Equivalent Citations

2009 OLR 2 201 . 2009 CUTLT 107 250 . 2009 AIR ORI 147 . 2009 SCC ONLINE ORI 3 .
2009 CLT 107 250 .

Swastik Agency And Others v. State Bank Of India, Bhubaneswar And

Others.
Orissa High Court (Jan 8, 2009)

CASE NO.

W.P (C) No. 7361 of 2008

ADVOCATES

R.C.Das
D.K.Mishra
A.N.Routray
JUDGES

Dr. B.S Chauhan, C.J

B.N Mahapatra, J.

SUMMARY

Facts

The petitioner had availed a cash credit loan of Rs. 2,00,000/- from the opposite party-
Bank in 1997 to run its business. The petitioner failed to repay the loan as per the
agreement and expressed willingness to pay Rs. 1,00,000/- within six weeks if the proposal
for OTS was accepted. The bank accepted Rs. 79,000/- but proceeded with the auction
sale and settled the property with a sum of Rs. 13,93,000/- in favour of opposite party No.
4. Petitioner filed objections, but the Bank authority rejected the same. The petition was
filed for quashing the judgment and order of the Debts Recovery Tribunal, Cuttack in O.A
No. 29 of 2006 and for quashing of the auction sale by opposite party No. 1- Bank in
pursuance of publication of notice dated 10-11-2005.
Issues

Whether the auction sale was conducted in compliance with the statutory provisions?

Can a confirmed sale be set aside in all circumstances?

Whether the non-compliance of the statutory provisions would vitiate the proceedings

Printed by licensee : Ashok Kumar Singh Advocate Page 1 of 21

 altogether?

Decision

The Court held that the auction sale was not conducted in compliance with the statutory
provisions and was liable to be set aside even after confirmation. The Court further held
that a confirmed sale can be set aside in all circumstances. The non- compliance of the
statutory provisions would vitiate the proceedings altogether. All proceedings subsequent
to notice under Section 13 (4) of the Act, 2002 being in flagrant violation of the statutory
provisions are liable to be quashed. In such a fact situation opposite party No. 4 is entitled
to refund of the amount deposited by him. Opposite party No. 1 is directed to recalculate
the amount due from the petitioner including interest thereon and issue a fresh demand
notice to be served upon the petitioner within four weeks from today. The Court further
directed that as the opposite party-bank proceeded illegally, it is not entitled to claim for
legal expenses or recovery expenses from the petitioner. On receipt of the recomputed
demand from the bank , the petitioner shall deposit the same within four weeks from the
date of receipt failing which the bank shall be at liberty to proceed against the petitioner
for making full recovery of its outstanding dues in accordance with law.
Reasoning

The Court held that the auction sale was not conducted in compliance with the statutory
provisions. The concept of the reserve price is not synonymous with valuation of the
property. Property is to be sold for obtaining the market price and not merely for
recovering the dues of the Corporation or any other subsequent charge-holder. Valuation is
a question of fact and valuation of the property is required to be determined fairly and
reasonably. The Court further held that it should not be a forced sale. Therefore, valuer is
to apply its mind to this aspect and the conduct of sale should not amount to material
irregularity. The Court observed that whenever any action of the authority is in violation of
the provisions of the statute or the action is constitutionally illegal, it cannot claim any
sanctity in law, and there is no obligation on the part of the Court to sanctify such an illegal
act. Wherever the statutory provision is ignored, the Court cannot become a silent
spectator to such an illegality, and it becomes the solemn duty of the Court to deal with the
persons violating the law with heavy hands.
Precedent

In Lachhman Dass v . Jagat Ram, (2007) 10 SCC 448 : (AIR 2007 SC (Supp) 1169) the
Hon'ble Supreme Court held that a right to hold property is a constitutional right as well as
a human right. A person cannot be deprived of his property except in accordance, with the
provisions of statute. In Dr. Rajbir Singh Dalai v . Chaudhari Devi Lal University, Sirsa
and another, (2008) 9 SCC 284 : (2008 AIR SCW 5817) and Divya Manufacturing
Company (P) Ltd. v . Union Bank of India , AIR 2000 SC 2346, the Apex Court held that
a confirmed sale can be set aside in all circumstances. A Constitution Bench of the
Supreme Court in Ajit Singh (II) v . State of Punjab, (1999) 7 SCC 209 : AIR 1999 SC

Printed by licensee : Ashok Kumar Singh Advocate Page 2 of 21

3471 held that any action being violative of Article 14 of the Constitution is arbitrary and
if it is found to be dehors the statutory rules, the same cannot be enforced. In Thiagarajan
v . Sri Venugopalaswamy B. Koil, AIR 2004 SC 1913, the Apex Court held that it is the
obligation of the Courts of law to further the clear intendment of the legislature and not
frustrate it by excluding the same. In Seth Kashi Ram Chemical (supra), the Apex Court
held that highest bidder in an auction does not acquire any right, at the most he can claim
the refund of the deposit made by him. In M.C Mehta v . Union of India , AIR 2006 SC
1325, the Apex Court observed that rule of law is the essence of democracy. Laws have to
be enforced. The Supreme Court has taken the same view in Ram Chand v . Union of
India , (1994) 1 SCC 14 : 1993 AIR SCW 3479 and held that “the exercise of power
should not be made against the spirit of the provisions of the statute, otherwise it would
tend towards arbitrariness.”

JUDGMENT

Dr. B.S Chauhan, C.J:— This writ petition has been filed for quashing the judgment and
order of the Debts Recovery Tribunal, Cuttack (hereinafter called ‘the Tribunal’) in O.A
No. 29 of 2006 and for quashing of the auction sale by opposite party No. 1- Bank in
pursuance of publication of notice dated 10-11-2005.
FACTUAL MATRIX:
2. The facts and circumstances giving rise to this case are that petitioner No. 1 had availed
a cash credit loan to the tune of Rs. 2,00,000/- (two lakhs) in the year 1997 from the
opposite party-Bank to run its business. Petitioners Nos. 2 and 3 stood as guarantors by
scrutinizing their assets pertaining to Sabak Plot No. 2, Sabak Khata No. 94 corresponding
to Hal Plot No. 2, Khata No. 100 of Mouza, Baramunda.
3. Petitioner No. 1 could not repay the loan as per the terms incorporated in the agreement.
Therefore, opposite party-Bank issued a notice dated 24-5-2004 under Section 13(2) of the
Securitisation and Reconstruction of the Financial Assets and Enforcement of Security
Interest Act, 2002 (hereinafter called “the Act, 2002”). The Bank issued another notice
dated 8-10-2004 under Section 13(4) of the Act, 2002 and appointed M/s. Lalita Chambers
and Constructions as Bank's Enforcement Agency to assist the Bank to take all necessary
steps for exercise of right under the Act, 2002. The notice under Section 13(4) was
published in daily newspaper. The ‘Sambad’ on 10-11-2005 for auction of the property in
question fixing 17-12-2005, the date of sale. Petitioner, approached the Bank immediately
thereafter, for entering into One Time Settlement (OTS) offering a sum of Rs. 2,20,000/-
and deposited a sum of Rs. 20.000/- in September, 2005 and further deposited a sum of Rs.
20,000/- on 10th November, 2005 to show its bona fide to make payment of the
outstanding dues and to get the matter settled. The Bank in its letter dated 21st November,
2005, asked the petitioner to apply for settlement afresh giving specific amount as offer
and terms of OTS. Petitioner again offered a sum of Rs. 2,20,000/- towards full and final
settlement of its loan dues subject to deduction of the amount already deposited. The
petitioner also expressed its willingness to pay another sum of Rs. 1,00,000/- within six

