appellants cited the decision of the Honourable Supreme Court in Om Sakthi Sekar v. V. Sukumar [(2026) 265 Comp Cas 689=2026 SCC OnLine SC 368] and argued that when fraud is committed and thereby, competitive bidding is curtailed or compromised, the High Court can exercise the jurisdiction under Article 226 of the Constitution of India to set aside the sale, even after the expiry of the time limit in the statute for filing application to set aside the sale.

It is true that the principle of ‘finality of litigation’ cannot be stretched to the extent of an absurdity that it can be utilized as an engine of oppression by dishonest and fraudulent litigants and it is also a well settled principle of law that a judgment, decree or order obtained by playing fraud on the court, Tribunal or authority is a nullity and non est in the eye of law. However, it is also well settled that fraud cannot be established without proper pleadings and evidence. In Bishundeo Narain v. Seogeni Rai and Jagernath [AIR 1951 SC 280 =1951 KLT OnLine 814 (SC)], the Honourable Supreme Court held as under:

It is well settled that a litigant who prefers allegation of fraud must place on record precise and specific details of the said allegations and on a careful perusal of the averments in Exhibit P16 statutory appeal and in the writ petition, we find that the appellants have raised allegations of fraud without precise and specific details and therefore, we find that this appeal is devoid of merit and is liable to be dismissed. The points are answered against the appellants.

In the result, this appeal is dismissed. No costs.