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Judgment
Ms. Zainab Khan, learned counsel representing Mr. G.L.V.Ramana Murthy, learned counsel for the appellants.
Mr. C.V.Narasimham, learned counsel for respdonent Nos.5 to 11.
Mr. S.S.Prasad, learned Senior Counsel representing
Ms. C.Sindhu Kumari, learned counsel for respondent Nos.12 to 15.
This intra court appeal emanates from an order dated 08.10.2010 passed by learned Single Judge in W.P.No.6415 of 2009, by which writ petition preferred by the appellants has been dismissed.
For the sake of convenience, the parties shall be referred to in this order as per their ranking before the learned Single Judge.
Facts giving rise to filing of this appeal in nutshell are that respondent No.4 vis-à-vis Vasavi Cooperative Urban Bank Ltd., Hyderabad (hereinafter referred to as ‘the Bank’) is a society registered under the Telangana Co-operative Societies Act, 1964 (briefly referred to hereinafter as ‘the Act’) and is engaged in the business of banking. Petitioner No.1 is a proprietary concern. The petitioners approached the Bank seeking financial assistance. Thereupon a loan to the tune of Rs.20.02 crores was sanctioned to them as term loan. However, the same were converted to overdraft accounts sometime in the year 2000-2001. Respondent Nos.12 to 15 mortgaged their property admeasuring 7528 square yards, situated at Begumpet Village of Balanagar Mandal in Ranga Reddy District (hereinafter referred to as ‘mortgaged property’) as a security for loan.
The petitioner and other borrowers as well as mortgagers, vis-à-vis respondent Nos.12 to 15 committed default in repayment of the amount. Thereupon, the Bank initiated the arbitration proceedings. Eventually, an award dated 20.02.2003 was passed in favour of the Bank for recovery of the loan amount from the borrowers as well as respondent Nos.12 to 15, who had created a mortgage of the property to secure the amount of loan.
The Bank was suffering from liquidity problems. Thereupon in exercise of powers under Section 35-A of the Banking Regulation Act, the Reserve Bank of India held a meeting on 04.04.2005 and was of the opinion that there was a possibility of reconstruction of the Bank provided the bank at least recovers an amount of Rs.20 crores from the mortgaged property in its favour, which is situated at Begumpet. The Reserve Bank of India also suggested the Bank to close two more branches and to reduce the expenditure on overheads. Thereupon the Bank took a decision on 07.12.2005 to permit the sale of mortgaged property. A Three Member Committee was constituted by the Bank to manage the affairs of the Bank. It was headed by Joint Collector, Ranga Reddy District as its Chairman. The aforesaid Committee made attempts in the years 2003, 2004 and 2005 to sell the mortgaged property by way of an auction. However, the highest offers which were received in the auctions held in the years 2003, 2004 and 2005 were Rs.11,600.00, Rs.14,500.00 and Rs.25,000.00 per square yard respectively. Respondent No.5, vis-à-vis Sri G.R.Thanga Maligai Pvt. Ltd., Chennai, which is a private limited company (hereinafter referred to as ‘the company’) submitted an offer to purchase the mortgaged property at the rate of Rs.30,500.00 per square yard. On receipt of the aforesaid offer, the Bank found that the aforesaid rate is in conformity with market trends and the target to recover at least Rs. 20.00 crores from the sale of mortgaged property can be achieved. The Reserve Bank of India in its meeting on 07.12.2005 took a decision to permit the sale of the mortgaged property. Thereupon the proposal in this regard was forwarded on behalf of the Bank to the Commissioner for Cooperation and Registrar of Cooperative Societies, Hyderabad (hereinafter referred to as ‘the Commissioner’), which in turn was forwarded to the State Government. The State Government thereafter by a memo dated 18.04.2006 permitted sale of mortgaged property in favour of the company. The Commissioner by an order dated 28.04.2006 directed the Bank to take further action for sale of mortgaged property by taking an undertaking from the purchasers by remitting the sale proceeds directly to the account of the Bank.
The bank thereupon obtained the consent of respondent Nos.12 to 15 who were the owners of the mortgaged property and the same was sold to respondent Nos.5 to 11 on 11.05.2006 for a total consideration of Rs.23,12,24,584.00.