Printed by licensee : Ashok Kumar Singh Advocate Page 3 of 21

weeks by selling some of its belongings if the proposal for OTS was accepted. Opposite
party No. 2 vide letter dated 1st December, 2005 intimated the petitioner that an amount of
Rs. 4,96,369.66 was due to the bank which included principal amount of Rs. 1,91,058.66;
interest to the tune of Rs. 2,85,180; and the balance amount towards legal and recovery
expenses. Petitioned was asked to deposit 25% of the offered amount by 5th December,
2005 as the auction sale was fixed for 17th December, 2005. Petitioner deposited a sum of
Rs. 30,000/- on 14-12-2005; Rs. 20,000/- on 16-12-2005 and Rs. 29,000/- on 17-12-2005.
In spite of acceptance of the money to the tune of Rs. 79,000/-, as per the instruction of the
bank , which was more than 25% of the offered amount, opposite party-Bank proceeded
with the auction sale and settled the property with a sum of Rs. 13,93,000/- in favour of
opposite party No. 4. Petitioner had filed a writ petition being W.P (C) No. 16213 of 2005
for quashing the sale notice, which was disposed of by this Court vide judgment and order
dated 2nd January, 2006 giving liberty to the petitioner to file objections before the Bank
authorities and directing said authorities to decide the same. It was further clarified that if
the petitioner was aggrieved by the order of the Bank Authorities, it may approach the
Tribunal. Petitioner approached the Bank Authority by filing objections, but the Bank
authority rejected the same in view of the fact that the property had already been sold to
opposite party No. 4 for a sum of Rs. 13,93,000/-. Being aggrieved petitioner approached
the Tribunal by filing O.A No. 29 of 2006 which was dismissed vide order dated 7-6-2006.
Petitioner preferred appeal No. 41 of 2006 against the order dated 7-6-2006 before the
Debt Recovery Appellate Tribunal at Kolkata (hereinafter called the DRAT). However, the
said appeal was also dismissed vide order dated 25th March, 2008. Hence this writ
petition.
SUBMISSIONS:
4. Learned counsel for the petitioners submitted that petitioner No. 1 could not deposit the
amount as per the terms of loan agreement. When petitioner offered Rs. 2,20,000/- towards
OTS, the Bank authorities intimated the petitioner to deposit 25% of the offered amount
and petitioner was asked to raise a fresh offer. Prior to the date of auction dated 17th
December, 2005 out of total outstanding dues petitioner deposited a sum of Rs. 99,000/-.
The balance amount mainly included interest, recovery and legal expenses. It is stated that
property was worth Rs. 30 lakhs and should not have been put to auction and that too
fixing the reserve price at Rs. 95 lakhs as it had been assessed at Rs. 4.12 lakhs. Proposal
for OTS submitted by the petitioner was rejected straightway without considering the
same. The opposite party-Bank did not meet the requirement of sub-rule (5) of Rule 8 of
the Security Interest (Enforcement) Rules, 2002 (hereinafter called the ‘Rules’) which
provided for a decision on the part of the Bank as to whether it was necessary to dispose
of the entire property to a part thereof for making the recovery of the outstanding dues. In
case, such statutory requirement had not been complied with the proceeding stood vitiated.
Order passed by this Court dated 2-1-2006 was simply brushed aside mentioning that
property had already been sold in auction, though the authorities were under legal
obligation not to confirm sale. The petitioner is still in actual and physical possession of
the property as interim relief has been granted to it from time to time as is evident from the

Printed by licensee : Ashok Kumar Singh Advocate Page 4 of 21

order dated 8-9-2006 (Annex.- D/4 ) passed by the District Collector, Khurda and order
dated 16-5-2008 passed by this Court in the present writ petition. The property in question,
has not yet vested in favour of the auction purchaser. Auction sale has not been conducted
and concluded in conformity of the statutory rules. Petitioners are willing to deposit the
entire decretal amount even today. The proceedings of sale are liable to be quashed.
5. On the contrary, Mr. D.K Misra, learned counsel appearing for the Bank opposed the
petition contending that the petitioner had not paid the outstanding dues therefore recovery
proceedings were initiated. Bank dues had been to the tune of Rs. 4.96 lakhs and the
petitioner could deposit only a sum of Rs. 99,000/-. The said amount of Rs. 4.96 lakhs
included the legal and recovery expenses.
Further, it has been submitted by Mr. Mishra that as the matter stood concluded by the
judgments of the Tribunal and the Appellate Tribunal and all the issues raised herein had
been examined and decided, it is not permissible for this Court to reopen the whole case
and appreciate the evidence etc. sale had been concluded giving strict adherence to the
statutory Rules. After auction sale, the Bank adjusted its dues and sent a Banker's Cheque
to the petitioner for Rs. 9,11,243/- which it did not receive. Thus it was received back by
the Bank . Hence, the petition is liable to be dismissed.
6. Mr. R.C Das, learned counsel for opposite party No. 4 has opposed the petition
contending that once the sale has been confirmed, this Court has no business to entertain
the writ petition as it is not permissible in law to set aside the confirmed sale after issuance
of the sale certificate, particularly, when sale had been conducted in accordance with
Rules. Petitioner failed to deposit the money in time. There had been a proper valuation of
the property and the opposite party No. 4 is a bona fide purchaser for consideration of the
same. All the issues had been agitated before the Tribunal and the appellate forum and
stood decided. DRT is not a party before the writ Court and thus, its judgment cannot be
set aside. Therefore, the facts of the case do no warrant any interference by this Court in
writ jurisdiction. The petition is liable to be dismissed.
7. We have considered the rival submissions made by the learned counsel for the parties
and perused the record.
ISSUES:
8. On the basis of pleadings and submissions made by the learned counsel for the parties,
mainly the following issues require determination:
(1) Whether proceedings had been conducted and concluded in accordance with the
statutory Rules, and if not, what are the consequences?; and
(2) Whether an auction sale can be quashed after it stood confirmed and sale certificate has
been issued?
STATUTORY PROVISIONS APPLICABLE:
9. It may also be necessary to refer to the relevant statutory provisions, particularly the

Printed by licensee : Ashok Kumar Singh Advocate Page 5 of 21

Rules applicable in the instant case. The relevant Rules are as under:
“8. (2) The possession notice as referred to in sub-rule (1) shall also be published in two
leading newspapers, one in vernacular language having sufficient circulation in that
locality, by the authorised officer.
xxx xxx xxx
(5) Before effecting sale of the immovable property referred to in sub-rule (1) of Rule 9,
the authorised officer shall obtain valuation of the property from an approved valuer and in
consultation with the secured creditor, fix the reserve price of the property and may sell the
whole or any part of such immovable secured asset by any of the following methods:—
(a) by obtaining quotations from the persons dealing with similar secured assets or
otherwise interested in buying such assets; or
(b) by inviting tenders from the public;
(c) by holding public auction; or
(d) by private treaty.
(6) The authorised officer shall serve to the borrower a notice of thirty days for sale of the
immovable secured assets, under sub-rule (5):
Provided that if the sale of such secured asset is being effected by either inviting tenders
from the public or by holding public auction, the secured creditor shall cause a public
notice in two leading newspapers one in vernacular language having sufficient circulation
in the locality by setting out the terms of sale…………
xxx xxx xxx
9. (1) No sale of immovable property under these rules shall take place before the expiry of
thirty days from the date on which the public notice of sale is published in newspapers as
referred to in the proviso to sub-rule (4) or notice of sale has been served to the borrower.”
(Emphasis added)
10. Thus, it is evident from the aforesaid statutory provisions that “possession notice” is
mandatorily required to be published in two leading newspapers having wide circulation in
the concerned area and one of them must be in vernacular language. After having the
valuation report, the authority has to then take a decision as to whether the property is to be
sold as a whole or in part and accordingly reserve price is to be fixed. It further provides
the various modes of alienation of the property. It includes inviting tenders, holding public
auction and even by private negotiations. Notice of sale is to be served upon the borrower.
In case property is to be disposed of by auction, “notice of auction sale” is also to be
published in two leading newspapers having wide circulation in the said locality and one of
them is to be in vernacular language.
RECOVERY OF PUBLIC DUES:

