Supreme Court Upholds Mandatory Deposit Rule for Setting Aside Auction Sales: Narayan Yadav vs. State of Bihar (2020)

Date of the Judgment: February 25, 2020
Citation: 2020 INSC 170
Judges: L. Nageswara Rao, J., R. Subhash Reddy, J. (authored the judgment)
Can an auction sale be set aside if the required deposit is not made within the stipulated time? The Supreme Court of India addressed this critical question in a case concerning the Bihar & Orissa Public Demands Recovery Act, 1914. The Court held that the deposit of the required amount within 30 days of the sale is mandatory for an application to set aside the sale to be valid. This judgment clarifies the strict timelines for challenging auction sales under the Act.

Case Background

In 1971, Sadhusharan Yadav (Respondent No. 14) took a loan from the Land Development Bank, Uda Kishunganj, mortgaging his agricultural land. Upon defaulting on the loan, a certificate case (No. 338 of 1981-82) was initiated to recover the loan amount. Prior to these proceedings, Sadhusharan Yadav had sold the mortgaged land to the objectors-writ petitioners through registered sale deeds. To recover the loan, the mortgaged land was auctioned on June 15, 1983, and purchased by the appellants.

The respondents-writ petitioners, upon learning of the auction, filed an application on July 15, 1983, before the Certificate Officer, seeking to set aside the sale under Section 28 of the Bihar & Orissa Public Demands Recovery Act, 1914. While there was some debate on whether the application was under Section 28 or 29, the authorities treated it as one under Section 28. Crucially, no deposit was made along with this application.

Timeline

Course of Proceedings

The Certificate Officer initially allowed the objections of the respondent-writ petitioners and set aside the sale on November 18, 1983. However, the Collector, Madhipura, overturned this order on January 29, 1985, stating that the deposit required under Section 28 of the Act was not made within the stipulated time. The Commissioner, Koshi Division, confirmed the Collector’s order on March 31, 1986, and the Member, Board of Revenue, also dismissed the revision on April 27, 1987, citing the same reason.

The respondent-writ petitioners then filed a Writ Petition (W.P. No. 3295 of 1987) before the High Court of Patna, which was allowed, restoring the Certificate Officer’s order. The Division Bench of the High Court dismissed the Letters Patent Appeal filed by the appellants, confirming the single judge’s order.

Legal Framework

The core legal provision in this case is Section 28 of the Bihar & Orissa Public Demands Recovery Act, 1914. This section outlines the procedure for setting aside the sale of immovable property in execution of a certificate.

Section 28 of the Bihar & Orissa Public Demands Recovery Act, 1914 states:

“28. Application to set aside sale of immovable property on deposit .(1) Where immovable property has been sold in execution of a certificate, the certificate-debtor, or any person whose interests are affected by the sale, may, at any time within thirty days from the date of the sale, apply to the Certificate Officer to set aside the sale, on his depositing-
(a) for payment to the certificate-holder; the amount specified in the proclamation of sale as that for the recovery of which the sale was ordered with interest thereon at the rate of six and a quarter per centum per annum calculated from the date of the sale to the date when the deposit is made;
(b) for payment to the purchaser, as penalty, a sum equal to ten percent of the purchase money, but not less than one rupee;
(c) for payment to the Collector (where the certificate is for a public demand payable to the Collector), such outstanding charges due to the Government under any law for the time being in force as the Collector certifies to be payable by the certificate-debtor.
(2) Where a person makes an application under Section 29 for setting aside the sale of his immovable property, he shall not unless he withdraws that application, be entitled to make or prosecute an application under this Section.
Note.-In computing the 30 days prescribed in Section 28(1), the day of sale should be excluded.”

This section allows a certificate-debtor or any person affected by the sale to apply to set aside the sale within 30 days of the sale date, provided they deposit the amount specified in the sale proclamation, along with interest and a penalty. The provision is intended to safeguard the interests of those affected by the sale by allowing them to reclaim their property by paying the dues.

