Shyam Lal and Another vs State of J. and K. and Another

Bhat, J.—Petitioner among other things challenges the vires of Section 82 of the Cooperative Societies Act of 1960. It is contended that the

said section is ultra vires of Article 14 of the Constitution as it denies protection of law and equality before law to the petitioner.

Petitioner seems to have borrowed some amount from the respondent No. 2 and mortgaged his land as security for repayment of the said loan.

On an earlier occasion the respondent No. 2 appears to have passed a sale order on 1-9-1981 against the petitioner. Petitioner contends that he

had challenged the said order before the High Court and the same was quashed Annexure I is copy of the order passed by the High Court on 22-

8-1983. The earlier order seems to have been quashed, for, there was no compliance of Sub-section (2) of Section 82 of J. and K. Co-operative

Societies Act, 1960 and a concession was made by the counsel for the Respondent No 2. The Bank was however allowed to take fresh

proceedings in accordance with law. Consequent upon the order of the High Court fresh proceedings were initiated and sale order issued.

The short point canvassed before us is that whereas Section 79 of the Co-operative Societies Act provides safeguard to the borrowers and they

are to be proceeded against through a suit on the mortgage or the Bank may take any other proceedings for recoveries of moneies due under the

mortgage. Section 79 provides procedure for receiving money and granting discharges notwithstanding the fact that the mortgage executed in

favour of Land Development Bank has been transferred or is deemed under; the provisions of Section 17 to have been transferred to the Land

Development Bank. Clause (a) of Section 79 makes payments valid to the Land Development Bank as a consequence of transfer of such

payments to the Land Development Bank. Clause (b) of the said section provides that in the absence of specific directions issued by the Board of

Trustees and communicated to the Land Development Bank, the said bank is entitled to sue on the mortgage or take any other proceeding for the

recovery of the moneys due under the mortgage.

Section 82(2)(a) which is impugned in this writ petition provides that notwithstanding anything contained in the Transfer of Property Act, where

a power of sale without the intervention of the Court is expressly conferred on the Land Development Bank by the mortgaged deed, the committee

of such Bank or any person authorised by such committee in this behalf shall in case of default of payment of the mortgage money or any part

thereof, have power in addition to any other remedy available to the Bank to bring the mortgaged property to sale without the intervention of the

Court. Sub-section (2)(a) says that no such power shall be exercised unless the Board is previously authorised the exercise of the power conferred

by Sub-section (1) after hearing the objections, if any, of the i mortgagor.

The substance of Section 82 as that power of sale of mortgage property can be exercised without the intervention of the court only if mortgage

deed-expressly confers such a power on the Land Development Bank. So the power conferred on the Bank must first emanate from the mortgage

deed and then the Bank will be at liberty to take recourse to Section 82 and issue orders for the sale of the mortgage property without intervention

of the court. Therefore it is a contractual covenant between the parties about the mode of recovery of debt in the event or, mortgaged i.e., the

borrower failing to pay the loan. The power in this behalf must be expressed in the deed. After the power is conferred, the Bank may proceed in

accordance with Section 82 to effect recovery of the mortgaged money or any part thereof and this remedy is in addition to any other remedy

available to the Bank.

Mr. Lone's contention is that it gives sweeping powers to the respondent No. 2 to sell the mortgaged properties without intervention of the

court, and makes a departure from the procedure which is laid in Section 79 of the Co-operative Societies Act and on that account it must be held

to be abuse of Article 14 as it denies equality before law to the petitioner.

Mr. Lone has relied on an authority of the Supreme Court in In Re: The Special Courts Bill, 1978, and canvassed before us that procedure

which I has the effect of imposing penalty must be fair and just. The creation of special courts was challenged before the Supreme Court as being

opposed to equality clause of the Constitution. With some guidelines the Supreme Court rejected the contention raised by the petitioners in that

case. This authority will not be of any help in this case because herein the power can be exercised by the respondent No. 2 only if there is express

covenant between the parties in the mortgage deed. None of the clauses of the mortgage deed is challenged before us. Therefore the provision in

the mortgage deed which empowers the bank to sell the mortgaged property, if the debt is not discharged, does not appear to be unfair or unjust

because it is the mortgagor himself who has of his own volition conferred such a power on the respondent No. 2. Section 82 of the Co-operative

Societies Act only recognizes the contractual obligation of the parties vis-a-vis each other, but it makes a safeguard in Sub-section (2) that i before

the power to sell is exercised, the Board has to authorise the authority to exercise the power and objections of the mortgagor are to be heard. This

provision seems to have been made to fulfil the requirements of principles of natural justice. Section 82 therefore cannot be said to be bad in any

manner or violative of equality clause because it only provides the method of observance of covenant in the mortgage deed with regard to the sale

of the property if the mortgage deed has expressly conferred said power on the Bank. The power is not to be exercised by the Bank arbitrarily or

at the back of the mortgagor, but his objections are first to be heard.

The language of Section 82 would make it amply clear that the Legislature has given recognition to the power conferred on the Bank by the

contract of mortgage to which a mortgagor is a party. Such a power cannot be implied but is to be express. Our attention was drawn to the

mortgage deed. We are convinced that the mortgagor has conferred the power on the respondent No. 2 in regard to the sale of his mortgage

property without the intervention of the court in the event of mortgagor's failure to pay the debt. Such Found clause in the Co-operative Societies

Act cannot be held to be ultra vires of the equality clause. Added to the said provision is statutory requirement of hearing objections of the

mortgagor before any power is conferred on any authority in respect of the sale of the mortgage property. It takes careof observance of principles

of natural justice and is not ultra vires in any manner.

Section 79 of the Act would operate in a different situation which are not like the one for which Section 82 is engrafted in the Cooperative

Societies Act. The remedies provided in the two sections depend on the conditions of the mortgage deed. Therefore, we are unable to agree with

Mr. M.H. Lone to hold that section is invalid or violative of the equality clause in the Constitution.

Mr. K.N. Bhat drew our attention to an order of this Court in Ahmad Mir v. State, Writ Petn. No. 247/1984 dt. 2-6-1987 whereby a

Division Bench of this Court has held that the writ petition against the Co-operative Societies was not maintainable as the said society was not

amenable to the jurisdiction of this Court. Reliance was placed on 1973 J&K LR 809 : 1974 Lab IC 373. In this case we do not wish to say

anything about the maintainability of the writ petition, but since the petitioner has challenged the vires of certain provisions of the Co-operative

Societies Act, therefore we cannot refuse to consider that aspect of the case in our writ jurisdiction. We, therefore heard the petitioner and learned

counsel for the respondents and hold that Section 82(2)(a) of the Co-operative Societies Act is valid and does not offend the equality clause of the

constitution as contended. The writ petition is accordingly dismissed.

Rizvi, J.

I agree.