Transfer of Property Act, 1882 – Section 56 – Marshaling by Subsequent Purchaser – Essential ingredients for invocation of this equitable principle.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 3417 OF 2019

IDBI Trusteeship Services Limited,
a company incorporated under the provisions of the Companies Act, 1956 and having its registered ofce at Asian Building, Ground Floor, 17,
R. Kamani Marg, Ballard Estate, Mumbai – 400 001;
though its Director / Authorized Representative Mr. Viragh Shah. … Petitioner

Versus

1.District Collector, Pune,
New Collector Ofce Building, opposite Sassoon
Hospital, Station Road, Pune – 411 011.

2. Additional Tehsildar,
Pimpri Chinchwad, Taluka Haveli, Pune.

3.Gyaneshwar Vishwanath Kaddu,
Sector No. 16, Plot No. 33, Flat No.2 Morya Park,
Raja Shivaji Nagar, Chinchwad, Pune – 411 019.

3A. Nitin Chagganlal Jain,
an adult Indian Inhabitant Sector No. 16, Plot No. 33,
Flat No. 2, Morya Park, Raja Shivaji Nagar,
Chinchwad, Pune – 411 019.

(Amendment carried out as per order dated 27th March, 2019

4. Darode Jog Homes Pvt Ltd.,
a Company duly incorporated under the provisions of the Company Act, 1956, having its registered ofce at 1212, Darode-Jog House, Apte Road, Deccan Gymkhana, Pune – 411 004.

5. Sudhir Darode,
adult, occupation business, Indian inhabitant, resident
at Chandraprabha, Plot No. 9, Mangalwadi
Co-operative Housing Society, Senapati Bapat Road, Pune – 411 016.

6.Anand Jog,
adult, occupation business, Indian inhabitant residing
at Rajas, Plot No. 42, S. No. 37/1, Karve Nagar,Kothrud, Pune – 411 052.

7.M/s. Darode Jog & Associates,
a partnership frm registered under the provisions
of the Indian Partnership Act, 1932, acting through its
partners Anand Jog and Sudhir Darode, having its
principal place of business at 1212, Darode Jog House,Apte Road, Decan, Gymkhana, Pune – 411 004.

8.Darode Jog Builders Pvt Ltd.,
a company incorporated under the provisions of the
Companies Act, 1956, having its registered ofce
at 1212, Darode-Jog House, Apte Road, Deccan Gymkhana, Pune – 411 004.

9. Maharashtra Real Estate Regulatory Authority,
an authority incorporated under the provisions of the
Real Estate (Regulation and Development Act, 2016,
having its ofce at 3rd Floor, A-Wing, SRA,
Administrative Building, Anant Kanekar Marg, Bandra East, Mumbai, Maharashtra 400051.

10.Kavit Chandan Rasal,
adult, Indian inhabitant residing at Flat No. 22,
Hira Ratan Niwas behind Janai Heights, Bhosari,Near PMT Bus Stop, Haveli, Pune – 411039.

11. Mangesh P. Deshpande,
adult, Indian inhabitant residing at Flat No. 8,
A8 Kunal Estate, Bhoir Chowk, Keshav Nagar,
Morya Gasavi Stadium, Mulshi, Chinchwad,Pune – 411 033.

12.Dwarkadas M. Mule,
adult, Indian inhabitant residing at Flat No. 22,
Hira Ratan Niwas behind Janai Heights, Bhosari,Near PMT Bus Stop, Haveli, Pune – 411039.

13. Puja Suyog Deshmukh,
adult, Indian inhabitant, residing at A28, Bluebell
Society, Chowdhery Park, Wakad, near Ganpati Mandir, Mulshi, Pune – 411 057.

14.Rekha S. Girme,
adult, Indian inhabitant residing at 279, Postal Colony,
Wakad, Ganpati Mandir, Mulshi, Pune – 411 057.

15.Vinod Chaudhary,
adult, Indian inhabitant, residing at B-1, Ketan
Paradise, Sector 6, Sant Nagar, Haveli, Aalandi, Pune – 412 105. … Respondents

Mr. Karl Tamboly a/w Mr. Hrushi Narvekar and Mr. Ryan D’souza i/b DSK Legal,for the Petitioner.
Mr. A. I. Patel, Addl. Govt. Pleader a/w Ms. K.N. Solunke for Respondent Nos. 1 and 2.
Mr. Drupad Patil i/b Mr. Pavan S. Patil, for Respondent Nos.3 and 3A.
Mr. Akshay Patil i/b K. K. Kandpile, for Respondent Nos. 4 to 8.
Mr. Manoj Badgujar i/b Mr. Akshay P. Shinde, for Respondent No.9
Mr. Sarnath Sariputta, for Respondent Nos.10 to 15.

CORAM : S. J. KATHAWALLA &
VINAY JOSHI JJ.
RESERVED FOR JUDGMENT : 12th MARCH, 2021

DATE OF PRONOUNCEMENT : 25th JUNE, 2021

JUDGMENT (PER S. J. KATHAWALLA & VINAY JOSHI, JJ. :

1. Rule. Rule made returnable forthwith. Heard fnally by consent of parties.

2. By this Writ Petition fled under Article 226 of the Constitution of India, the Petitioner has challenged the auction sale of immovable property being a parcel of land bearing Survey No. 95 Hissa No. 3, situated at Chovisawadi, Taluka Haveli, District Pune, admeasuring 0 Hectares 49.66 Ares (“the said Property”), of which the Petitioner is a Mortgagee, by Respondent No. 1 (District Collector, Pune) and Respondent No. 2 (Additional Tehsildar, Pimpri Chinchwad, Pune), in favour of Respondent Nos. 3 and 3A, in order to recover amounts payable by Respondent No. 4 to the Respondent Nos. 10 to 15, under Orders passed by Respondent No. 9 (Maharashtra Real Estate Authority) under the provisions of the Real Estate (Regulation and Development) Act, 2016.

3. The Petitioner is a Trusteeship Company in whose favour the said Property has been mortgaged. Respondent Nos. 1 and 2 are the revenue authorities who have conducted the auction sale of the said Property. Respondent Nos. 3 and 3A are the Auction Purchasers of the said Property. Respondent No. 4 is the Original Owner of the said Property and has created the mortgage in respect thereof in favour of the Petitioner. Respondent Nos. 5, 6 and 8 are the Promoters of Respondent No. 4.

4. Respondent No. 7 is a Partnership Firm forming part of the same group as Respondent Nos. 4 to 6 and 8. Respondent No. 9 is the Maharashtra Real Estate Authority. Respondent Nos. 10 to 15 are Flat Purchasers who had fled RERA Complaints against Respondent No. 4 before Respondent No. 9. Respondent No. 9 had passed Orders directing Respondent No. 4 to refund the monies paid to it by Respondent Nos. 10 to 15 along with interest. It was for recovery of these amounts that Respondent Nos. 1 and 2 conducted the auction sale of the said Property.

4.1. The case of the Petitioner in the present Petition, is as follows:

4.2. The Petitioner is a leading Indian Trusteeship Company providing services as a debenture trustee, security trustee, share pledge trustee, securitisation trustee etc.

4.3. By and under a Debenture Trust Deed dated 16th February 2016, executed by and between Respondent Nos. 4 to 8 and the Petitioner (“Debenture Trust Deed”), Respondent No. 4 agreed to issue secured, redeemable optionally convertible debentures for an aggregate sum of Rupees One Hundred and Twenty Crores to the subscribers thereof, in order to raise funds for developing certain immovable properties. The Petitioner is the Debenture Trustee under the Debenture Trust Deed. The Debenture Trust Deed has been registered with the Sub-Registrar of Assurances at Haveli-16 under Registration No. Havl-16/1511/211/2015. Various immovable properties, including the said Property, were mortgaged in favour of the Petitioner to secure the obligations of Respondent No. 4 under the Debenture Trust Deed.

4.4. Respondent No. 4 purchased further immovable property under a Sale Deed dated 8th June 2015. The same was mortgaged in favour of the Petitioner under a Supplementary Deed of Mortgage dated 12th February 2016, to secure the performance of the obligations of Respondent No. 4 under the Debenture Trust Deed.

4.5. Based on the aforesaid documents, the Petitioner became the frst charge holder in respect of the properties mentioned therein, including the said Property. Respondent No. 4 failed to redeem the debentures on their due dates, which constituted an event of default under the Debenture Trust Deed. In view of the same, the Petitioner became entitled to enforce its mortgage in respect of the various properties mortgaged to it, including the said Property.

4.6. One of the properties mortgaged to the Petitioner is land situated at Dudulgaon, Taluka Haveli, District Pune. Respondent No. 4 was developing a real estate project on this property, which was registered with Respondent No. 9 under the name of “Padmanabh Phase – 1”. Respondent Nos. 10 to 15 had purchased fats from Respondent No. 4 in this project. Respondent Nos. 10 to 15 fled Complaints before Respondent No. 9 stating that Respondent No. 4 had not completed the project within the time stipulated under their respective agreements for sale, and accordingly sought refund of the monies paid by them to Respondent No. 4. Respondent No. 9 disposed of the Complaints fled by Respondent Nos. 10 to 15 by its Orders dated 14th and 27th February 2018, directing Respondent No. 4 to refund the monies paid by Respondent Nos. 10 to 15 along with interest. It is the Petitioner’s case that Respondent No. 4 did not inform the Petitioner about these Orders, and that the Petitioner only became aware of the same shortly prior to fling of the present Petition.