Arguments

Appellants’ Arguments:

• The appellants argued that the respondent-writ petitioners did not make the required deposit along with their application on July 15, 1983, as mandated by Section 28 of the Bihar & Orissa Public Demands Recovery Act, 1914.
• They contended that the deposit is a mandatory requirement for an application to set aside a sale, and without it, the application could not be entertained.
• The appellants further argued that the Certificate Officer had no power to extend the time for deposit or to entertain an application not supported by the deposit.
• They submitted that the Collector rightly interfered with the Certificate Officer’s order, which was later confirmed by the Board of Revenue.
• The appellants asserted that the High Court misinterpreted Section 28 of the Act.

Respondents’ Arguments:

• The respondents argued that they had purchased the land through registered sale deeds from the original owners before the mortgage.
• They contended that they deposited the auction amount along with the penalty and interest.
• They submitted that the Certificate Officer had the power to extend the time for deposit, especially when the application was filed within the 30-day period.
• The respondents argued that the High Court had correctly considered the matter and that there were no grounds for interference.

State of Bihar’s Argument:

• The State of Bihar supported the case of the appellants, arguing that the deposit was a mandatory requirement and that the Certificate Officer did not have the power to extend the time for deposit.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court considered the core issue to be the interpretation of Section 28 of the Bihar & Orissa Public Demands Recovery Act, 1914. Specifically, the issue was whether the deposit of the amount required to set aside the sale within 30 days of the sale date was mandatory, and if the Certificate Officer had the power to extend the time for such deposit.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Court considered the following legal provisions:

• Section 28 of the Bihar & Orissa Public Demands Recovery Act, 1914: This section was central to the dispute, outlining the procedure for setting aside the sale of immovable property. The Court interpreted it strictly, emphasizing the mandatory nature of the 30-day deposit period.

Authorities Table

Judgment

The Supreme Court allowed the civil appeal, setting aside the High Court’s order and confirming the order of the Board of Revenue. The Court held that the application filed by the respondent-writ petitioners under Section 28 of the Bihar & Orissa Public Demands Recovery Act, 1914, was rejected because the deposit was not made within the mandatory 30-day period. The Court directed that the money deposited by the respondent-writ petitioners be refunded.

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Section 28 of the Bihar & Orissa Public Demands Recovery Act, 1914: The Court interpreted this provision strictly, emphasizing that the deposit must be made within 30 days from the date of sale for an application to set aside the sale to be valid. The Court held that the provision is in the nature of a concession to a defaulter, who must strictly comply with the requirements.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the mandatory nature of the deposit requirement under Section 28 of the Bihar & Orissa Public Demands Recovery Act, 1914. The Court emphasized that the 30-day time limit for making the deposit was not discretionary and that the Certificate Officer had no power to extend this period. The Court noted that the provision was a concession to defaulters, requiring strict compliance. The Court also considered the fact that the respondents were not the original owners of the property and had purchased the land after the mortgage.

The Court’s reasoning was based on the following points:

• The plain language of Section 28 requires the deposit to be made within 30 days of the sale date.
• The term “deposit” implies that the money must be deposited either before or simultaneously with the application.
• There is no provision in Section 28 that allows the Certificate Officer to extend the time for deposit.
• The 30-day period is mandatory, and any deposit made after this period cannot be considered.
• The provision is intended to safeguard the interests of those affected by the sale, and allowing deposits after 30 days would defeat the purpose of the provision.

The Court highlighted the necessity of strict adherence to statutory timelines, especially in cases involving the recovery of public demands. The decision reflects a commitment to upholding the legislative intent behind the Bihar & Orissa Public Demands Recovery Act, 1914.

Fact:Law Ratio

Logical Reasoning:

The Court considered the argument that the respondent-writ petitioners were bona fide purchasers but held that this did not negate the mandatory requirement of the deposit within 30 days. The Court also rejected the argument that the Certificate Officer had the discretion to extend the time for deposit, stating that the statute did not confer such power.