The amount of sale consideration was adjusted in the overdraft loan accounts bearing Nos.478 and 479 in favour of M/s.Maheswari Enterprises and M/s.Bhargavi Enterprises. The principal amount was also credited to the overdraft loan accounts bearing Nos.471 to 477.
The petitioners after two years and ten months from the execution of the sale deed in favour of the company on 25.03.2009 filed the writ petition vis-à-vis W.P.No.6415 of 2009, in which validity of the memo dated 18.04.2006 and the order passed by the Commissioner dated 28.04.2006 were assailed.
Learned Single Judge by order dated 08.10.2010 passed in W.P.No.6415 of 2009, inter alia held that Rule 52(11)(f) of the Telangana Co-operative Society Rules, 1964 (briefly referred to hereinafter as ‘the Rules’) do not apply to the fact situation of the case as the sale applies to a case of an execution of decrees, decisions or orders. It was further held that the writ petition was filed belatedly and therefore, the petitioners are not entitled to any relief. It was further held that in view of provisions under Sections 59 and 60 of the Indian Contract Act, 1872, it is for the creditor to adjust the amount at its discretion for any lawful debt actually due. It was further held that the principal amount was adjusted against all loan accounts. However, the amount of interest was adjusted against two loan accounts of M/s.Maheswari Enterprises and M/s.Bhargavi Enterprises. The writ petition preferred by the petitioners was dismissed.
In the aforesaid factual background, this intra court appeal has been filed.
Learned counsel for the appellants submitted that the mortgaged property belonging to respondent Nos.11 to 15 has been sold in violation of Section 52 of the Rules in as much as no auction was held. It is further submitted that the action of the Bank in appropriating the amount of sale proceeds only against the two loan accounts is arbitrary and unjust. It is further submitted that the appellants ought to have been given an opportunity of being heard before directions under Section 131 of the Act were issued.
On the other hand, learned counsel for respondent Nos.5 to 11 submits that Rule 52 of the Rules had no application to the inadequate factual matrix of the case. It is further submitted that the mortgaged property belonging to respondent Nos.12 to 15 was sold with their consent. It is also urged that the appellants cannot question the adjustment by the Bank in view of Sections 59 and 60 of the Indian Contract Act, 1872, as it is for the creditor to adjust any amount at its discretion for any lawful dues. It is further submitted that the order passed by the learned Single Judge does not call for any interference in this intra court appeal.
Learned counsel for respondent Nos.12 to 15 has also submitted that the order passed by the learned Single Judge does not call for any interference in this intra court appeal.
We have considered the rival submissions and have perused the record.
It is not in dispute that the appellants as well as other borrowers have taken a loan of Rs.20.02 crores from the Bank. It is also not in dispute that the appellants did not pay the amount of loan to the Bank. Thereupon the Bank was constrained to invoke the arbitration proceedings, in which an award dated 20.02.2003 was passed in its favour. A Committee of the Bank, which was headed by the Joint Collector had made attempts to sell the property in the years 2003, 2004 and 2005. However, offers to purchase the mortgaged property at the rate of Rs.11,600.00, Rs.14,500.00 and Rs.25,000.00 per square yard were received. The attempts made by the Bank to sell the mortgaged property proved futile. Thereafter, the offer was submitted by the company to purchase the mortgaged property at the rate of Rs.30,500.00 per square yard. The Bank was of the opinion that the aforesaid rate was in conformity with the market trends. The Reserve Bank of India also in its meeting on 07.12.2005 took a decision to permit the sale of the mortgaged property. The proposal submitted by the company was sent to the Commissioner, which in turn was forwarded to the State Government. The State Government thereafter by a memo dated 18.04.2006 permitted the sale of the mortgaged property.