Printed by licensee : Ashok Kumar Singh Advocate Page 6 of 21

11. Undoubtedly, public money should be recovered and recovery should be made
expeditiously. But it does not mean that the financial institutions which are concerned only
with the recovery of their loans, may be permitted to behave like property dealers and be
permitted further to dispose of the secured assets in any unreasonable or arbitrary manner
in flagrant violation of statutory provisions.
12. In Lachhman Dass v. Jagat Ram, (2007) 10 SCC 448 : (AIR 2007 SC (Supp) 1169) the
Hon'ble Supreme Court held that a right to hold property is a constitutional right as well as
a human right. A person cannot be deprived of his property except in accordance, with the
provisions of statute.
13. Similar view has been reiterated by the Apex Court in Chairman, Indore Vikas
Pradhikaran v. Pure Industrial Coke and Chemicals Ltd. , AIR 2007 SC 2458 and
Commissioner of Municipal Corporation, Shimla v. Prem Lata Sood, (2007) 11 SCC 40 :
(AIR 2007 SC (Supp) 272).
Thus the condition precedent for taking away someone's property or disposing of the
secured assets, is that the authority must ensure compliance of the statutory provisions.
14. In case the property is disposed of by private treaty without adopting any other mode
provided under the aforesaid rules, there may be a possibility of collusion/fraud and even
when public auction is held, the possibility of collusion among the bidders cannot be ruled
out. In State of Orissa v. Harinarayan Jaiswal , AIR 1972 SC 1816, the Apex Court held
that a highest bidder in public auction cannot have a right to get the property or any
privilege, unless the authority confirms the auction sale, being fully satisfied that the
property has fetched the appropriate price and there has been no collusion between the
bidders.
15. Haryana Financial Corporation v. Jagdamba Oil Mills, AIR 2002 SC 834, the Hon'ble
Supreme Court consider this aspect and while placing reliance upon its earlier judgment in
Chairman and Managing Director, SPICOT v . Contromix (P) Ltd., AIR 1995 SC 1632
held as under:
“…in the matter of sale of public property, the dominant consideration is to secure the best
price for the property to be sold. This can be achieved only when there is maximum public
participation in the process of sale and everybody has an opportunity of making an offer.
Public auction after adequate publicity ensures participation of every person who is
interested in purchasing the property and generally secures the best price. But many times
it may not be possible to secure the best price by public auction when the bidders join
together so as to depress the bid or the nature of the property to be sold is such that suitable
bid may not be received at a public auction. In that event, any other suitable mode for
selling of property can be by inviting tenders. In order to ensure that such sale by calling
tenders does not escape attention of an intending participant, it is essential that every
endeavour should be made to give wide publicity so as to get the maximum price.”
(Emphasis added)

Printed by licensee : Ashok Kumar Singh Advocate Page 7 of 21

16. Therefore, it becomes a legal obligation on the part of the authority that property be
sold in such a manner that it may fetch the best price. Thus essential ingredients of such
sale remain a correct valuation report and fixing the reserve price. In case proper valuation
has not been made and the reserve price is fixed taking into consideration the inaccurate
valuation report the intending buyers may not come forward treating the property as not
worth purchase by them. As a moneyed person or a big businessman may not like to
invoke himself in small sales/deals.
VALUATION AND RESERVE PRICE:
17. The word ‘value’ means intrinsic worth or cost or price for sale of a thing/ property
(vide Union of Indiav. Bombay Tyre International Ltd. (1984) 1 SCC 467 : (AIR 1984 SC
420) and Gurbachan Singh v. Shivalak Rubber Industries, AIR 1996 SC 3057).
18. In State of U.P v. Shiv Charan Sharma , AIR 1981 SC 1722 , the Supreme Court
explained the meaning of “reserve price” explaining that the price with which the public
auction starts and the auction bidders are not permitted to give bids below the said price,
i.e the minimum bid at auction.
19. In Anil Kumar Srivastava v. State of U.P, AIR 2004 SC 4299, the Hon'ble Apex Court
considered the scope of fixing the reserve price and placing reliance on its earlier judgment
in Duncans Industries Ltd. v. State of U.P, AIR 2000 SC 355, explained that reserve price
limits the authority of the auctioneer. The concept of the reserve price is not synonymous
with valuation of the property. These two terms operate in different spheres. An invitation
to tender is not an offer. It is an attempt to ascertain whether an offer can be obtained with
a margin. The valuation is a question of fact, it should be fixed on relevant material. The
difference between the ‘valuation’ and ‘reserve price’ is that, fixation of an upset price may
be an indication of the probable price which the property may fetch from the point of view
of intending bidders. Fixation of the reserve price does not preclude the claimant from
adducing proof that the land had been sold for a low price.
20. In view of the above, it is evident that there must be application of mind by the
authority concerned while approving/ accepting the report of the approved valuer and
fixing the reserve price, as the failure to do so may cause substantial injury to the
borrower/ guarantor and that would amount to material irregularity and ultimately vitiate
the subsequent proceedings.
DECISION TO SELL WHOLE OR PART OF THE SECURED ASSETS:
21. In Ambati Narasaya v . M. Subba Rao, AIR 1990 SC 119, the Apex Court dealt with
a case where in execution of a money decree for Rs. 2,400/- the land was sold for Rs.
17,000/-. The Apex Court set aside the sale observing as under:
“……Out of 10 acres, the Court could have conveniently demarcated a portion and sold it.
Unfortunately, no such attempt was made and it was not even thought of. The Court has
blindfold sold the entire property. This is an usual feature which we have noticed in most
of the execution cases. We must deprecate this tendency. There is a duty cast upon the