4.7. Since Respondent No. 4 did not pay the amounts due to Respondent Nos. 10 to 15 under the aforesaid Orders passed by Respondent No. 9, execution proceedings were initiated against Respondent No. 4 under Section 40 of the Real Estate (Regulation and Development) Act, 2016 (“RERA”). Under Section 40(1) of the RERA, if a promoter fails to pay compensation, interest or penalty imposed upon him by the RERA authorities, the same is recoverable from the promoter as arrears of land revenue. Under Rule 3 of the Maharashtra Real Estate (Regulation and Development) (Recovery of Interest, Penalty, Compensation, Fine Payable, Forms of Complaints and Appeal etc.) Rules, 2017, any interest, penalty or compensation imposed on a promoter and recoverable under Section 40 of RERA, shall be recovered as arrears of land revenue in the manner provided in the Maharashtra Land Revenue Code, 1966 (“MLRC”). In pursuance of the same, Respondent No. 9 issued a Recovery Warrant under Section 40(1) of RERA, and directed Respondent No. 1 to recover the amounts payable by Respondent No. 4 to Respondent Nos. 10 to 15 as arrears of land revenue.

4.8. Pursuant to the above, various notices were issued and correspondence was exchanged between May 2018 and February 2019 inter se between the authorities under the MLRC regarding recovery of the amounts due to Respondent Nos. 10 to 15 as arrears of land revenue. According to the Petitioner, the correspondence exchanged between the MLRC authorities shows that they were aware of the encumbrance created over the said Property in favour of the Petitioner.

4.9. On 20th February 2019, Respondent No. 4 shared a Public Notice with the Petitioner which was issued by Respondent No. 2 in a local newspaper, inviting bids for sale of the said Property by public auction to be held on 21st February 2019. Immediately upon learning of the same, the Petitioner by its Advocate’s Notice dated 21st February 2019 informed Respondent No. 2 of the fact that the Petitioner is the Mortgagee in respect of the said Property under the Debenture Trust Deed. The Public Notice for auction sale of the said Property has been issued without disclosing the Petitioner’s mortgage over the same. The Petitioner asserted that it was a secured creditor having paramount rights over the said Property and called upon Respondent No. 2 to cancel the auction.

4.10. Despite the above, Respondent No. 2 proceeded with the auction as scheduled and passed an Order dated 21st February 2019 (the impugned Order) confrming the sale of the said Property in favour of Respondent Nos. 3 and 3A for a consideration of Rs. 1,66,40,000/-, without considering or disclosing the Petitioner’s objections. Respondent No. 2 accepted twenty fve percent of the sale consideration from Respondent Nos. 3 and 3A and called upon them to pay the balance consideration within eight days from 21st February 2019.

4.11. The Petitioner thereafter made enquiries and discovered the information pertaining to the sale of the said Property as set out in the Petition. The Petitioner through its Advocates addressed a Letter dated 28th February 2019 to Respondent Nos. 1 to 3A, once again stating its objections to the sale of the said Property and calling upon them not to act in furtherance of the same.

4.12. According to the Petitioner, the auction sale of the said Property has been conducted by Respondent Nos. 1 and 2 contrary to the provisions of the MLRC and the rules made thereunder. The Petitioner is a Mortgagee in respect of the said Property under a registered instrument. The same was brought to the notice of Respondent No. 2 vide a Letter of the Petitioner’s advocate dated 21st February 2019. That apart, the correspondence exchanged amongst the MLRC authorities demonstrates that Respondent No. 2 was made aware of the mortgage created in respect of the said Property prior to the auction sale. Despite the same, Respondent No. 2 confrmed the sale in favour of Respondent Nos. 3 and 3A. This was done without considering or disclosing the Petitioner’s rights as a Mortgagee in respect of the said Property. Moreover, the same is contrary to the provisions of the MLRC. There is a diference between actual arrears of land revenue and amounts which are to be recovered in the same manner as arrears of land revenue. In the present case, the amounts payable by Respondent No. 4 to Respondent Nos. 10 to 15 under the Orders passed by the Respondent No. 9 are not actual arrears of land revenue but are recoverable in the same manner and under the same procedure as arrears of land revenue. Therefore, in so far as the said Property is concerned, the Petitioner would have a priority in view of its prior registered mortgage in respect of the same. None of this has been considered by Respondent Nos. 1 and 2 prior to conducting the auction sale of the said Property or whilst confrming the same in favour of Respondent Nos. 3 and 3A. The auction sale in favour of Respondent Nos. 3 and 3A is illegal, arbitrary, fraudulent and amounts to a colourable exercise of power. These are the principal grounds on which the Petitioner has fled the present Petition challenging the auction sale of the said Property in favour of the Respondent Nos. 3 and 3A.

4.13. The Petitioner has prayed for the following substantive reliefs in the Petition : “A. That this Hon’ble Court be pleased to declare that the entire exercise of conducting auction of the Subject Property is fraudulent and non-est and quash and set aside the same; B. that this Hon’ble Court be pleased to call for the records pertaining to the Impugned Order and after considering the legality and validity thereof, be pleased to issue of writ of certiorari or any other writ, order or direction in the nature thereof quashing and setting aside the sale and Impugned Order dated February 21, 2019, being Exhibit C hereto; C. that strictly in the alternative and without prejudice to prayer clause (A) and (B) above, in the alternative and only if this Hon’ble Court is not inclined to quash and set aside the Impugned Order and sale in favour of Respondent No. 3 and 3A, then this Hon’ble Court be pleased to pass an order and direction directing the Respondents to deposit the entire sale consideration in respect of the Subject Property;”

5. The present Petition was fled on 14th March 2019. On 20th March 2019, this Court passed an Order directing the Respondent No. 9 RERA Authority not to part with the monies deposited by Respondent No. 2 with it pursuant to the auction sale of the said Property. Further, by an Order dated 27th March 2019, a statement made on behalf of Respondent Nos. 3 and 3A that they will not create any third-party rights with respect to the said Property till the next date of hearing was recorded and accepted by this Court. The aforesaid interim orders have been continued from time to time by various subsequent Orders passed in this Petition.

6. Respondent Nos. 1 and 2 have fled an Afdavit dated 2nd July 2019 opposing the Petition. Respondent Nos. 1 and 2 have not disputed that Respondent No. 2 scheduled the auction sale of the said Property on 21st February 2019 in furtherance of the Recovery Warrant issued by Respondent No. 9. Respondent Nos. 1 and 2 have contended that on 21st February 2019, during the auction process, the Petitioner through its Advocate raised objections by claiming that the said Property which was put to auction was already mortgaged to the Petitioner. According to Respondent Nos. 1 and 2, though the Petitioner had raised this objection, it did not provide details of the loan or mortgage transaction. Moreover, no mutation entry qua the mortgage had been effected in the revenue record of the said Property. Since Respondent Nos. 3 and 3A ofered the highest price of Rs. 1,66,40,000/-, the process of auction was concluded in their favour. Respondent Nos. 1 and 2 have taken the stand that the entire auction process was conducted in compliance with the provisions of the MLRC. It is contended that the Petitioner can recover its dues from the other properties of the borrower. The Petitioner has an alternate remedy to recover the amounts due from the borrower, in terms of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act (short ‘SARFAESI’). It is contended that, in terms of Section 169 of the MLRC, the State has frst charge over the said Property. With these contentions, Respondent Nos. 1 and 2 have sought to justify the auction sale and prayed for rejection of this Petition.

7. We have heard Learned Counsel appearing for the respective parties in this Petition.

8. Shri Tamboly, the Learned Counsel appearing on behalf of the Petitioner, made the following submissions:

8.1. That the actions of Respondent Nos. 1 and 2 in conducting the auction sale of the said Property, and passing the impugned Order dated 21st February 2019, confrming the sale in favour of Respondent Nos. 3 and 3A, are arbitrary, colourable and contrary to the principles of natural justice.

8.2. That at the time when the auction was being conducted on 21st February 2019, the Petitioner’s Advocate remained present and informed Respondent No. 2 of the Petitioner’s prior registered mortgage in respect of the said Property. In fact, the Petitioner through their advocate’s Letter dated 21st February 2019, recorded the Petitioner’s objections to the auction and handed over the same to Respondent No. 2 before the auction was concluded.

8.3. That the authorities, despite being aware of the previous rights of the Petitioner qua the said Property, proceeded to conclude the auction sale in favour of Respondent Nos. 3 and 3A, without even mentioning the Petitioner’s objections in the impugned Order dated 21st February 2019.

8.4. That Respondent No. 2 ought to have provided the Petitioner with an opportunity of being heard, and ought to have considered its objections before taking any fnal decision in the matter, and by not doing so, the authorities have acted arbitrarily and contrary to the principles of natural justice.

8.5. That Section 195 of the MLRC, provides for postponement of auction sale for any sufficient reason. Therefore, upon the Petitioner having taken a serious objection to the auction sale and having demonstrated before the auction was concluded that it held a prior registered mortgage in respect of the said Property, the same was sufficient reason to postpone the auction sale in order to properly consider the Petitioner’s objection.

8.6. That despite the availability of this provision, the auction sale was concluded on the same day with undue haste, without considering the Petitioner’s stand in the matter, which demonstrates an absence of bona fdes on the part of the authorities in conducting the sale. Such undue haste is also demonstrated from the fact that the Public Notice qua the auction sale was published only on 19th February 2019 for the auction to be held on 21st February 2019.

8.7. That the said Property could never have been sold by way of public auction without the Petitioner’s consent, in view of its prior registered charge over the same, and certainly not without recognizing, or being made subject to the Petitioner’s rights as a Mortgagee thereof.

