In a significant judgment delivered by the Supreme Court of India on September 27, 2024, in The Ahmednagar District Central Cooperative Bank Ltd. vs. The State of Maharashtra and Ors. (Civil Appeal No. 8343 of 2024), the court upheld an auction sale of immovable property, criticizing the appellant for its delayed challenge. The bench, comprising Justice Dipankar Datta and Justice Prashant Kumar Mishra, emphasized that “courts do not aid indolent litigants,” rejecting the bank’s arguments due to their failure to act promptly.
Background of the Case
The Ahmednagar District Central Cooperative Bank Ltd. had sanctioned a loan of ₹95 lakh to Mula Sahakari Soot Girni Ltd., a cooperative society. Due to default on repayment, the bank initiated recovery proceedings and obtained an award to recover ₹1,05,98,710 with interest at 17.5% per annum.
However, the society was placed into liquidation, and its immovable property was put up for auction in 2016. The auction led to a sale of the property for ₹2.51 crore to the Agricultural Produce Market Committee (APMC), Rahuri, a statutory body. The Bank challenged this auction, claiming that the property had been grossly undervalued.
Legal Issues Involved
1. Valuation of Property:
The primary legal issue in the case was whether the property in question was sold at a significantly undervalued price. The Bank had obtained an initial valuation of ₹4.10 crore in 2013. However, the property was auctioned for ₹2.51 crore in 2016, which the Bank claimed was unreasonably low, especially since property prices typically appreciate over time. The core question was whether the valuation used for the auction process was proper and whether the auction was conducted in a manner that ensured a fair price for the property.
2. Compliance with Auction Procedure:
Another key issue was whether the auction process complied with the statutory requirements under the Maharashtra Cooperative Societies Act, 1960. The Bank contended that the auction was not widely publicized and that only two bidders participated, whereas the law mandated participation of at least three bidders. This raised the issue of whether the auction had been conducted in a transparent and legally compliant manner, ensuring competitive bidding.
3. Delay in Challenging the Auction:
A pivotal legal issue was whether the Bank’s delayed challenge to the auction process was justifiable. The Bank only filed its writ petition in August 2016, several months after the auction was finalized. The Court had to decide whether the delay should bar the Bank from seeking relief, considering that third-party rights had already vested with the APMC, Rahuri, as the highest bidder.
Appellant’s Contention
The Bank argued that the property’s upset price of ₹2.47 crore, set during the auction process in 2016, was far lower than its real value. A prior valuation in 2013 had placed the property at ₹4.10 crore, and the Bank contended that the property price should have only increased over time. The appellant also contended that the auction process lacked transparency, alleging that sufficient notice had not been given and that only two bidders participated, whereas three were required by law.
Senior Counsel Mr. Hansaria, representing the Bank, stressed that the entire process was tainted by irregularities and sought the court’s intervention to annul the auction.
Respondents’ Defence
The State of Maharashtra, represented by Mr. Varma, and the APMC, Rahuri, represented by Mr. Deshmukh, countered that the auction process had been conducted fairly and in compliance with legal procedures. They argued that three bidders had initially expressed interest, but only two participated in the final auction, which was permissible under the law. Furthermore, they contended that the appellant had ample opportunity to challenge the auction but failed to act in a timely manner.
Supreme Court’s Key Observations
The Court took a firm stance against the appellant, stating that the Bank’s challenge was unjustifiably delayed. The justices noted that the Bank had full knowledge of the auction process and the property’s valuation but chose not to take immediate legal action.
In a scathing observation, the Court stated:
“Law is well-settled that a writ court does not encourage petitions from indolent, tardy, and lethargic litigants; the writ court comes to the aid of a litigant who approaches it with promptitude and before accrual of third-party rights.”
The Court also pointed out that despite being aware of the undervaluation claim in 2016, the Bank only filed its writ petition in August 2016, after the auction had been finalized. The judges highlighted that “precious time was lost” as the Bank continued to gather information post-auction instead of taking swift legal action.
Final Verdict
While acknowledging that the property had indeed been sold at a lower value than earlier estimates, the Court declined to annul the auction, noting that the appellant had allowed the auction process to proceed without timely objection. The justices held that it was not in the interest of justice to reopen settled matters years after the auction, especially when third-party rights had already vested with the APMC, Rahuri.
However, in invoking its powers under Article 142 of the Constitution, the Supreme Court directed the APMC, Rahuri, to pay the Bank a sum of ₹1,05,98,710 (without interest) as a full and final settlement of the Bank’s dues. This amount is to be paid within three months, failing which it will accrue interest at 6% per annum.
Case Title: The Ahmednagar District Central Cooperative Bank Ltd. vs. The State of Maharashtra and Ors
Case Number: Civil Appeal No. 8343 of 2024 (Arising out of SLP(C) No. 16901 of 2024)