The memo dated 18.04.2006 reads as under:
“Sub: Cooperative Urban Banks - Vasavi Coop. Urban Bank Ltd, Hyderabad Proposal for sale of Begumpet property - Owners and connected Transactions-Reg
Ref: From the Commissioner for Cooperation & Registrar of Cooperative Societies, AP, Hyderabad Lr Rc No.38629/2000
UB.V. dt 23.12.2005
&&&
The attention of the Commissioner for Cooperation and Registrar of Cooperative Societies, A.P., Hyderabad is invited to the reference cited. He is informed that the Begumpet land was put to auction thrice during 2003, 2004 and 2005 and the highest offer in the three auctions was Rs.11,600/- Rs.14,500/- and Rs.25,000/- per sq. yard respectively. The auctions during 2004 and 2005 were conducted under the Three Member Committee with the Joint Collector, Ranga Reddy and the Person-in-charge member of the Bank as members. The Bank could not get more than the amounts mentioned above in the auctions. Now, the rate offered by M/s G R Tangamalai Pvt Limited, Chennai is Rs.30,500/- per sq. yard which is in conformity with the market trends as mentioned in the proposal. The Reserve Bank of India felt that there is a possibility for reconstruction of the bank provided the bank achieves (4) four goals. One if it, is recovery of at least Rs.20.00 crores from the sale of the properties mortgaged to the bank situated on Begumpet Road. The PIC Committee of the bank resolved to permit the mortgagers to sell the Begumpet property to the buyers of their choice.
The Law Department opined that the Supreme Court has made it clear that nothing said in the order shall prevent the banks to enter into settlement with the debtors in accordance with the law. Further, as per the orders of the Supreme Court that if any amount is recovered from or paid by the judgment debtors to the Cooperative Banks concerned in view of the stay granted, it shall be open to them to seek appropriate relief from the bench, finally hearing these matters for refund of the said amount and interest thereon. Therefore, viewed from all angles the proposal of the Commissioner for Cooperation and Registrar of Cooperative Societies is agreed to for sale of the Begumpet property by the owners mortgagers to one M/s GR Tangamalai Pvt Ltd, Chennai at the price offered duly getting the market value assed by Competent Agency in the interest of the Bank and depositors With regard to land at Mankhal in Maheshwaram Mandal, Ranga Reddy District, the same cannot be sold as it is Bhoodan land and as such the proposal of the Bank to accept pay of Rs.14.00 lakhs and return the security documents of the property to Smt Shashikala Reddy. Further the bank may follow up for recovery of the balance amount with the borrowers.
The Commissioner for Cooperation and Registrar of Cooperative Societies is requested to take necessary action accordingly.”
Thus, it is evident that the State Government has taken a well considered decision while agreeing sale of the mortgaged property. Thereafter, the Bank obtained the consent of respondent Nos.12 to 15, who were owners of the mortgaged property and were also the borrowers. Eventually with their consent, a sale deed dated 11.05.2006 was executed in favour of respondent Nos.5 to 11.
At this stage, before proceeding further, it is apposite to take note of relevant provisions of the Telangana Cooperative Societies Act, 1964 and the Telangana Cooperative Society Rules, 1964.
Section 131 of the Act deals with powers of the Government to give directions whereas Rule 52 of the Rules provides for procedure in execution of decrees, decisions or orders.
Section 131 of the Act reads as under:
“131. Power of Government to give directions:- (1) the Government may generally or in any particular matter under this Act, issue such orders and directions, which are in accordance with the provisions of this Act and in the interest of Cooperative movement in the State as they may consider necessary to the Registrar and thereupon he shall give effect to such orders or directions and shall report to the Government in due course the result thereof.
(2) In any case, in which a direction has been given under sub-section (1), the Government may call for and examine the record of the proceedings of the Registrar and pass such orders in the case as they may think fit :
Provided that before passing any order under this sub-section, the person likely to be affected by such order shall be given an opportunity of making his representation.”
Thereafter, Rule 52 of the Rules provides that any decree-holder may apply to the Registrar of the district in which the cause of action arises for the execution of the decree after deposit of necessary costs. Rule 52(10) of the Rules provides that immovable property shall not be sold in execution of a decree unless such property has been previously attached. Rule 52(11) of the Rules provides that in respect of an attachment and sale or sale without attachment of immovable property, the procedure prescribed therein shall be followed.