Printed by licensee : Ashok Kumar Singh Advocate Page 8 of 21

Court to sell only such property or a portion thereof as necessary to satisfy the decree….”
22. While deciding the said case a very heavy reliance had been placed by the Supreme
Court on its earlier judgment in Takkaseela Pedda Subba Reddi v. Pujari Padmavathamma,
AIR 1977 SC 1789.
23. In S. Mariyappa (dead) by LRs v . Siddappa , ( 2005) 10 SCC 235 , the Hon'ble
Supreme Court held that it is duty of the Executing Court to consider whether sale of only
a part of the property would be sufficient to meet the decretal amount and in case such a
decision is not taken, the sale deserves to be set aside. While deciding the said case,
reference has been made to its earlier judgment in Ambati Narasaya (AIR 1990 SC 119)
(supra).
24. In Desh Bandhu Gupta v. N.L Anand and Rajinder Singh, (1994) 1 SCC 131 : (1993
AIR SCW 3458) the Hon'ble Apex Court held that in an auction sale and in execution of
the Civil Court's decree, the Court has to apply its mind to the need for furnishing the
relevant material particulars in the sale proclamation and the records must indicate that
there has been application of judicial mind and principle of natural justice had been
complied with. The Court further held as under:
“The estimate of the value of the property is a material fact to enable the purchaser to
know its value. It must be verified as accurately and fairly as possible so that the intending
bidders are not misled or to prevent them from offering inadequate price of to enable them
to make a decision of offering adequate price.”
25. While deciding the said case, the Apex Court had placed reliance upon its earlier
judgment in Gajadhar Prasad v. Babu Bhakta Ratan , AIR 1973 SC 2593, wherein it had
been held that the estimated value of the property to be sold, must not accept merely the
ipse dixit of one side and a fair valuation has to be made. More so, the judgment-debtor is
to be given a reasonable opportunity in regard to the valuation of the property sought to be
sold, in absence thereof the sale would suffer from material irregularity where the
judgment-debtor suffers substantial injury by the sale.
26. Similar view has been reiterated by the Hon'ble Apex Court in S.S Dayananda v. K.S
Nagesh Rao, (1997) 4 SCC 451 and D.S Chohan v. StateBank of Patiala, (1997) 10 SCC
65.
27. In Gajraj Jain v. State of Bihar, (2004) 7 SCC 151 : (AIR 2004 SC 3392) the Apex
Court held that before putting the assets for sale the Financial Corporation must ascertain
the market value of the property, assets should be sold on itemized basis or as a whole,
whichever found to be more profitable, and bidders should know the details of the assets or
itemized value. Property is to be sold for obtaining the market price and not merely for
recovering the dues of the Corporation or any other subsequent charge- holder. In such a
case auction is to be held to obtain the best possible price for the mortgaged assets and the
best possible price must, in the context, mean the fair market price. The authority, while
assessing the fair market price, must act in accordance with the statutory rules and cannot
be permitted to act unreasonably. The reasonableness is to be tested against the dominant

Printed by licensee : Ashok Kumar Singh Advocate Page 9 of 21

consideration to secure the best price.
28. Thus, in view of the above, it is evident that law requires a proper valuation report, its
acceptance by the authority concerned by application, of mind and then fixing the reserve
price accordingly and accept the auction bid taking into consideration that there was no
possibility of collusion of the bidders. The authority is duty bound to decide as to whether
sale of part of the property would meet the outstanding demand. Valuation is a question of
fact and valuation of the property is required to be determined fairly and reasonably.
SETTING ASIDE AUCTION SALE-AFTER CONFIRMATION:
29. In Navalkha and Sons v . Sri Ramanya Das , AIR 1970 SC 2037 , the Apex Court
while dealing with the confirmation of sale by Court held that there must be a proper
valuation report, which should be communicated to the judgment-debtor and he should file
his own valuation report and the sale should be conducted in accordance with law and after
confirmation of sale and issuance of sale certificate, Court cannot interfere unless it is
found that some material irregularity in the conduct of sale has been committed. The Court
further held that it should not be a forced sale. A valuer's report should be as good as the
actual offer and the variation should be within limit. Such estimate should be done
carefully and bids by the seasoned auctioneer. The Court further held as under:
“The condition of confirmation by the Court operates as a safeguard against the property
being sold at inadequate price whether or not it is a consequence of any irregularity or
fraud in the conduct of the sale. In every case it is the duty of the Court to satisfy itself that
having regard to the market value of the property the price offered is reasonable. Unless
the Court is satisfied about the adequacy of the price the act of confirmation of the sale
would not be a proper exercise of judicial discretion……….”
Therefore, valuer is to apply its mind to this aspect and the conduct of sale should not
amount to material irregularity.
30. A similar view has been reiterated by the Hon'ble Apex Court, following the said
judgment in Kayjay Industries (P) Ltd. v. Asnew Dru(P) Ltd., AIR 1974 SC 1331.
31. In Union Bank of Indiav. Official Liquidator, High Court of Calcutta and others, AIR
2000 SC 3642, the Apex Court, while dealing with the winding up proceeding of the
company, held that in case the valuation report was not disclosed to the creditor and
reserve price was not fixed, it was tantamount to non application of mind to the materials
which are required to be considered for auction sale. Thus the auction sale was liable to be
set aside even after confirmation.
32. In B. Arvind Kumar v. Govt. of India, (2007) 5 SCC 745 : (AIR 2007 SC (Supp) 1306)
the Apex Court held that when an auction-purchaser derives title on confirmation of sale in
his favour, and a sale certificate is issued to him, it does not require any deed of transfer or
registration of any document as required under Section 17 of the Registration Act, 1908.
33. In Transcore v. Union of India, AIR 2007 SC 712, the Apex Court explained the scope
of various provision of the Act, 2002 and the Rules observing that the Act provides for

Printed by licensee : Ashok Kumar Singh Advocate Page 10 of 21

recovery of possession by non-adjudicatory process; therefore, to say that the rights of the
borrower would be defeated without adjudication would be erroneous. Particularly Rules 8
and 9 of the Rules provides sufficient safeguards in respect of taking possession thereof,
preserving it and disposing it of in accordance with Rules. Rule 9 thereof provides for
issuance of sale certificate and delivery of possession.
34. In Dr. Rajbir Singh Dalai v. Chaudhari Devi Lal University, Sirsa and another, (2008) 9
SCC 284 : (2008 AIR SCW 5817) and Divya Manufacturing Company (P) Ltd. v. Union
Bank of India, AIR 2000 SC 2346, the Apex Court held that a confirmed sale can be set
aside in all circumstances. However, in Valji Khimji and Company v. Official Liquidator of
Hindustan Nitro Product (Gujarat) Ltd., (2008) 9 SCC 299; (2008 AIR SCW 5828) the
Court held that auction sale should be set aside only if there is a fundamental error in the
procedure of auction e.g not giving wide publication or on evidence that property could
have fetched more value or there is somebody to offer substantially increased amount and
not only a little over the auction price, that can by itself suggest that any fraud has been
done in holding the auction properly or involvement of any kind of fraud.
35. In FCS Software Solutions Ltd. v. LA Medical Devices Ltd., 2008 AIR SCW 5284 :
(AIR 2008 SC 3137) the Apex Court considered a case where after confirmation of auction
sale it was found that valuation of movable and immovable properties, fixation of reserve
price, inventory of Plant and Machineries had not been made in proclamation of sale, nor
disclosed at time of sale notice. Therefore, in such a fact-situation, the sale was set aside
after its confirmation.
36. In Gajraj Jain ( AIR 2004 SC 3392 ) (supra), the Apex Court held that in absence of
valuation report and reserve price the auction sale becomes a pretence and is liable to be
set aside.
37. In view of the above, law can be summarised that authority is under a legal obligation
to be satisfied itself that price fetched is reasonable and sale has been conducted giving
strict adherence to the procedure prescribed by the statute and if the sale is confirmed
without considering the issue the confirmation stands vitiated or material irregularity in
conduct of the sale would vitiate the proceedings. Therefore, auction sale can be set aside
even after confirmation.
PROCEDURE — PRESCRIBED IN LAW — TO BE FOLLOWED:
38. When the statute provides for a particular procedure, the authority has to follow the
same and cannot be permitted to act in contravention of the same. It has been hitherto
uncontroverted legal position that, where a statute requires to do a certain thing in a certain
way, the thing must be done in that way or not at all. Other methods or mode of
performance are impliedly and necessarily forbidden. The aforesaid settled legal
proposition is based on a legal maxim “Expressio unius est exclusio alterius” meaning
thereby that if a statute provides for a thing to be done in a particular manner, then it has to
be done in that manner and in no other manner and following other course is not
permissible. ( Vide Taylor v . Taylor , ( 1876) 1 Ch D 426 ; Nizir Ahmed v . King