8.8. That Clause 1.1.49(b) read with Annexure 2 of the Debenture Trust Deed and Clauses 4.1 and 7.1.16 of the Debenture Trust Deed and the contents of page 45 of the Petition establishes that a registered mortgage is created in respect of the said Property in favour of the Petitioner and the said mortgage is an English Mortgage as defned under Section 58(e) of the Transfer of Property Act, 1882.

8.9. That the content at page 435 of the Afdavit of Respondent No. 2 in reply to the present Petition establishes that Respondent No. 2 had knowledge of the Debenture Trust Deed and the Petitioner’s mortgage in respect of the said Property prior to confrming the auction sale of the same in favour of Respondent Nos. 3 and 3A by the impugned Order dated 21st February 2019.

8.10. That even otherwise, considering that the mortgage in respect of the said Property in favour of the Petitioner is by a registered instrument, Respondent Nos. 1, 2, 3 and 3A were bound and deemed to have knowledge of the same in view of the frst explanation in Section 3 of the Transfer of Property Act, 1882, which reads thus :

Explanation I.—Where any transaction relating to immovable property is required by law to be and has been effected by a registered instrument, any person acquiring such property or any part of, or share or interest in, such property shall be deemed to have notice of such instrument as from the date of registration …….”

8.11. That by Clauses 7.1.16(b) and 10.1.17 (l) of the Debenture Trust Deed, the Respondent No. 4 was restrained from creating any leases, sales, charges and encumbrances over the said Property, without the prior approval of the Petitioner.

8.12. That in case of occurrence of an event of default as defned in Clause 11.3 of the Debenture Trust Deed, the Petitioner is entitled to enforce the mortgage.

8.13. That the clauses of the Debenture Trust Deed mentioned above makes it clear that the mortgagor did not have any right to deal with the said Property without the consent of the Petitioner. Moreover, in order to enforce its security, the Petitioner had the absolute right to deal with the said Property as set out above.

8.14. That apart from the aforesaid contractual rights, the Petitioner has statutory rights as a Mortgagee under Sections 67, 68, 69 and 69A of the Transfer of Property Act, 1882.

8.15. That the Petitioner’s contractual and statutory rights have been seriously prejudiced by the actions of Respondent Nos. 1 and 2 in conducting the auction sale of the said Property, and confrming the same in favour of Respondent Nos. 3 and 3A.

8.16. That in the alternative at the very least, the sale of the said Property would necessarily have to be subject to the Petitioner’s mortgage rights therein.

8.17. That by the impugned Order dated 21st February 2021, Respondent No. 2 has confrmed the sale of the said Property in favour of Respondent Nos. 3 and 3A, but the same was not made subject to the Petitioner’s prior charge and rights in respect of the same, nor was the consent of the Petitioner taken prior to the same. Such actions are in the teeth of the legal position expounded in the following Judgments :

i. Kanti Ram Ors. vs. Kutubuddin Mahomed Ors.; MANU/WB/0007/1894 
ii. State Bank of Indore vs. Regional Provident Fund Commissioner Ors., 1964 SCC Online MP 45; and
iii. Vishal N. Kalsaria vs. Bank of India Ors., (2016) 3 SCC 762

8.18. That Section 169 of the MLRC, Section 40(1) of RERA and Rule 3 of the Maharashtra Real Estate (Regulation and Development) (Recovery of Interest, Penalty, Compensation, Fine Payable, Forms of Complaints and Appeal etc.) Rules, 2017, makes it clear that the stand taken in the Afdavit of Respondent No. 2 in reply to the present Petition, to the efect that the Government has frst charge over the said Property, is misconceived and contrary to law.

8.19. That a perusal of Section 169 of the MLRC demonstrates that there is a clear distinction drawn between actual arrears of land revenue, and monies other than land revenue, but which are recoverable in the same manner as land revenue. In the former case, the State Government shall have a paramount charge over the land in question and precedence over any mortgage in respect of the same. In the latter case, the State Government shall have priority over the land only as against unsecured claims, and not over secured creditors. Under Section 40 of RERA and Rule 3 of the aforesaid Rules, it is clear that the amounts of refund and interest which have been awarded by Respondent No. 9 in favour of Respondent Nos. 10 to 15 against Respondent No. 4 are not actual arrears of land revenue, but are only to be recovered in the same manner as arrears of land revenue. Hence the same fall under Section 169(2) and not Section 169(1) of the MLRC. In view of the fact that the Petitioner is a registered Mortgagee in respect of the said Property, its claim over the same shall have precedence over the State Government in view of Section 169(2) of the MLRC.

8.20. That the above submission is fortifed by the decisions of the Madhya Pradesh High Court in the case of State of Bank of Indore vs. Regional Provident Fund Commissioner, Indore Ors. (supra) and Maulbax vs. Sardarmal Anr., AIR 1978 MP 152 where it has been held that where monies are to be recovered in the same manner as an arrear of land revenue, the same does not amount to an arrear of land revenue which gives the State any precedence over other claims against the defaulter.

8.21. That the stand taken by Respondent No. 2 that the Government has frst charge over the said Property, is therefore incorrect and contrary to law.

8.22. That Respondent Nos. 1 and 2 conducted the auction sale of the said Property in gross violation of Sections 176(d), 181 and 194 of the MLRC.

8.23. That for all the above reasons the present Petition deserves to be allowed and the impugned Order dated 21st February 2019 and the auction sale of the said Property by Respondent Nos. 1 and 2 in favour of Respondent Nos. 3 and 3A, deserve to be quashed and set aside.

9. Shri Akshay Patil, the Learned Counsel appearing on behalf of Respondent Nos. 4 to 8 (Mortgagors) supported the prayers in the present Petition. In addition to what was argued by the Petitioner’s Counsel, he made the following submissions :

9.1. That the Proclamation of Sale was not done as per Section 192 of the MLRC or Rule 12 of the Maharashtra Realisation of Land Revenue Rules, 1967.

9.2. That the Notifcation of Sale was not issued nor affixed as per Section 193 of the MLRC.

9.3. That the said Property was not attached as per Rule 11 of the Maharashtra Realisation of Land Revenue Rules, 1967.

9.4. That the upset price of the said Property was not fxed as per Rule 13 of the Maharashtra Realisation of Land Revenue Rules, 1967.

9.5. That the auction sale of the said Property by Respondent Nos. 1 and 2 being in violation of the provisions of the MLRC and the Rules framed thereunder, the sale in favour of Respondent Nos. 3 and 3A stands vitiated, which submission is fortifed by the decision of this Court in the case of Vaijnath s/o Trimbak Zarkar vs. State of Maharashtra, Order dated 13th December 2012 in Writ Petition No. 9120 of 2012; and the decision of the Nagpur Bench of this Court in Gitabai vs. Prbhavati, 1982 (84) Bom LR 412.

9.6. That in the case of Vaijnath (supra), this Court set aside the action of putting an immovable property to auction in view of the fact that the same was in violation of Section 194 of the MLRC. Applying that ratio, the sale of the said Property ought to be set aside in view of the various violations of the MLRC which have been highlighted above.

9.7. That in the case of Gitabai (supra), the Nagpur Bench of this Court has held (paragraphs 17 to 22) that Sections 192 and 193 of the MLRC as well as Rules 11 and 12 of the Maharashtra Realisation of Land Revenue Rules, 1967 are mandatory. The sale in favour of Respondent Nos. 3 and 3A is illegal in view of the fact that the same is clearly contrary to the mandatory provisions of the MLRC.

9.8. That the Petitioner is a secured creditor as defned under the SARFAESI Act as well as the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. In that view of the matter, the Petitioner’s charge in respect of the said Property would be paramount and would have priority over any claim of the State towards revenue. That this submission is fortifed by the Judgment of this Court in the case of State Bank of India vs. State of Maharashtra, Order dated 17th December, 2020 in Writ Petition (stamp) No. 92816 of 2020 more particularly as set out in paragraphs 19 to 28 and 30 thereof.

9.9. That the entire auction process was conducted with great and undue haste, contrary to mandatory provisions of the MLRC and the Rules framed thereunder, and in derogation of the Petitioner’s secured rights as a registered Mortgagee, and therefore the Petitioner deserves to succeed in the present Petition.

10. Initially, Ms. Solunke appeared on behalf of Respondent Nos. 1 and 2. She submitted that Respondent No. 2 was not aware of the mortgage created in favour of the Petitioner prior to the fnalization of the sale of the said Property in favour of Respondent Nos. 3 and 3A. Since she was desirous of taking instructions to answer our queries, as well as the serious allegations levelled by the Petitioner and Respondent Nos. 4 to 8 respectively, with respect to non-compliance of the provisions of the MLRC and the Rules framed thereunder qua the auction sale of the said Property, we adjourned the matter with a direction that the concerned ofcer be kept present before us on the adjourned date alongwith the original fle containing the documents demonstrating all the steps taken qua the auction sale of said Property. Thereafter, Shri Asif Patel, Additional Government Pleader appeared before us on behalf of Respondent Nos. 1 and 2. He produced the original fle pertaining to the auction sale of the said Property from the custody of Respondent No. 2 for our perusal. The submissions of the Respondent Nos. 1 and 2 as set out in their Afdavit-in-reply are already set out in paragraph 6 above.

11. Shri Drupad Patil, Learned Counsel appearing for Respondent Nos. 3 and 3A, made the following submissions opposing the Petition:

11.1. That Respondent No. 4 did not challenge the Orders passed by Respondent No. 9 directing it to refund the amounts paid by Respondent Nos. 10 to 15 fat purchasers with interest, nor did it challenge the demand notices served upon it by the authorities to recover such amounts. Respondent No. 4 has also not challenged the auction sale of the said Property in favour of Respondent Nos. 3 and 3A.