The Court’s decision was based on a strict interpretation of the law, and it did not find any grounds to deviate from the plain language of Section 28 of the Bihar & Orissa Public Demands Recovery Act, 1914.

The Court quoted from the judgment, “From the language of Section 28, it is clear that the application to set-aside the sale can be made only after deposit of purchase money.”

The Court further stated, “Further, the word “deposit” used in the Section, is to be understood and mean that deposit is to be made either, before making an application, or simultaneously with the application within the prescribed time of thirty days.”

The Court also held, “In absence of any power conferred on the authority under Section 28 of the Act, and considering the consequence of not depositing the money within the time of thirty days, the period of thirty days as mentioned in the Section 28 is to be considered as mandatory.”

Key Takeaways

• Mandatory Deposit: For an application to set aside an auction sale under Section 28 of the Bihar & Orissa Public Demands Recovery Act, 1914, the required deposit must be made within 30 days from the date of sale.
• No Discretionary Extension: The Certificate Officer does not have the authority to extend the 30-day period for making the deposit.
• Strict Compliance: The provision is a concession to defaulters, and they must strictly comply with the requirements, including the time limit for the deposit.
• Refund: The respondent-writ petitioners are entitled to a refund of the money they deposited with the Certificate Officer.

Directions

The Supreme Court directed that the money deposited by the respondent-writ petitioners with the Certificate Officer be refunded.

Development of Law

The ratio decidendi of this case is that the deposit of the amount required to set aside a sale under Section 28 of the Bihar & Orissa Public Demands Recovery Act, 1914 must be made within 30 days from the date of the sale. This judgment reinforces the mandatory nature of the time limit and clarifies that the Certificate Officer has no discretionary power to extend this period. This decision reinforces the strict timelines for challenging auction sales under the Act.

Conclusion

In the case of Narayan Yadav vs. State of Bihar, the Supreme Court held that the deposit of the required amount within 30 days of the sale is mandatory for an application to set aside the sale under Section 28 of the Bihar & Orissa Public Demands Recovery Act, 1914. The Court emphasized that the Certificate Officer does not have the power to extend this time limit. This decision underscores the importance of strict adherence to statutory timelines in matters of public demand recovery.

Category

• Bihar & Orissa Public Demands Recovery Act, 1914
  • Section 28, Bihar & Orissa Public Demands Recovery Act, 1914
  • Auction Sales
  • Public Demand Recovery
  • Mandatory Deposit
  • Time Limit

FAQ

Q: What is the main issue in the Narayan Yadav vs. State of Bihar case?
A: The main issue was whether the deposit of the amount required to set aside a sale under Section 28 of the Bihar & Orissa Public Demands Recovery Act, 1914, must be made within 30 days from the date of the sale and whether the Certificate Officer has the power to extend this time.

Q: What did the Supreme Court decide in this case?
A: The Supreme Court held that the deposit must be made within 30 days from the date of the sale, and the Certificate Officer does not have the power to extend this time. The Court emphasized that the 30-day period is mandatory.

Q: What is the significance of Section 28 of the Bihar & Orissa Public Demands Recovery Act, 1914?
A: Section 28 outlines the procedure for setting aside the sale of immovable property in execution of a certificate. It requires the certificate-debtor or any person affected by the sale to deposit the amount specified in the sale proclamation, along with interest and a penalty, within 30 days of the sale.

Q: What happens if the deposit is not made within 30 days?
A: If the deposit is not made within 30 days, the application to set aside the sale is invalid, and the sale will be upheld.

Q: Can the Certificate Officer extend the 30-day time limit for making the deposit?
A: No, the Certificate Officer does not have the power to extend the 30-day time limit. The Supreme Court held that this period is mandatory and must be strictly adhered to.

Q: What is the implication of this judgment for future cases?
A: This judgment reinforces the importance of strict compliance with statutory timelines, especially in cases involving the recovery of public demands. It clarifies that the 30-day deposit period under Section 28 is mandatory and cannot be extended.