Printed by licensee : Ashok Kumar Singh Advocate Page 11 of 21

Emperor, AIR 1936 PC 253; Deep Chand v. State of Rajasthan, AIR 1961 SC 1527; Patna
Improvement Trust v. Smt. Lakshmi Devi, AIR 1963 SC 1077; State of Uttar Pradesh v.
Singhara Singh, AIR 1964 SC 358; Hukam Chand Shyam Lal v. Union of India, AIR 1976
SC 789; Chettiam Veetil Ammad v. Taluk Land Board, AIR 1979 SC 1573; State of Bihar
v. J.A.C Saldanna, AIR 1980 SC 326; State Of Mizoram v. Biakchhawna., (1995) 1 SCC
156 : ( 1995 AIR SCW 1497 ); J.N Ganatra v. Morvi Municipality, Morvi. , Morvi, AIR
1996 SC 2520; Haresh Dayaram Thakur v. State of Maharashtra (2000) 6 SCC 179 : (AIR
2000 SC 2281), Dhanajaya Reddy v. State Of Karnataka., (2001) 4 SCC 9 : (AIR 2001 SC
1512 ), Commissioner of Income Tax Mumbai v. Anjum M.H Ghaswala , ( 2002) 1 SCC
633 : (AIR 2001 SC 3868), Prabha Shankar Dubey v . State of Madhya Pradesh, AIR
2004 SC 486 ; Ram Phal Kundu v. Kamal Sharma. , AIR 2004 SC 1657; Indian Banks'
Association v. Devkala Consultancy Service, AIR 2004 SC 2615; Parle Biscuits (P) Ltd. v.
State of Bihar , (2005) 9 SCC 669; Harinarayan G. Bajaj v. Rajesh Meghani , (2005) 10
SCC 660 and Raja Ram Pal v. Hon'ble Speaker, Lok Sabha , ( 2007) 3 SCC 184 : ( AIR
2007 SC (Supp) 1448).
FOUNDATION REMOVED — STRUCTURE FALLS:—
39. It is settled legal proposition that if initial action is not in consonance with law, the
subsequent proceedings would not sanctify the same. In such a fact situation, the legal
maxim “sublato fundamento cedit opus” is applicable, meaning thereby in case a
foundation is removed, the superstructure falls.
40. In Badrinath v. State of Tamil Nadu, AIR 2000 SC 3243, the Apex Court observed that
once the basis of a proceeding is gone, all consequential acts, actions, orders would fall to
the ground automatically and this principle of consequential order which is applicable to
judicial and quasi-judicial proceedings is equally applicable to administrative orders.
Similar view has been reiterated in State of Kerala v. Puthenkavu N.S.S Karayogam ,
(2001) 10 SCC 191.
WRIT COURTS DUTY:
41. Writ Jurisdiction is discretionary in nature and must be exercised in furtherance of
justice. The Court has to keep in mind that its order should not defeat the interest of justice
nor it should permit an order to secure dishonest advantage or perpetuate an unjust gain or
approve an order which has been passed in contravention of the statutory provisions: (vide
Champalal Binani v. CIT, West Bengal, AIR 1970 SC 645; M.P Mittal v. State of Haryana,
AIR 1984 SC 1888; State of U.P v. U.P State Law Officers Association , AIR 1994 SC
1654; Dr. Arundhati A. Pargaonkar v. State of Maharashtra, AIR 1995 SC 962; Chandra
Singh v. State of Rajasthan, AIR 2003 SC 2889; ONGC Ltd. v. Sendhabhai Vastram Patel,
(2005) 6 SCC 454; and K.D Sharma v. Steel Authority of India Ltd. , 2008 AIR SCW
6654).
42. In Andhra Pradesh State Financial Corporation v . GAR Re-Rolling Mills, AIR
1994 SC 2151, the Apex Court held as under:

Printed by licensee : Ashok Kumar Singh Advocate Page 12 of 21

“A Court of equity, when exercising its equitable jurisdiction under Article 226 of the
Constitution must so act as to prevent perpetration of a legal fraud and the Courts are
obliged to do justice by promotion of good faith, as far as it lies within their power. Equity
is always known to defend the law from crafty evasions and new subtleties invented to
evade law.”
43. Similarly in State of Maharashtra v. Prabhu, (1994) 2 SCC 481, the Court considered
the scope of application of equity jurisdiction by the High Court and observed as under:
“Where the Government or any authority passes an order which is contrary to rules or law
it becomes amenable to correction by the Courts in exercise of writ jurisdiction. But one of
the principles inherent in it is that the exercise of power should be for the sake of
justice……… It is the responsibility of the High Court as custodian of the Constitution to
maintain the social balance by interfering where necessary for sake of justice and refusing
to interfere where it is against the social interest and public good.”
(Emphasis added).
44. In Jamshed Hormusji Wadia v. Board of Trustees, Port of Mumbai, AIR 2004 SC 1815,
the Apex Court observed that Courts are concerned with substantial justice and prevent to
perpetuate grave injustice to parties and whenever the order is one which shocks the
conscience of the Court or suffers on account of disregard to the form of legal process or
with violation of the principles of natural justice by the statutory provisions the Court
would interfere. The Court “would never do injustice nor allow injustice being perpetuated
just in the sake of upholding technicalities”.
45. In Ashutosh v. State of Rajasthan, AIR 2005 SC 3434, the Apex Court held that when
substantial justice must be given preference over technicalities and Court must do justice at
all costs and at the same time the Court should not forget that justice should be tempered
with mercy.
STATUTORY PROVISION — TO BE ENFORCED:
46. It is settled law that when the action of the State or its instrumentalities is not as per
the rules or regulations and supported by the statute, the Court must exercise its
jurisdiction to declare such an act to be illegal and invalid.
47. In Sirsi Municipality v. Cecelia Kom Francis Tellis, AIR 1973 SC 855, the Supreme
Court observed that “the ratio is that the rules or the regulations are binding on the
authorities.”
48. Similarly, a Constitution Bench of the Supreme Court in Sukhdev Singh v. Bhagatram
Sardar Singh Raghuvanshi, AIR 1975 SC 1331, has observed as under:—
“The statutory authorities cannot deviate from the conditions of service. Any deviation will
be enforced by legal sanction of declaration by Courts to invalidate actions in violation of
rules and regulations………… In cases of statutory bodies there is no personal element
whatsoever because of the impersonal character of statutory bodies……… This Court has