11.2. That the auction sale of the said Property held on 21st February 2019 is not illegal or void solely on the ground that no prior notice thereof was given to the Petitioner Mortgagee. That there is no legal provision requiring such notice in favour of the Mortgagee.

11.3. That the efect of the mortgage created in favour of the Petitioner was never reffected in the revenue records in respect of the said Property. Hence, the Petitioner cannot be heard to complain that the revenue authorities have not taken its mortgage into consideration before proceeding with or concluding the auction sale of the said Property.

11.4. That a mortgage only creates a limited interest in the property in favour of the mortgagee. That mortgages are governed by Chapter IV of the Transfer of Property Act, 1882. That a mortgage has been defned under Section 58(a) of the Transfer of Property Act,1882 to mean a transfer of interest in specific immovable property for the purpose of securing payment of money advanced or to be advanced by way of loan. That under Section 50(b) of the Transfer of Property Act, 1882 a simple mortgage is one where the mortgagor binds himself personally to pay the mortgage money, without delivering possession of the mortgaged property, and agrees expressly or impliedly that in the event of his failing to pay as per his contract, the mortgagee shall have a right to cause the mortgaged property to be sold, and the proceeds of sale to be applied in the payment of the mortgage money. That a mortgage being a transfer of interest in immovable property, the mortgagee always has a security in the property itself. That once the mortgage is created, the interest in the property will always enure to the beneft of the mortgagee and that any subsequent sale or mortgage of the property, whether with or without notice to the mortgagee, cannot derogate from the mortgagee’s rights. That this is for the obvious reason that in the case of a mortgage, the mortgagor is always vested with the right of redemption of the mortgage, and that any subsequent transferee or mortgagee only acquires the interest which the original owner had at the time of the transaction.

11.5. That the language of Section 56 of the Transfer of Property Act, 1882 makes it clear that a mortgage is only a creation of a limited interest in the property, and that the same cannot take away the right of the mortgagor to transfer the property subsequently.

11.6. That the Petitioner being a Mortgagee in respect of the said Property, only has a limited interest therein. The Petitioner cannot resist the sale of the said Property in favour of Respondent Nos. 3 and 3A. That the Petitioner has a mortgage in respect of over 23 hectares of land. The said Property which has been auctioned only admeasures 49 gunthas. That Respondent Nos. 3 and 3A therefore have a right to claim marshalling of the securities under Section 56 of the Transfer of Property Act, 1882. That this contention of the Respondent Nos. 3 and 3A is fortifed by the decision of the Supreme Court in the case of J. P. Builder vs. A. Ramdas Rao, (2011) 1 SCC 429.

11.7. That under Section 69 of the Transfer of Property Act, 1882, a mortgagee has a right to concur in the sale of the land only in case of default on the part of the mortgagor. In the present case, the Petitioner has not made any averments with respect to any default committed by Respondent Nos. 4 to 8, nor are Respondent Nos. 3 and/or 3A aware of any action initiated by the Petitioner against Respondent Nos. 4 to 8 for any default committed. Therefore, the Petitioner’s consent was not required before confrming the auction sale in favour of Respondent Nos. 3 and 3A.

11.8. That the Debenture Trust Deed is not an English Mortgage. It does not fulfl the ingredients of an English Mortgage. In fact, the Debenture Trust Deed is nothing but a joint venture agreement between the parties thereto.

11.9. That the said Property was sold in execution of Orders passed by Respondent No. 9 against Respondent No. 4, under the provisions of Section 40 of RERA. This Section provides for recovery of the amount as arrears of land revenue.

11.10. That in view of Sections 72 and 169(1) of the MLRC, the arrears of land revenue shall have a paramount charge over the land in question. That therefore the Petitioner cannot claim a superior charge over the said Property. That Section 169(2) of the MLRC would not have any application to the present case as the same is applicable to only claims of the State Government which are sought to be recovered and not to other claims.

11.11. That the dues sought to be recovered under RERA have primacy over the dues of the Petitioner, as held by the Supreme Court in the case of Central Bank of India vs. State of Kerala Anr., (2009) 4 SCC 94.

11.12. That Respondent Nos. 3 and 3A are bona fde purchasers of the said Property. Hence, even if there is any procedural irregularity found in the auction process, the interests of the Auction Purchasers are required to be protected as held by the Supreme Court in the cases of Gurjonginder Singh vs. Jaswant Kaur, (1994) 2 SCC 368 and Janakraj vs. Gurdial Singh, (1967) 2 SCR 77.

11.13. That without prejudice to all their rights and contentions, Respondent Nos. 3 and 3A are willing to deposit an amount of Rupees One Crore Sixty-Six Lakhs for redemption of the mortgage of the said Property.

12. Shri Sariputta, Learned Counsel appearing on behalf of Respondent Nos. 10 to 15 submitted that his clients are innocent fat purchasers who have been duped by Respondent No. 4. They purchased fats in the Padmanabh Phase-1 project of Respondent No. 4, but the same were not delivered in time. Hence, they fled complaints under Section 18 of the RERA before Respondent No. 9, and succeeded in obtaining orders of refund of the purchase monies paid by them with interest against Respondent No. 4. He submitted that his client is entitled to recover their monies in the manner set out in Section 40 of RERA. He submitted that his clients have suffered at the hands of Respondent No. 4. He submitted that therefore the proceeds of the auction sale of the said Property should be handed over to his clients who are innocent suferers.

13. Before we concluded the hearing of this matter, we had asked the Counsels for the respective parties to fle their written submissions. The Counsel for the Petitioner, Respondent Nos. 4 to 8 and Respondent Nos. 3 and 3A respectively, have fled their written submissions in the matter.

14. We have considered the Petition, the Afdavit in reply fled by Respondent No.2 and the oral and written submissions of the Learned Counsels for the parties. We have also perused the original fle produced by Respondent No. 2 pertaining to the auction sale of the said Property. Our findings in respect of the same are as follows:

15. The Petitioner and Respondent Nos. 4 to 8 have entered into the Debenture Trust Deed dated 16th February 2015. Respondent No. 4 raised funds to the tune of Rupees One Hundred and Twenty Crores by issuing debentures to the subscribers thereof. The Petitioner is the Debenture Trustee on behalf of the debenture holders under the Debenture Trust Deed. To secure the due fulflment of its obligations of redemption of the debentures on their due dates, Respondent No. 4 has mortgaged various immovable properties in favour of the Petitioner, including the said Property. This is evident from a reading of Clauses 4.1 and 7.1.16 of the Debenture Trust Deed quoted above, read with Clause 1.1.49(b) and Annexure 2 thereof. The Debenture Trust Deed has been stamped as a Mortgage Deed under Article 40(b) of the Maharashtra Stamp Act. This is evident from the Stamp Duty Challan annexed at page 45 of the Petition. The Debenture Trust Deed has been registered with the Sub-Registrar of Assurances at Haveli-16 under Registration No. Havl-16/1511/211/2015. In view of the above, we have no hesitation in holding that the Petitioner is the Mortgagee of the said Property under the Debenture Trust Deed.

16. The Learned Counsel for the Petitioner has contended that the mortgage created by Respondent No. 4 in favour of the Petitioner in respect of the said Property, is an English Mortgage as defned under Section 58(e) of the Transfer of Property Act, 1882. On the other hand, the learned Counsel for Respondent Nos. 3 and 3A contended that the mortgage in favour of the Petitioner does not fulfl the ingredients of an English Mortgage. To address this controversy, let us take a look at Section 58(e) of the Transfer of Property Act, 1882, which reads as follows:

(e) English mortgage.—Where the mortgagor binds himself to repay the mortgage-money on a certain date, and transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso that he will re-transfer it to the mortgagor upon payment of the mortgage-money as agreed, the transaction is called an English mortgage.

17. In an English Mortgage, as defned under Section 58(e) of the Transfer of Property Act, 1882 there is transfer of ownership of the property by the mortgagor to the mortgagee, with a covenant to repay the debt on a certain date, with a proviso that on this condition being performed, the mortgagee will retransfer the property to the mortgagor. The three essential ingredients of an English Mortgage thus are: (i) the mortgagor binds himself to repay the mortgage money on certain day, (ii) the property mortgaged is transferred to the mortgagee, and (iii) such transfer is made subject to a proviso that the mortgagee will reconvey the property to the mortgagor upon payment of mortgage money as promised.

18. Let us test whether the mortgage of the said Property fulflls these three ingredients of an English Mortgage. Clause 7.1.16 of the Debenture Trust Deed is relevant in this regard. The same reads as follows:

“7.1.16 Grant and Transfer, Convey, Assign, Assur

(a) ………..

