Auction Sale Was Set Aside On Equitable Considerations & Not For Being Illegal: SC Modifies Karnataka HC Judgment
The Supreme Court modified a judgment of Karnataka High Court after it noticed that the auction was set aside based on equitable consideration and not because of it being illegal.
A Bench of Justice Abhay S Oka and Justice Ujjal Bhuyan held, “In short, the High Court set aside the auction sale not based on the provisions of the said Rules or on the ground that the auction was illegal. The High Court set aside the auction on equitable considerations, as the entire amount due and payable to the 4th respondent bank, including interest, was deposited by the 1st and 2nd respondents with the High Court within three months from filing the Writ Petition.”
Additional Solicitor General K.M. Nataraj represented the appellant, while Senior Advocate CS Vaidyanathan appeared for the respondent.
A Co-operative Bank (Bank) had advanced a business loan to the four respondents on the guarantee of two other respondents (Guarantors) for re-payment of the said loan. Upon default in payment of instalments, the bank filed a dispute before the Assistant Registrar (Asst. Registrar), the Co-operative Societies and Recovery Officer for recovery of the loan amount with interest, who allowed the dispute. In recovery proceedings, a sale proclamation was issued by the Asst. Registrar for the sale of property held by the respondents.
In the auction sale, the highest bid, which was offered by the appellant, was accepted. The amount was deposited by the appellant, however, the cheque was returned due to inter se dispute amongst the borrowers.
The respondents invoked the writ jurisdiction of the High Court for setting aside the auction. The Single Bench proceeded to set aside the auction sale made in favour of the appellant directing the bank to refund the entire auction amount paid by the appellant along with an additional amount of 5 per cent of the said amount in the light of sub-rule 4(b) of Rule 38 of the Karnataka Cooperative Societies Rules, 1960 (the Rules).
The Supreme Court noted that the Single Bench while exercising its discretionary jurisdiction under Article 226 of the Constitution, directed that the appellant be compensated by paying 5 per cent of the amount deposited by him as the auction purchaser.
“In law, there was no basis for the said direction. The Division Bench has confirmed the said direction by holding that payment of the additional amount of 5 per cent adequately compensates the appellant. The 4th respondent bank has not challenged the impugned orders and has thus accepted the finding that the appellant must be compensated,” the Bench remarked.
Consequently, the Court held, “Though there was nothing illegal about the auction, 4th respondent did not challenge the impugned orders. Therefore, the impugned judgments need modification in the peculiar facts and circumstances of the case for adequately compensating the appellant.”
Accordingly, the Supreme Court partly allowed the appeal.
Cause Title: Salil R. Uchil v. Vishu Kumar & Ors. (Neutral Citation: 2024 INSC 793)
Appearance:
Appellant: ASG K.M. Nataraj; Advocates Shailesh Madiyal, Vinayak Sharma, Sharath Nambiar, Chitransh Sharma, B K Satija, Shraddha Deshmukh, Sarthak Karol, Kritagya Kait, Rajan Kumar Chourasia, Madhav Singhal and Sansrithi Pathak; AOR Arvind Kumar Sharma,
Respondent: Senior Advocate CS Vaidyanathan; Advocates Akshay Nagarajan, Akshay N, Vinayak Goel, Pramod Tiwari, Vivek Tiwari, Bhoopesh Pandey and Priyanka Dubey; AOR Sanya Sud Vinod and Kumar Tewari