Printed by licensee : Ashok Kumar Singh Advocate Page 13 of 21

repeatedly observed that whenever a man's rights are affected by decision taken under
statutory powers, the Court would presume the existence of a duty to observe the rules of
natural justice and compliance with rules and regulations imposed by statute.”
(Emphasis added).
49. Similar view has been taken by the Supreme Court in Commissioner of Police,
Bombay v . Gordhandas Bhanji, AIR 1952 SC 16; Ambica Quarry Works etc. v. State of
Gujarat, AIR 1987 SC 1073; Shrilekha Vidyarthi etc. etc. v. State of U.P, AIR 1991 SC
537; Indra Sawhney II v. Union of India , AIR 2000 SC 498; and A.P Aggarwal v .
Government (of N.C.T) of Delhi, AIR 2000 SC 205).
50. In M.C Mehta v. Union of India, AIR 2006 SC 1325, the Apex Court observed that rule
of law is the essence of democracy. “It has to be preserved. Laws have to be enforced.”
51. In Dr. Dr Meera Massey (Mrs) v. Dr Abha Malhotra , AIR 1998 SC 1153 , the Apex
Court observed as under:—
“If the laws and principles are eroded by such institutions, it not only pollutes its
functioning deteriorating its standard but also exhibits………… wrong channel
adopted……… If there is any erosion or descending by those who control the activities all
expectations and hopes are destroyed. If the institutions perform dedicated and sincere
service with the highest morality it would not only up- lift many but bring back even a
limping society to its normalcy.”
52. The Supreme Court has taken the same view in Ram Chand v . Union of India ,
(1994) 1 SCC 14 : 1993 AIR SCW 3479 and held that “the exercise of power should not
be made against the spirit of the provisions of the statute, otherwise it would tend towards
arbitrariness.”
53. A Constitution Bench of the Supreme Court in Ajit Singh (II) v. State of Punjab, (1999)
7 SCC 209 : AIR 1999 SC 3471 held that any action being violative of Article 14 of the
Constitution is arbitrary and if it is found to be dehors the statutory rules, the same cannot
be enforced.
54. Thus whenever any action of the authority is in violation of the provisions of the
statute or the action is constitutionally illegal, it cannot claim any sanctity in law, and there
is no obligation on the part of the Court to sanctify such an illegal act. Wherever the
statutory provision is ignored, the Court cannot become a silent spectator to such an
illegality, and it becomes the solemn duty of the Court to deal with the persons violating
the law with heavy hands. Vide R.N Nanjundappa v . T. Thimmaiah , AIR 1972 SC
1767 ; B.N Nagarajan v. State of Karnataka AIR 1979 SC 1676 ; Delhi Development
Horticulture Employees' Union v. Delhi Administration, Delhi, AIR 1992 SC 789; State of
Orissa v. Sukanti Mohapatra, AIR 1993 SC 1650; State of Himachal Pradesh v . Nodha
Ram, AIR 1997 SC 1445; Nazira Begum Lashkar v. State of Assam, AIR 2001 SC 102;
Dr. Chanchal Goyal (Mrs) v. State Of Rajasthan , AIR 2003 SC 1713; M.D, State of
Haryana v. Tilak Raj, AIR 2003 SC 2658; and Sultan Sadik v. Sanjay Raj Subba, AIR 2004

Printed by licensee : Ashok Kumar Singh Advocate Page 14 of 21

SC 1377.
55. Thus, the legal position remains that every statutory provision requires strict
adherence, for the reason that the statute creates rights in favour of the citizens, and if any
order is passed dehors the same, it cannot be held to be a valid order and cannot be
enforced. As the statutory provision creates legal rights and obligations for individuals, the
statutory authorities are under a legal obligation to give strict adherence to the same and
cannot pass an order in contravention thereof, treating the same to be merely decoration
pieces.
56. The question further arises that Rule 8(6) provides for publication of auction notice in
two leading newspapers having wide circulation in the locality and one of them must be in
vernacular language. Rule 38 of the Orissa Minor Mineral Concession Rules, 2004
contains similar provision where, upset price is more than Rs. 5 lakhs. The purpose of such
a requirement is to give notice to maximum number of intending auctioneers so that the
best possible price may be fetched. Section 4 (1) of the Land Acquisition Act, 1894 also
contains a similar provision. Such provisions have consistently been held to be mandatory,
vide Smt. Laxmi Devi v. State of Orissa, AIR 1990 Ori 196; Nutakki Sesharatanam v. Sub-
Collector, Land Acquisition, Vijayawada, AIR 1992 SC 131; and Sanjeevanagar Medical
& Health Employees' Co-operative Housing Society v. Mohd. Abdul Wahab, AIR 1996 SC
3360. Non- compliance thereof has always been held to be fatal. Further, question does
arise as to whether in a newspaper in vernacular language it is necessary to publish a notice
in vernacular language or it could be published in English. Language used in the statute
does not specifically suggest that notice itself should also be in vernacular language.
However, if the notice is published in English language in a vernacular newspaper, it
would not serve the purpose of making publication of the notice therein.
57. In Gurdev Kaur v. Kaki, AIR 2006 SC 1975, the Apex Court held that the Courts are
bound to administer the law according to the provisions of law. It is their duty to discern
legislative intention in the process of adjudication. Justice administered according to
individual's whim, desire, inclination and notion of justice would lead to confusion,
disorder and chaos.
58. In Dilip N. Shroff v. Joint Commissioner of Income Tax, Mumbai, (2007) 6 SCC 329 :
AIR 2007 SC (Supp) 1280 the Hon'ble Supreme Court placed reliance upon its earlier
judgment in P.N Krishna Lal v. Govt. of Kerala , 1995 Supp. ( 2) SCC 187 : 1995 AIR
SCW 1325 and held that “more stringent the law, more strict construction thereof would be
necessary.”
PURPOSIVE INTERPRETATION:
59. Rules of interpretation require that construction, which carries on objectives of the
Statute, protects interest of the party and keeps the remedy alive, should be preferred
looking into the text and context of the Statute. It must be so as to further the ends of
justice and not to frustrate the same. Construction given by the Court must promote the
object of the Statute and serve the purpose, for which it had been enacted, and should not

Printed by licensee : Ashok Kumar Singh Advocate Page 15 of 21

efface its very purpose. Vide Reserve Bank of Indiav. Peerless General Finance and
Investment Co. Ltd. , AIR 1987 SC 1023; N.K Jain v. C.K Shah , AIR 1991 SC 1289;
Meera Gupta v. State of West Bengal , AIR 1992 SC 1567; Food Corporation of Indiav.
New Delhi Assurance Co. Ltd. , AIR 1994 SC 1889; S. Gopal Reddy v. State of Andhra
Pradesh, AIR 1996 SC 2184; Gayatri Devi Pansari v. State of Orissa, AIR 2000 SC 1531;
Regional Provident Fund Commissioner v. Shiv Kumar Joshi., AIR 2000 SC 331; Gautam
Paul v. Debi Rani Paul, AIR 2001 SC 61; Ambalal Sarabhai Enterprises Ltd. v. Amrit Lal
& Co. , AIR 2001 SC 3580; Commissioner of Income Tax, Mumbai v. Anjum M.H
Ghaswala , AIR 2001 SC 3868 ; Joseph Joseph v. State of Kerala , AIR 2002 SC 1117;
Ashwin S. Mehta v. Custodian, AIR 2006 SC 795; and Southern Petrochemical Industries
Co. Ltd. v. Electricity Inspector & ETIO, AIR 2007 SC 1984.
60. In Thiagarajan v. Sri Venugopalaswamy B. Koil, AIR 2004 SC 1913, the Apex Court
held that it is the obligation of the Courts of law to further the clear intendment of the
legislature and not frustrate it by excluding the same.
61. In Tinsukhia Electric Supply Co. Ltd. v. State of Assam , AIR 1990 SC 123, the
Hon'ble Supreme, Court placed reliance upon the judgment in Whitney v . I.R.C, 1926 AC
37, wherein it had been observed as under:—
“A Statute is designed to be workable, and the interpretation thereof by a Court should be
to secure that object…….”
The Court further held as under:—
“The Courts strongly lean against any construction which tends to reduce a Statute futility.
The provision of the Statute must be so construed as to make it effective and
operative……”
62. Thus, in view of the above, the legal position emerges that Court must interpret a
provision making it fully effective and operative to serve the purpose for which it stood
enacted.
REFUND TO AUCTION PURCHASER — IF SALE IS SET ASIDE:
63. In Seth Kashi Ram Chemical (India) v. State of Haryana, AIR 1991 SC 478, the Apex
Court held that highest bidder may be entitled for refund of the amount offered and
deposited by him with interest by the judgment debtor. He cannot claim the right to get the
property if there had been a compromise between the judgment debtor and the secured
creditor after the auction sale.
64. A similar view has been reiterated by the Apex Court in Mangal Prasad (dead) by LRs
v . Krishna Kumar Maheshwari, AIR 1992 SC 1857, observing that an equitable relief
should be granted to the auction purchaser to refund the amount with interest.
65. In Seth Kashi Ram Chemical (supra), the Apex Court held that highest bidder in an
auction does not acquire any right, at the most he can claim the refund of the deposit made
by him.