(b) In consideration of the Subscriber subscribing / agreeing to subscribe to the Debentures and with an intention to create a frst and exclusive charge by way of a mortgage, the Company

DOTH HEREBY GRANT, TRANSFER, CONVEY, ASSIGN AND ASSURE, UNTO the Debenture Trustee, the Mortgaged Assets of Project 2

TOGETHER WITH all the present and future structures to be constructed on Property 2 including the Unites comprised therein

TOGETHER WITH all rights, liberties, privileges, easements, advantages, assets, benefts, revenues, income and appurtenances whatsoever to and arising in relation thereto

TO HAVE AND TO HOLD the Mortgaged Assets of Project 2 hereby granted or expressed so to be

UNTO PROVIDED ALWAYS and it is hereby agreed and declared that if the Company redeems the Debentures in the manner provided in this Deed and also all other moneys, costs, charges and expenses by Applicable Law or under these presents or under the Transaction Documents, payable to the Debenture Holders then in such case, the Debenture Trustee shall upon the request and at the cost charges and expenses of the Company re-transfer the Mortgaged Assets of Project 2

UNTO the Company or to such person as the Company may direct and shall also deliver to the Company or such person this Deed and all documents relating to the Mortgaged Assets of Project 2 which shall be in possession or power of the Debenture Trustee

AND IT IS HEREBY FURTHER AGREED by and between the parties hereto that until default be made by the Company redemption / payment / repayment of the Debentures, the Company shall remain in possession of the Mortgaged Assets of Project 2

PROVIDED THAT the Company shall while in possession of the Mortgaged Assets of Project 2 as aforesaid, have no power to make any leases or sales or other disposal thereof, save and except as provided herein or with the previous consent in writing of the Debenture Trustee (acting for and on behalf of the Debenture Holders). It is further agreed that simultaneously upon execution hereof the Company shall deposit the originals of title documents in respect of Property 2, a list whereof is set out in Part B of Annexure-9 with the Debenture Trustee. The Debenture Trustee shall return the aforesaid documents to the Company upon Settlement Date of Project 2”

19. The language of the Clause confrms that the mortgaged assets of Project 2 have been conveyed and assigned by Respondent No. 4 to the Petitioner. The Clause further provides that in the event Respondent No. 4 redeems the debentures in the manner provided under the Debenture Trust Deed, then upon its request, the Petitioner is required to re-transfer the mortgaged assets of Project 2 to the Respondent No. 4. Therefore, it is clear that the parties intended to transfer the property with an option to the Mortgagor to get it re-transferred upon payment of the mortgage money. The said Property forms part of the mortgaged assets of Project 2 as defned under clause 1.1.49(b) of the Debenture Trust Deed read with Annexure 2 thereof. Hence, we find that the mortgage created by Respondent No. 4 in favour of the Petitioner in respect of the said Property is an English Mortgage as defned under Section 58(e) of the Transfer of Property Act, 1882.

20. Respondent Nos. 10 to 15 were purchasers of fats in a real estate project of Respondent No. 4 called Padmanabh Phase – 1. It appears that since Respondent No. 4 failed to deliver fats to the Purchasers within time, Respondent Nos. 10 to 15 fled complaints before Respondent No. 9 under Section 18 of RERA, seeking to exit the project and for refund of the purchase consideration paid by them with interest. Respondent No. 9 by its Orders dated 14th and 27th February 2018 held in favour of Respondent Nos. 10 to 15 and directed Respondent No. 4 to refund the purchase consideration paid by them with interest. Respondent No. 4 did not challenge those Orders. They were therefore put to execution. Under Section 40(1) of RERA read with Rule 3 of the Maharashtra Real Estate (Regulation and Development) (Recovery of Interest, Penalty, Compensation, Fine Payable, Forms of Complaints and Appeal etc.) Rules, 2017, the compensation and interest imposed on Respondent No. 4 by Respondent No.9 is to be recovered as arrears of land revenue in the manner provided in the MLRC. The relevant provisions in this regard are as follows:

Section 40 (1) of RERA:

40. Recovery of interest or penalty or compensation and enforcement of order, etc. – (1) If a promoter or an allottee or a real estate agent, as the case may be, fails to pay any interest or penalty or compensation imposed on him, by the adjudicating ofcer or the Regulatory Authority or the Appellate Authority, as the case may be, under this Act or the rules and regulations made thereunder, it shall be recoverable from such promoter or allottee or real estate agent, in such manner as may be prescribed as an arrears of land revenue.”

Rule 3 of the Maharashtra Real Estate (Regulation and Development) (Recovery of Interest, Penalty, Compensation, Fine Payable, Forms of Complaints and Appeal etc.) Rules, 2017:

“3. Manner of recovery of interest, penalty and compensation. – Any interest or penalty or compensation imposed on a promoter or an allotee or a real estate agent shall be recoverable under section 40 of the Act, from such promoter or allotee or real estate agent, as the case may be, in the same manner as applicable in respect of land revenue as provided in the Maharashtra Land Revenue Code, 1966 (Mah. XLI of 1966).”

The above provisions make it clear that the compensation and interest imposed upon a promoter under RERA is recoverable in the same manner as arrears of land revenue under the MLRC. It is in furtherance of these provisions that Respondent No. 9 issued a Recovery Warrant to Respondent No. 1 to recover the amounts awarded by it to Respondent Nos. 10 to 15 from Respondent No. 4 in the same manner as arrears of land revenue. Respondent Nos. 1 and 2 sold the said Property by public auction in furtherance of the same. Therefore, the involvement of the revenue authorities under the MLRC in execution of orders of compensation and interest passed by Respondent No. 9, finds its genesis in Section 40 of RERA.

21. One of the central areas of controversy involved in this Petition is the priority of charges held over the said Property. Is it the Petitioner that has priority over the said Property by virtue of it being a registered Mortgagee in respect of the same, as contended by the Counsel for the Petitioner, or is it the State Government seeking to recover the compensation and interest due by Respondent No. 4 to Respondent Nos. 10 to 15 in the same manner as arrears of land revenue, that has priority, as contended by the learned Advocate on behalf of Respondent Nos. 1 and 2 and the learned Counsel on behalf of Respondent Nos. 3 and 3A. We think that the answer to this lies in Section 169 of the MLRC, which reads thus:

“169. Claims of State Government to have precedence over all others. – (1) The arrears of land revenue due on account of land shall be a paramount charge on the land and on every part thereof and shall have precedence over any other debt, demand or claim whatsoever, whether in respect of mortgage, judgement-decree, execution or attachment, or otherwise howsoever, against any land for the holder thereof.

(2) The claim of the State Government to any monies other than arrears of land revenue, but recoverable as a revenue demand under the provisions of this Chapter shall have priority over all unsecured claims against any land or holder thereof.”

The aforesaid Section makes a clear distinction between actual arrears of land revenue due on account of land, and amounts other than arrears of land revenue which are recoverable as arrears of land revenue under the MLRC. In the former case, the arrears of land revenue due on account of land, amount to a paramount charge on the land in question, which shall have precedence over all other debts. However, in the latter case, the claim of the State Government to monies recoverable as other than arrears of land revenue but in the same fashion, have priority only over unsecured claims and not over secured debts. Land revenue has been defned in Section 2(19) of the MLRC to mean, “all sums and payments, in money received or legally claimable by or on behalf of the State Government from any person on account of any land or interest in or right exercisable over land held by or vested in him, under whatever designation such sum may be payable and any cess or rate authorised by the State Government under the provisions of any law for the time being in force; and includes premium, rent, lease money, quit, rent, judi payable by a inamdar or any other payment provided under any Act, rule, contract or deed on account of any land;”.

Therefore, it is clear that land revenue means amounts payable to the State Government on account of land. In the present case, we are of the opinion that the amounts of compensation and interest which have been awarded by Respondent No. 9 against Respondent No. 4 and in favour of Respondent Nos. 10 to 15 cannot be said to be actual arrears of land revenue. They are not dues payable to the State Government which arise out of any particular land. They are not even claims of the State Government. They are dues payable by a promotor of a real estate project to the fat purchasers under orders passed under the provisions of RERA. The mode of recovery of such amounts is the same as if they were arrears of land revenue under the MLRC. Hence these amounts clearly cannot be governed by Section 169(1) of the MLRC. Therefore, the claims of Respondent Nos. 10 to 15 as awarded by Respondent No. 9 cannot have priority over the properties of Respondent No. 4 in derogation of the Petitioner’s secured interest therein. Having held that the Petitioner is a secured creditor of Respondent No. 4 and a Mortgagee in respect of the said Property under the Debenture Trust Deed, we find that the Petitioner has priority in respect of the said Property over the claims of Respondent Nos. 10 to 15. In other words, the Petitioner is entitled to have its debts satisfed out of the said Property in priority over Respondent Nos. 10 to 15.

22. The above finding is fortifed by a similar finding of the Madhya Pradesh High Court in the case of State Bank of Indore vs. Regional Provident Fund Commissioner (supra) relied upon by the Counsel for the Petitioner. In that case, a mortgage deed was executed by a company, mortgaging its entire immovable property in favour of a bank. That company failed and neglected to pay the employer’s contribution due from it under the Employees’ Provident Funds Act, 1958. The State, pursuant to a provision in the Employees’ Provident Funds Act, 1958 sought to recover the contribution as an arrear of land revenue under the Madhya Pradesh Land Revenue Code, 1959. Despite the bank informing the State of its prior registered mortgage over the property of the company, the State sold the property to recover the company’s provident fund contribution as arrears of land revenue. The following observations were made by the Court while holding the sale to be bad in law:

5. In our judgment, the contentions advanced on, behalf of the petitioner must be given efect to. Section 8 of the Act provides, inter alia, that any amount due from the employer in relation to an establishment to which a Scheme under the Act applies, may, if the amount is in arrear, be recovered by the appropriate Government in the same manner as an arrear of land revenue. It does not say that the amount may be recovered as an arrear of land revenue. It merely provides the manner of the recovery of the amount mentioned in Section 8 . The manner prescribed for the recovery of the amount as an arrear of land revenue does not convert the amount into an arrear of land revenue; nor does it create any charge on any property of the employer for the payment of the amount or give a priority in the manner of payment of the amount. There is no provision in the Act in regard to the creation of any such charge or priority for the payment of the employer’s contribution.

(emphasis supplied).

23. In view of the above discussion, we accept the Petitioner’s submission that it has priority over the said Property as against the claims of Respondent Nos. 10 to 15.