Rule 52(11)(f) of the Rules reads as under:
“(f) When any immovable property is sold under these rules, the sale shall be subject to the prior encumbrances on the property, if any. The decree-holder shall, when the amount for the realization of which the sale is held, exceeds one hundred rupees, furnish to the sale of officer within such time as may be fixed by the sale officer or by the Registrar of the district, an encumbrance certificate from the Registration Department for a period of not less than twelve years prior to date of attachment of the property, sought to be sold or in a case falling under the proviso to sub-rule (10), prior to the date of the application for execution. The time for production of the encumbrance certificate may be extended at discretion of the sale officer or the Registrar of the district, as the case may be. The sale shall be by public auction / e-Auction to the highest bidder, provided that it shall be open to the sale officer to decline or accept the highest bid where the price offered appears to be unduly low or for other reasons and provided also that the Registrar of the district or the sale officer may, in his discretion adjourn the sale to a specified day and hour, recording his reasons for such adjournment. Where a sale is so adjourned for a longer period than seven days a fresh proclamation under clause (e) shall be made, unless the judgment-debtor consents to waive it. The sale shall be held after the expiry of not less than thirty days calculated from the date on which notice of the proclamation was affixed at the office of the Registrar of the district. The Mode, time and place of sale shall be fixed by the Registrar of the district and the place of sale shall be the village (or town) where the property to be sold is situated or such adjoining prominent place of public resort as may be fixed by the said Registrar:
Provided that in cases where an encumbrance certificate is not obtainable owning to the destruction of the connected records, an affidavit from the village karanam in regard to the encumbrance known to him supported by a certificate from the Registration Department that the encumbrance certificate cannot be granted owning to the destruction of the connected records, shall be accepted in the place of an encumbrance certificate.”
The memo dated 18.04.2006 which has been issued by the State Government has not been issued in exercise of powers under Section 131 of the Act. The aforesaid memo has been granted on the basis of the memo submitted by the Commissioner seeking permission to sale. Therefore, the contention urged on behalf of the appellants that an opportunity of hearing needs to be afforded to the appellants is misconceived. Even otherwise, the mortgaged property has been sold with the consent of the other borrowers, vis-à-vis respondent Nos.12 to 15, who are the owners of the property in question. The procedure prescribed in Rule 52 of the Rules applies to a case of an execution of decree or order and does not apply to a case of sale of property which has been sold with the consent of the owners. Therefore, the contention that the mortgaged property has been sold in violation of Rule 52 of the Rules also stands subside.
It is trite law that extraordinary jurisdiction of this Court under Article 226 of the Constitution of India is discretionary in nature. It is also equally well-settled legal proposition that delay defeats equity and this Court in exercise of powers under Article 226 of the Constitution of India would not grant relief to an indolent person who has slept over his rights (See S.S.Balu v. State of Kerala (2009) 2 SCC 479, Vijay Kumar Kaul v. Union of India (2012) 7 SCC 610, and U.P.Power Corporation Limited v. Ram Gopal (2021) 13 SCC 225).
In the instant case, the sale deed was executed in favour of respondent Nos.5 to 11 on 11.05.2006. The writ petition has been filed after a period of two years and ten months i.e., on 25.03.2009. The appellants have not furnished any explanation for approaching the Court after a period of two years and ten months. Thus, the writ petition filed by the appellants suffer from delay and laches and therefore, on this ground also, the appellants are not entitled to invoke the extraordinary discretionary jurisdiction of this Court under Article 226 of the Constitution of India.
As far as contention raised on behalf of the appellants that the amount of sale proceeds ought to have been adjusted to all the accounts is concerned, suffice it to say that Sections 59 and 60 of the Indian Contract Act, 1872 permit the creditor to adjust any amount at its discretion for any lawful dues. It is pertinent to note that the principal amount has been adjusted towards all the accounts and the interest has been adjusted against two of the accounts belonging to M/s.Maheswari Enterprises and M/s.Bhargavi Enterprises. The aforesaid action has been taken in consonance with law and does not suffer from any infirmity.
In view of preceding analysis, we do not find any ground to differ with the view taken by learned Single Judge.
In the result, the appeal fails and is hereby dismissed. There shall be no order as to costs.
Miscellaneous applications, if any pending, shall stand closed.