Printed by licensee : Ashok Kumar Singh Advocate Page 16 of 21

INSTANT CASE & FINDINGS:
66. The instant case requires to be decided in the light of the aforesaid settled legal
propositions. Undoubtedly the petitioners failed to deposit the loan amount as per the terms
incorporated in the loan agreement. Opposite party- Bank had every right to make the
recovery and recovery had to be made expeditiously, keeping in mind the legislative intent
that special statute has been enacted for a speedy recovery of loan advanced by financial
institutions. However, the institutions and the authorities are legally bound to ensure strict
compliance of the statutory requirement, particularly of those provisions which have been
meant to protect the interest of the borrower for the reason that a detailed and full fledged
procedure followed in civil Court proceedings is not applicable in these proceedings. Thus,
the legislature in its wisdom to protect the public at large from any kind of
misrepresentation or fraud enacted the provisions of Rule 8 (2) providing mandatorily to
publish the notice of possession in two leading newspapers having wide circulation in the
locality. Rule 8(6) mandatorily requires notice of sale to the borrower/ guarantor and
simultaneously makes it legally obligatory that auction notice shall be published in two
leading newspapers having wide circulation in the locality concerned and one of them shall
be in vernacular language. The auction notice shall also contain the valuation of the
property, the reserve price, time and place of auction and all other details of the property to
be put to auction. The purpose to make publication of the auction notice in two leading
newspapers having wide circulation and one of them in vernacular language is to invite
maximum number of intending purchasers i.e maximum public participation, so that the
property may secure the best price. The natural corollary of compliance of the aforesaid
statutory provisions is that there has to be a proper valuation of the property on the basis of
which the set up price may be fixed and auction may be held only after having wide
publication. Purpose of enacting such a statutory requirement is to protect the borrower
and guarantor from any kind of depressed sale of their property and to certain extent to
prevent any kind of collusion or fraud either by the authorities or by the auction bidders.
The non-compliance of the statutory provisions would vitiate the proceedings altogether.
From the point of non-compliance of the statutory requirement proceedings would render
invalid, if not nullity.
67. The total outstanding dues payable to the Bank were about 4.96 lakhs. The break up of
the same was as follows:
“(i)Principal in the account:Rs. 1,91,058.66(ii)Legal expenses incurred:Rs.
12,516.00(iii)Expenses incurred on paper publication on 3-9-2005:Rs.
3,447.00(iv)Expenses incurred on paper publication on 10-11-05:Rs. 4,168.00( v )Interest
payable in the account up to 28-11-2005:Rs. 2,85,180.00 —————————————
Total amount payable to the bank =Rs. 4,96,369.66”
68. From the pleadings taken in the petition and submissions made by the learned counsel
for the parties we could not be satisfied that auction had been held giving strict adherence
to the statutory provisions. We summoned the original record and with the help of the
Officers of the Bank examined the same. So far as the procedural part is concerned, the

Printed by licensee : Ashok Kumar Singh Advocate Page 17 of 21

admitted facts are as under:
(1) Possession Notice had been issued in two leading newspapers as required under Rule 8
(2) of the Rules. It was published in ‘The Sambad’ an Oriya newspaper, but the notice was
in English language.
(2) Notice of auction has been published in two leading newspapers having wide
circulation in the area as required under the proviso to Rule 8(6) of the Rules. It is
published in ‘The Sambad’ an Oriya newspaper, but the notice was in English language.
(3) No notice had been issued to the petitioners as required under Rule 8(6) of the Rules.
69. In the instant case following facts remained undisputed.
(1) The outstanding dues were to the tune of Rs. 4.96 lakhs and the principal dues had been
only Rs. 1.91 lakhs.
(2) The interest had been calculated to the tune of Rs. 2.85 lakhs and the rest remained the
legal and recovery expenses.
(3) Petitioner had deposited a sum of Rs. 99,000/- prior to the date of auction.
(4) The market value of the property had been assessed at Rs. 4.15 lakhs and the reserve
price was fixed as Rs. 3.95 lakhs. Petitioner had not been involved in this process by any
means. Nor any separate notice as required under Rule 8(6) was given to it.
(5) The issue as to whether the entire property should be sold or a part thereof would be
sufficient to make the recovery has not been considered by the authorities.
(6) The Authorities did not consider it appropriate to consider petitioners' grievance as
directed by this Court vide order dated 2-1-2006 and rejected the same vide order dated
1-3-2006 mentioning that property had been put to auction on 17-12-2005, though this
Court passed the order on 2-1-2006 knowing all these facts.
(7) The sale certificate has been issued in favour of opposite party No. 4.
(8) The petitioner is still in possession of the property in dispute as interim order has been
granted by this Court vide order dated 2-1-2006 in W.P(C) No. 16213/2005 and again vide
order dated 16-5-2008 in the present writ petition.
(9) The Banker's Cheque amounting to Rs. 9,11,243/- sent by the opposite party-Bank to
the petitioner, as the excess amount after adjusting all its dues, had not been encashed by
the petitioner, rather it has been received back by the opposite party-Bank .
70. There is no explanation worth the name, though the officers of the Bank have also
been called in the Court with the entire record, as under what circumstances and in which
manner the approved valuer has assessed the property at Rs. 4.15 lakhs, if it has admittedly
been sold for Rs. 13.93 lakhs. In case valuation of the property had been made correctly, it
could have been necessary for the opposite parties - bank to take a decision under sub-
rule (5) of Rule 8 of the Rules as to whether the property should be sold as a whole or in
part to make the recovery of the outstanding dues. The property has fetched the price more