24. There is another reason to hold that the Petitioner’s claim over the said Property shall take precedence over the claims of the State and Respondent Nos. 10 to 15. At the cost of repetition, we may reiterate that the Petitioner’s interest was secured by way of registered mortgage, quite prior to the adjudication by Respondent No. 9 of the claims of Respondent Nos. 10 to 15. In this regard, it would be relevant to note the term ‘secured creditor’ as defned under Section 2(la) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (“RDB Act”). The same is similar to the defnition of the term ‘secured creditor’ as defned under Section 2(1) (zd) of the SARFAESI Act. Contextually, we have gone through the defnition of the term ‘secured creditor’ as defned under SARFAESI Act, which reads as under:-

“(zd) “secured creditor” means- (i) any bank or fnancial institution or any consortium or group of banks or fnancial institutions holding any right, title or interest upon any tangible asset or intangible asset as specifed in clause (l);

(ii) debenture trustee appointed by any bank or fnancial institution; or

(iii) an asset reconstruction company whether acting as such or managing a trust set up by such asset reconstruction company for the securitisation or reconstruction, as the case may be; or

(iv) debenture trustee registered with the Board appointed by any company for secured debt securities; or

(v)any other trustee holding securities on behalf of a bank or fnancial institution.”

25. Undoubtedly, the Petitioner Debenture Trustee holds rights to recover debt which amounts to ‘fnancial assets’ as defned under Section 2(l) of the SARFAESI Act, which reads as below:-

“2(l) “fnancial asset” means debt or receivables and includes —

(i) a claim to any debt or receivables or part thereof, whether secured or unsecured; or

(ii) any debt or receivables secured by, mortgage of, or charge on, immovable property; or

(iii) a mortgage, charge, hypothecation or pledge of movable property; or

(iv) any right or interest in the security, whether full or part underlying such debt or receivables; or

(v) any benefcial interest in property, whether movable or immovable, or in such debt, receivables, whether such interest is existing, future, accruing, conditional or contingent; or

[(va) any benefcial right, title or interest in any tangible asset given on hire or fnancial lease or conditional sale or under any other contract which secures the obligation to pay any unpaid portion of the purchase price of such asset or an obligation incurred or credit otherwise provided to enable the borrower to acquire such tangible asset; or

(vb) any right, title or interest on any intangible asset or licence or assignment of such intangible asset, which secures the obligation to pay any unpaid portion of the purchase price of such intangible asset or an obligation incurred or credit otherwise extended to enable the borrower to acquire such intangible asset or obtain licence of the intangible asset; or]

(vi) any fnancial assistance;”

26. The conjoint reading of these provisions clearly postulates that, the Petitioner is a secured creditor as its debt has been secured by way of a registered mortgage.

27. At this juncture, it is relevant to note Section 31-B of the RDB Act which gives priority to the claim of the secured creditor reads as under :-

“31-B. Priority to secured creditors – Notwithstanding anything contained in any other law for the time being in force, the rights of secured creditors to realise secured debts due and payable to them by sale of assets over which security interest is created, shall have priority and shall be paid in priority over all other debts and Government dues including revenues, taxes cesses and rates due to the Central Government, State Government or local authority.”

28. We can find a similar provision under Section 26-E of the SARFAESI Act, which reads as under:-

“26-E. Priority to secured creditors – Notwithstanding anything contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority.”

29. Both provisions start with a non-obstante clause, meaning thereby, that the same would prevail over any other law for the time being in force. The legislative intent is loud and clear to give an assurance to the secured creditor of having priority in case of recovery of its dues.

30. In view of the above discussion, we believe that the Learned Counsel for Respondent Nos. 4 to 8 is correct in relying upon the decision of a Division Bench of this Court in State Bank of India vs. The State of Maharashtra (supra). In that case it was held that the dues of secured creditors have priority over the dues recoverable under the Maharashtra Value Added Tax Act, 2002 (‘MVAT’). In the said case, the Division Bench of this Court has considered the provisions of Section 26-E of the SARFAESI Act along with Section 31-B of the RDB Act. It is held that the dues of secured creditors get priority of charge over the dues under the MVAT Act. This pronouncement would assist the Respondent No. 4 to contend that there is no priority to the dues recoverable under RERA.

31. In view of all of the above, we cannot accept the contention of the Learned Counsel for Respondent Nos. 3 and 3A that dues under RERA would have primacy over the dues of the Petitioner. The Judgment of the Supreme Court in the case of Central Bank of India vs. State of Kerala Anr. (supra) relied upon by Learned Counsel for Respondent Nos. 3 and 3A will not apply to the facts of the present case. The said case relates to recovery of sales tax dues which is considered to be dues of the State Government. The Sales Tax Act bears a specific provision under Section 38(c) of giving primacy to that charge. In that context, it was ruled that the nonobstante clause in the Central Act like SARFAESI could not render the frst charge created by the State enactments inoperative. However, RERA does not create any such charge over the assets of the promoter. Therefore, the said ratio has no application to the facts of the case in hand.

32. We next deal with the contention of the Learned Counsel for Respondent Nos. 3 and 3A that they as subsequent purchasers are entitled to marshalling of the securities as contemplated under Section 56 of the Transfer of Property Act, 1882. For ready reference Section 56 of the Transfer of Property Act is reproduced herein below:-

“56. Marshaling by subsequent purchaser – If the owner of two or more properties mortgages them to one person and then sells one or more of the properties to another person, the buyer is, in the absence of a contract to the contrary, entitled to have the mortgage-debt satisfed out of the property or properties not sold to him, so far as the same will extend, but not so as to prejudice the rights of the mortgagee or persons claiming under him or of any other person who has for consideration acquired an interest in any of the properties.”

33. In order to appreciate the applicability of Section 56 of the Transfer of Property Act, 1882, one has to understand the essential ingredients for invocation of this equitable principle. These are as under:-

(i) the owner of two or more properties must have mortgaged them to one person;

(ii) he should have subsequently sold one or more of such properties to a third person;

(iii) the exercise of this right must not prejudice the rights of the mortgagee or of persons claiming under him, or of any other person who has, for consideration acquired an interest in any of the properties, and

(iv) there must be no contract to the contrary.

34. It is true that in the absence of a contract to the contrary, the buyer can get mortgage debts satisfed out of the other property not sold to him. This is what Respondent Nos. 3 and 3A contend. They submit that, the Petitioner has a number of properties of Respondent No. 4 mortgaged to it and can recover its dues from the same. They contend that several properties were mortgaged to the Petitioner which are separate properties having distinct revenue extracts. Therefore, according to the Auction Purchasers, the Petitioner Mortgagee can enforce its dues against the rest of the mortgaged properties so that the sale of the said Property in their favour can be saved.

35. We find that Section 56 of the Transfer of Property Act, 1882 has an inbuilt proviso that the subsequent buyer cannot exercise such a right of marshalling which could cause prejudice to the rights of the mortgagee. Thus, even if right of marshaling under this Section may arise, the exercise of the same must not cause prejudice to the rights of the mortgagee or any person claiming through such mortgagee.

36. The question of prejudice is essentially purely one of fact which has to be assessed from the facts and circumstances of each case. Since it is a question of fact, the matter must be examined from the view point of whether the exercise of such right of marshalling by Respondent Nos. 3 and 3A would cause any prejudice to the Petitioner i.e. the prior Mortgagee. We are conscious of the fact that we cannot go into disputed questions of fact in a Writ Petition. Proceeding on the basis of the record before us, it is ex-facie clear that the various pieces of land were mortgaged to the Petitioner under the Debenture Trust Deed. The said Property, i.e. land bearing Survey No. 95/3, admeasuring 49 ares, is one of them. Funds were raised by Respondent No. 4 by issuance of debentures to the tune of Rupees One Hundred and Twenty Crores. The properties have been mortgaged to secure the timely redemption of these debentures. The Petition discloses that Respondent No. 4 did not redeem the debentures on time, constituting an event of default under the Debenture Trust Deed. Respondent No. 4 has not disputed this position before us. A Legal Notice dated 6th June 2018 was issued by the Petitioner to Respondent No. 4 which states that the outstanding dues have increased to Rs. 252.89 crores as on that date. At the time of hearing, the Learned Counsel for the Petitioner submitted that the outstanding dues have today crept up to the tune of Rs. 450 Crores. We, of course, are not entering into the correctness of this submission, or in fact the arena of ascertaining the actual dues. However, if the contention of the Petitioner is correct, the outstanding dues payable by Respondent No. 4 are substantial.

37. In the course of executing the recovery warrant issued by Respondent No. 9 under Section 40(1) of RERA, the Additional Tehsildar got the said Property valued. The communication dated 25th January 2019 of the Additional Tehsildar disclosed at pages 331 and 332 of the Petition states that the properties owned by Respondent No. 4 at Village Chovisawadi have an estimated valuation of Rs. 28.60 Crores. Out of this the said Property bearing S. No. 95/3 has been valued at Rs. 1,59,52,800/-. This would not cover the Mortgage Debt claimed by the Petitioner. In order to exercise the right of marshalling, Respondent Nos. 3 and 3A as the subsequent purchasers must come with such a specific case and amply demonstrate the same. They have done neither. In absence of the same, it is not possible for us to hold that the Petitioner Mortgagee shall not be prejudiced if it is to recover its dues from the other mortgaged properties, excluding the said Property, especially in view of the substantial dues claimed by it. Therefore, the Auction Purchasers have failed to demonstrate that they are entitled to marshalling of securities under Section 56 of the Transfer of Property Act, 1882.