Printed by licensee : Ashok Kumar Singh Advocate Page 18 of 21

than three times than the value assessed by the approved valuer. Meaning thereby there has
not been proper valuation of the property. Thus the question does arise as to whether not
making a proper valuation amounts to fundamental procedural defect which would vitiate
the proceedings subsequent to the point of making the wrong assessment. If the petitioner
had already deposited a sum of Rs. 99,000/- out of the outstanding dues within a period of
two to three months prior to the date of auction, why the Bank has not considered its
request to give some more time to clear the dues.
71. It is evident that the property has been assessed at Rs. 4.15 lakhs and reserve price was
fixed at Rs. 3.95 lakhs, but it has fetched the value to the tune of Rs. 13.95 lakhs. The
difference between the value assessed and value received is more than three times.
Therefore, even by stretch of imagination, it cannot be held that the valuation has been
made correctly. As a consequence reserve price had been fixed at a lower side and auction
on the basis of such report cannot be held to be fair and reasonable as large number of
persons who might have indulged in purchasing property of higher value like instant, had
been misled and they did not participate. Thus the auction sale is stood vitiated.
72. As the compliance of the statutory requirement had not been made and there is nothing
on record to show that the valuation report had been made properly and the reserve price
has been fixed accordingly. If it is presumed that it was done properly, then question arises
how the property has fetched more than three times of the value fixed by the Bank . More
so, non-publication of the notice in Oriya language is also fatal as it might have deprived
persons not knowing English language to participate in the proceeding.
73. Out of the outstanding dues of Rs. 4.96 lakhs, the principal amount has been Rs. 1.91
lakhs. Rest remain the interest, legal and recovery expenses. Petitioners had deposited a
sum of Rs. 99,000/- within a period of six weeks prior to the date of auction and had been
insisted for grant of time to make the deposit of the balance amount. Of course application
for waiving some penal interest or entering into OTS had also been there. But it is not a
case where the petitioners had not shown their bona fide to deposit the outstanding dues.
Petitioners had always been insisting that proceedings were not being conducted in
conformity with the statutory Rules. It is not a case where petitioners remained a silent
spectators sitting on the fence and waiting for conclusion of the proceedings. They left no
stone unturned for redressal of their grievances. This Court disposed of their writ petition
vide judgment and order dated 2nd January, 2006 asking the Bank authority to decide their
objections. The Objections had been brushed aside only on the ground that property had
already been put to auction and third party interest was created. No explanation could be
furnished by Mr. Mishra, learned counsel appearing for the Bank that why the notice of
possession as well as notice of auction as required under Rule 8 had not been published in
“vernacular language” and as to whether it was necessary to involve the petitioner/
borrower/guarantor while fixing the set up price giving it the copy of the valuation report.
Admittedly no notice as required under Rule 8 (6) had ever been served upon the
petitioners. In case we accept the submission made by Mr. Das, learned counsel for
opposite party No. 4 that the auction notice published in the newspaper itself was
tantamount to notice to the borrower and guarantors, and it is not mandatory to serve a

Printed by licensee : Ashok Kumar Singh Advocate Page 19 of 21

separate notice upon them, particularly, when petitioners had approached the Bank
authority immediately after the auction notice, such a requirement could have proved to be
a futile exercise, the question does arise as to whether the opposite party- authorities had
proceeded in consonance with the statutory requirement under Rule 8(5) taking a decision
as to whether the whole or a part of the property should be sold. More so, Rule 8 (6)
provides mandatorily, publication of auction notice in two leading newspapers and one of
them must be in vernacular language. Admittedly, there had been advertisement in ‘The
Sambad’ dated 10-11-2005 which is a newspaper printed in Oriya language but the notice
is in English language.
74. The distinction between the literal interpretation and purposive construction of statute
has almost diminished and there could be hardly a smoke screen dividing the same. It is
not permissible for the Court to change the placement of the words. However, the language
used in the Rules has to be read in the context of the subject in entirety. The Rule has been
engrafted to protect the persons who may be aggrieved because of depressed sale. The
term “vernacular” has to be considered in a correct perspective in the context of the rural
and illiterate masses of the country. If the notice is published in English in a newspaper
printed in vernacular language, it would definitely not serve the purpose for which the
Rule has been grafted. Therefore, notice has to be published in vernacular language in the
newspaper published in vernacular language. The property mortgaged with the secured
creditor may situate in rural area and the persons residing in rural area may be interested in
purchasing it. Therefore, the need was considered to have the publication of the notice in
vernacular language also. The concept of flexibility in the science of interpretation is to be
adopted. If the provision applicable herein is given a strict literal meaning it will not be
possible to sub-serve the purpose of giving notice to all intending purchasers and get the
maximum price for the secured assets. Section 4 (1) notice under the Land Acquisition Act
is always published in vernacular language.
75. Non- compliance of such a mandatory requirement vitiated the proceedings. The
Tribunal and DRAT have dealt with various issues without touching the most material
issues involved in this case as explained hereinabove. The Tribunal and DRAT have mis-
directed themselves without entering into the legal issues, particularly the requirement and
compliance of statutory provisions as non- compliance thereof would vitiate the entire
proceedings. It seems to be highly arbitrary and unreasonable that for the recovery of a
sum of amount about Rs. 4 lakhs a property had been sold for Rs. 14 lakhs and after
adjusting its outstanding dues a sum of rupees more than double of their outstanding dues
had been remitted to the petitioners. The petitioners did not accept the amount and returned
the same to the Bank . The recovery proceedings had definitely not been made complying
with the statutory provisions. Non-compliance of such statutory provisions tantamount to
fundamental procedural defects which enables the Court to set aside the confirmed sale
even after issuance of sale certificate.
Non-compliance of statutory requirements of publication of possession notice and auction
notice in vernacular language rendered the statutory requirement as farce. There should be
purposeful compliance of the provisions of law and it cannot be reduced to an empty

Printed by licensee : Ashok Kumar Singh Advocate Page 20 of 21

formality. The requirement to cause publication in “vernacular language” in the newspaper
is fundamental and the statutory requirement which cannot be compromised., It is not for
the borrower or guarantor to establish that non- publication of the said notices in
“vernacular language” in the newspaper has caused any prejudice to its cause. It is for the
respondents to establish that non-compliance of the statutory requirements has not caused
any prejudice at all. Proof of prejudice is unnecessary where requirement of statutory
provision is mandatory. “It ill-comes from a person who has denied justice that the person
who has been denied justice is not prejudiced.” Vide S.L Kapoor v. Jagmohan, AIR 1981
SC 136; and State of U.P v. Shatrughan Lal, AIR 1998 SC 3038.
76. In view of the above, the writ petition succeeds and is allowed. All proceedings
subsequent to notice under Section 13 (4) of the Act, 2002 being in flagrant violation of
the statutory provisions are liable to be quashed. The case is squarely covered by the
judgments of the Apex Court referred to above in Dr. Rajbir Singh Dalai, 2008 AIR SCW
5817 (supra), Divya Manufacturing Company (P) Ltd., AIR 2000 SC 2346 (supra) and
Valji Khimji and Company, 2008 AIR SCW 5828 (supra), wherein the Apex Court held
that not giving wide publication of the auction notice itself is a good ground for quashing
the confirmed sale. In such a fact situation opposite party No. 4 is entitled to refund of the
amount deposited by him. The opposite party-Bank shall refund the amount deposited by
opposite party No. 4 with interest @ 10% per annum to him within four weeks from today.
Opposite party No. 1 is directed to recalculate the amount due from the petitioner
including interest thereon and issue a fresh demand notice to be served upon the petitioner
within four weeks from today. We further direct that as the opposite party-bank proceeded
illegally, it is not entitled to claim for legal expenses or recovery expenses from the
petitioner. On receipt of the recomputed demand from the bank , the petitioner shall
deposit the same within four weeks from the date of receipt failing which the bank shall
be at liberty to proceed against the petitioner for making full recovery of its outstanding
dues in accordance with law.
No costs.
B.N Mahapatra, J.:— 17. I agree.
Order accordingly.

Printed by licensee : Ashok Kumar Singh Advocate Page 21 of 21