38. The Judgment of the Supreme Court in case of J. P. Builder vs. A. Ramdas Rao (supra) on which the learned Counsel for Respondent Nos. 3 and 3A has placed reliance does not carry his case any further. In this decision itself, it has been held that the question of prejudice is purely one of fact and the same depends upon various factors. The right of marshaling was upheld in the facts of that case. However, we are unable to hold so in favour of Respondent Nos. 3 and 3A in the facts of the present case in view of our findings above.

39. There is another reason to hold that the disputed auction sale has caused prejudice to the rights of the Petitioner as a prior Mortgagee. As narrated above, several properties were mortgaged to the Petitioner. The said Property was one of them. At the time of hearing, the Learned Counsel for the parties showed us a plan of Village Chovisawadi and the various lands which have been mortgaged to the Petitioner. The said Property is road facing. The Learned Counsel for the Petitioner contended that this would have a bearing on its value and make it more marketable. He further pointed out that all of the mortgaged properties in that Village were contiguous pieces of land. If the Petitioner were to enforce its security by dealing with all of the mortgaged properties as one lot, the same could fetch a much higher value. On the other hand, he submitted that if the said Property is allowed to be sold in isolation, as has been done by the impugned auction sale, the same would have a rippling efect of diminishing the market value of the lands adjoining it, as the Petitioner would not be able to deal with the same in one lot, or as contiguous pieces of land. He therefore submitted that the prejudice caused to the Petitioner’s security by the auction sale of the said Property is palpable. If the said portion is excluded, then certainly it would diminish the commercial value of the rest the of the mortgaged property and thus, it would cause prejudice to the rights of Mortgagee. In view of the same, and in the absence of any material to the contrary being produced by Respondent Nos. 3 and 3A, we cannot accept their submission that by permitting them to have the securities marshalled under Section 56 of the Transfer of Property Act, 1882, no prejudice shall be caused to the Petitioner.

40. We next turn to the Petitioner’s contention that the action of completing the auction process and confrming the sale of the said Property in favour of Respondent Nos. 3 and 3A was arbitrary, mala fde and contrary to the principles of natural justice. In this regard, we note that admittedly the Public Notice for auction sale of the said Property was published in the local newspaper on 19th February 2019. The auction sale was fxed just two days later i.e. on 21st February 2019. On the date of the auction, the Petitioner had admittedly remained present through its Advocate and submitted its objections vide its Advocate’s Letter dated 21st February 2019. The same clearly mentions that the Petitioner claims to have a prior registered mortgage over the said Property. This has also been admitted by Respondent No. 2 in the Afdavit in Reply to the above Petition. The relevant averment in the Afdavit in this regard is as follows :

“……….At the time of the auction process, the advocate from the petitioner trustee has came at the place and given written objection thereby stated that the said property along with the other properties have mortgaged in their favour by the respondent no. 4 to 8 and further requested to withdraw the said notice and cancel the entire auction……….”

41. Thus, by his own admission, Respondent No. 2 had notice of the Petitioner’s claim over the said Property, prior to the auction process being concluded. The principles of natural justice demand that the representation made by the Petitioner ought to have been considered before concluding the auction sale. This is more so in light of the fact the Public Notice announcing the auction sale was issued merely two days prior thereto. The Petitioner raised a timely objection and asserted its rights in respect of the said Property which was proposed to be sold before the auction was concluded, which ought to have been considered by the authorities before concluding the sale. The utter haste in which the auction was held and the sale was concluded within two days of the same being announced publicly, and that too despite a serious objection being taken by the Petitioner at the time of the auction, leaves much to be desired, and smacks of arbitrariness and colorable exercise of power. The Petitioner is correct in submitting that the same smacks of an absence of bona fdes. When the Petitioner appeared before the revenue authority in a timely manner, and raised a serious objection to the sale of the said Property by claiming rights therein, the same ought to have been considered and investigated and dealt with before any fnal decision was taken. The authorities instead concluded the auction sale on the same day and passed the impugned Order dated 21st February 2019 without considering, or even adverting to the Petitioner’s objections.

42. At the time of hearing, the Learned Counsel for the Petitioner contended that despite the Petitioner’s objections, taken by its Advocates vide their Letters dated 21st February 2019 and 28th February 2019, Respondent Nos. 1 and 2 issued a Sale Certifcate dated 11th March 2019 in favour of Respondent Nos. 3 and 3A. We find that this is in the teeth of Section 208 of the MLRC, which reads thus:

“208. On the expiration of thirty days [or, as the case may be, one hundred and eighty days] from the date of the sale, if no such application as is mentioned in section 207 has been made, or if such application has been made and rejected the Collector shall make an order confrming the sale : Provided that, if he has reason to think that the sale ought to be set aside notwithstanding that no such application has been made, or on ground other than those alleged in any application which has been rejected, he may, after recording his reasons in writing, set aside the sale.”

Clearly, the sale was not only confrmed within 30 days, but the Sale Certifcate was also issued before the expiry of thirty days. This too demonstrates the undue haste with which the authorities have proceeded to conclude the auction sale of the said Property in favour of Respondent Nos. 3 and 3A, and completely vitiates the sale procedure.

43. There is another reason to hold that there was undue haste on the part of the authorities in concluding the sale. The Learned Counsel for the Petitioner is correct in placing reliance upon Section 195 of the MLRC, which reads thus:

195. Postponement of sale: The Sale may from time to time be postponed for any sufficient reason: Provided that, when the sale is postponed for a period of longer than thirty days, a fresh proclamation and notice shall be issued unless the defaulter consents to waive it.

This provision clearly demonstrates that Respondent No. 2 had the power to postpone the auction sale for any sufficient reason. In our opinion, when the Petitioner came forward with an objection pointing out that it had a registered mortgage over the said Property which was the subject matter of the auction, the same was sufficient reason for the authority to postpone the same. It could have postponed the sale, investigated the claim of the Petitioner, and if the same was not found to be genuine, it could have conducted the sale thereafter. No prejudice would have been caused to any party if such course of action was adopted. On the contrary, the Petitioner, suffered serious prejudice by its objections being disregarded and the sale being concluded despite the same. In fact, we have found the Petitioner’s claim as a Mortgagee to be genuine as noted above. That being the case, the authorities have clearly acted with undue haste and with a premeditated intention to conclude the sale on 21st February 2019 itself, whatever the circumstances or objections raised. We find that this conduct vitiates the sale.

44. Apart from the above, it is required to be noted that when a transfer of immovable property is effected by way of a registered instrument, a subsequent purchaser is said to have implied notice of the same. Section 3 of the Transfer of Property Act, 1882 takes into its ambit not only the actual notice but also implied notice by way of a registered instrument, provided that the instrument is required by law to be registered. Mere non-entering the encumbrances in the revenue records as contended on behalf of Respondent Nos. 1 and 2 and 3 and 3A cannot be an excuse. Moreover, the second proviso to Section 149 of the MLRC exempts the obligation of reporting the acquisition of rights by a registered instrument to the revenue authorities. Section 149 reads as follows:

“149. Acquisition of rights to be reported. – Any person acquiring by succession, survivorship, inheritance, partition, purchase, mortgage, gift, lease or otherwise, any right as holder, occupant, owner, mortgagee, landlord, Government lessee or tenant of the land situated in any part of the State or assignee of the rent or revenue thereof, shall report orally or in writing his acquisition of such right to the Talathi within three months from the date of such acquisition, and the said Talathi shall at once give a written acknowledgement of the receipt of such report to the person making it: Provided that, where the person acquiring the right is a minor or otherwise disqualifed, his guardian or other person having charge of his property shall make the report to the Talathi:

Provided further that, any person acquiring a right with the permission of the Collector or by virtue of a registered document shall be exempted from the obligation to report to the Talathi:

Provided also that, where a person claims to have acquired a right with the permission of the Collector where such permission is required under the provisions of this Code or any law for the time being in force, such person shall on being required by the Talathi so to do produce such evidence of the order by which such permission is given as may be required, by rules made under this Code.

Explanation I.- The rights mentioned above include a mortgage without possession, but do not include an easement or a charge not amounting-to a mortgage of the kind specifed in Section 100 of the Transfer of Property Act, 1882.

Explanation II.- A person in whose favour a mortgage is discharged or extinguished or lease determined, acquires a right within the meaning of this Section.

Explanation III.- For the purpose of this Chapter, the term “Talathi” includes any person appointed by the Collector to perform the duties of a Talathi under this Chapter.”

[emphasis supplied]

45. Apparently, the revenue authorities were well cautioned about the prior mortgage of the Petitioner, but acting in a hasty manner, they proceeded with the auction which shows complete disregard and mala fdes on their part.

46. The Petitioner has placed reliance on the decision of the Supreme Court in the case of Vishal N. Kalsaria vs. Bank of India and others (supra) to contend that the consent of the creditor was necessary before the sale of mortgaged property. In the said case, a lease was created after the property was mortgaged. In that context, it has been held that the consent of the creditor ought to have been taken before granting leasehold rights relating to the property which has been mortgaged to the bank, a secured creditor. In the case at hand also, the Additional Tehsildar was well aware about the prior mortgage created in favour of the Petitioner by way of a registered instrument, but he still did not bother to obtain the Mortgagee’s consent.

47. In view of the same, we find that the Learned Counsel for the Petitioner is correct in pointing out the prejudice caused to the Petitioner’s contractual and statutory rights as a registered Mortgagee of the said Property by the conclusion of the auction sale in favour of Respondent Nos. 3 and 3A. The learned Counsel for Respondent Nos. 3 and 3A contended that the Petitioner being a Mortgagee of the said Property only had a limited interest therein. He submitted that as a Mortgagee, the Petitioner could not object to the auction sale of the said Property as its rights as a Mortgagee were not afected in law. We thereupon enquired with the learned Counsel whether his clients were willing to have the sale of the said Property in their favour confrmed, subject to the Petitioner’s secured charge in respect of the same. The learned Counsel for Respondent Nos. 3 and 3A categorically responded in the negative. He stated that in such an event his clients would prefer to take a refund of the amounts paid by them in furtherance of the auction sale. We find this stand of the Auction Purchasers to be untenable. They cannot on the one hand contend that the Petitioner’s rights as a Mortgagee in respect of the said Property are unafected by the auction sale in their favour, and on the other hand contend that the sale in their favour be unconditional and without reference to the Petitioner’s rights therein. The argument is self – defeating and cannot be countenanced.

48. This leaves us to consider the submissions made by the Learned Counsel for the Petitioner that the auction sale of the said Property was effected contrary to the provisions of Chapter XI of the MLRC and the Rules framed thereunder. We have perused the documents annexed to the Petition, the Afdavit in Reply, and those found in the original fle produced by Respondent No. 2 for our perusal, to check the aspect of compliance of the procedural aspect by the authorities. In this regard, the following chronological list of dates is relevant: Date Event 16.02.2015 The Debenture Trust Deed was executed between the Petitioner and Respondent Nos. 4 to 8 under which the mortgage of the said Property was created in favour of the Petitioner.

12.02.2016 Respondent No. 4 executed the Supplementary Deed of Mortgage in favour of the Petitioner.

14.02.2018 27.02.2018 Orders passed by Respondent No. 9 disposing of the complaints fled by Respondent Nos. 10 to 15 and directing Respondent No. 9 to refund the amounts paid by them with interest.

23.04.2018 Recovery Warrant was issued by Respondent No. 9 in terms of Section 40(1) of the RERA.

24.05.2018 The Collector, Pune, directed the Additional Tehsildar to initiate recovery of the sums, in terms of the provisions of MLRC, with a description of property (the said Property was not mentioned).

11.06.2018 The Additional Tehsildar issued a Demand Notice under Rule No. 5 of the Maharashtra Recovery of Land Revenue Rules (“MRLR Rules”).

23.07.2018 The Additional Tehsildar issued a Notice of Attachment under Rule 6 of the MRLR Rules (without a description of the said Property) September 2018.

The Additional Tehsildar issued Proclamation under Rule 6 of MRLR Rules (without a description of the said Property) 23.10.2018 The Talathi issued a Demand Notice under Sections 174 and 178 of the MLRC to Respondent No. 4.

15.09.2018 The Additional Tehsildar issued a Notice of Attachment to the borrower specifying the property to be attached (the said Property has not been mentioned).

21.09.2018 The Talathi gave a description of the property owned by the Respondent No. 4 – borrower.

22.09.2018 The Talathi informed the SDO that the mutation entry relating to the RERA dues has been effected in the revenue record and sought valuation.

19.01.2019 Valuation Report of the said Property showing its value to be Rs.

1,59,52,800/- was received from the Sub-registrar.

24.01.2019 Panchanama was prepared by the Talathi of various properties owned by the Respondent No. 4 including the said Property.

25.01.2019 The Additional Tahsildar sought approval from the SDO for conducting auction of the properties owned by the borrower (including the said Property).

04.02.2019 The SDO approved the Valuation Report and permitted initiation of recovery proceedings by way of auction as per the MLRC.

05.02.2019 The Tehsildar issued a letter to the concerned authority for issuing Public Notice regarding auction sale of the said Property.

19.02.2019 Public Notice qua the auction sale was published in the daily local news paper ‘Sakal’.

21.02.2019 Auction was scheduled as per the Public Notice.

21.02.2019 The Petitioner raised oral and written objections and requested Respondent No. 2 to withhold the auction.

21.02.2019 The Additional Tehsildar conducted the auction in which the bid of Respondent Nos. 3 and 3A for sum of Rs. 1,66,40,000/- was accepted for sale of the said Property.

21.02.2019 Respondent Nos. 3 and 3A Auction Purchasers deposited 1/4th amount of the sale consideration.

Respondent No. 3 and 3A Auction Purchasers deposited the balance sale consideration with the Additional Tehsildar.

08.03.2019 The auction sale was confrmed by the Additional Tehsildar.

11.03.2019 Sale Certifcate was issued by the authorities in favour of Respondent Nos. 3 and 3A.

49. Since the dues payable by Respondent No. 4 to Respondent Nos. 10 to 15 are to be recovered in the same manner as arrears of land revenue, the provisions of Chapter XI of MLRC which provides for the manner of realization of land revenue, would be applicable.

50. Sections 181 and 182 of the MLRC, authorize the Collector to attach a defaulter’s immovable property and take it under his management. The procedure for effecting sale can be found under Sections 192 and 193 of the MLRC. It is clear from these provisions that a proclamation of sale has to be issued, specifying the time and place of the sale. The proclamation is to be made by a specific mode, i.e. customary mode by beat of drum at the place where the immovable property is situated. Moreover, under Section 193 of the MLRC, a written notice of the intended sale along with the time and place is to be affixed at the Offices of the Collector and the Tehsildar of the relevant place. Every auction sale must be preceded by an order of attachment of said property. These provisions are mandatory. The Learned Counsel for Respondent Nos. 1 and 2 failed to show us that either due proclamation was issued or the said Property was attached prior to the auction sale being conducted.

51. During the course of making submissions, the revenue authorities relied upon the Proclamation dated 15th October 2018 issued in Form No. 3 in terms of Rule 9 of the MRLR Rules. This in fact, was a form for attachment of movable property. Be that as it may, it does not bear reference to the property which came to be attached. There appears to be a vague reference of land bearing ‘Survey No. 94 and others’ that too in the context of land in respect of which there are arrears of land revenue. There is absolutely no mention of the said Property. On 23rd July 2018, the Additional Tehsildar issued a Written Notice of Attachment in Form No. 2 as per Rule 6 of the MRLR Rules. However, the same does not bear reference to the said Property. Another Notice issued by the Additional Tehsildar in the month of September 2018 equally does not bear a specific reference to the said Property. By no stretch of imagination can the same be termed to be an attachment of the said Property.

52. As already held above, the sale was confrmed within a period of thirty days of the auction being held, contrary to the provisions of Section 208 of the MLRC. Moreover, the auction sale was held within two days of the Public Notice in respect of the same being issued on 19th February 2019. The same is contrary to the mandatory 30 day period mentioned in Section 194 of the MLRC. It is thus, evident that the mandatory provisions of the MLRC are not followed while conducting the auction sale.

53. The reliance placed by the learned Counsel for Respondent Nos. 3 and 3A on the Judgments of the Supreme Court in the cases of Gurjonginder Singh vs. Jaswant Kaur (supra) and Janakraj vs. Gurdial Singh (supra) are distinguishable and not applicable in the facts of our case. They were passed in the context of sales made in execution of decrees passed under the Civil Procedure Code, 1908 and not in the context of sales under the provisions of the MLRC. Moreover, contrary to the submission of the learned Counsel for Respondent Nos. 3 and 3A, these Judgments cannot be cited to propagate an absolute proposition that even if there is any procedural irregularity found in the auction process, the interests of the auction purchasers are required to be protected. If such a submission is to be accepted, then no concluded auction sale could be interfered with at the pleasure of the auction purchaser, even if the same is in the teeth of mandatory legal provisions, as is the case in the present Petition.

54. The statutory requirements under Chapter XI of the MLRC bear a specific purpose. The mandatory 30 day period between the public announcement of the auction sale and the holding of the auction gives time to the defaulter to comply with his obligations or for anybody on his behalf to come forward to his rescue. That apart, it gives time to any other interested party to lay claim in respect of the property put up for auction, such as the Petitioner in the present case. It gives time to interested members of the public to assess their options and participate in the auction with sufficient time at their disposal. It is meant to make the process transparent and above reproach. The conclusion of the sale by Respondent Nos. 1 and 2 without any proclamation or attachment of the same, and within forty-eight hours of the public announcement, betrays the process to be murky and anything but transparent. The same is in the teeth of mandatory legal provisions of the MLRC and the same vitiates the sale.

55. In view of our findings recorded above, we find that the auction sale of the said Property, the conclusion of the same in favour of Respondent Nos. 3 and 3A and the issuance of the Sale Certifcate dated 11th March 2019 in favour of Respondent Nos. 3 and 3A are void and legally unsustainable. We accordingly exercise our jurisdiction under Article 226 of the Constitution of India to quash and set aside the same. The Petition is made absolute in terms of prayer clauses A and B, which read as follows:

“A. That this Hon’ble Court be pleased to declare that the entire exercise of conducting auction of the Subject Property is fraudulent and non-est and quash and set aside the same; B. that this Hon’ble Court be pleased to call for the records pertaining to the Impugned Order and after considering the legality and validity thereof, be pleased to issue of writ of certiorari or any other writ, order or direction in the nature thereof quashing and setting aside the sale and Impugned Order dated February 21, 2019, being Exhibit C hereto;”

56. Since we have set aside the auction sale of the said Property, we direct that the sale proceeds deposited by Respondent Nos. 3 and 3A be refunded to it. The same are lying deposited with Respondent No. 9 under Orders passed in this Petition. We direct Respondent No. 9 to refund the amount of Rs. 1,66,40,000/- with accrued interest to Respondent Nos. 3 and 3A. We sympathize with the Respondent Nos. 10 to 15 fat purchasers; however, their remedy lies elsewhere.

57. Rule is made absolute in the above terms with no order as to costs.

 

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