In a significant judgment protecting the rights of farmers against arbitrary auction procedures, the Chhattisgarh High Court has quashed the auction sale of a 9.4-hectare agricultural land, holding that the “entire episode of the transaction auction proceeding up to the confirmation of the auction sale smells about collusion between the private respondents/auction purchasers and the bank authorities.”
A Division Bench comprising Chief Justice Ramesh Sinha and Justice Ravindra Kumar Agrawal delivered the verdict on January 23, 2025, allowing the writ appeal (WA No. 895 of 2024) filed by Anup Kumar Shukla, a 68-year-old agriculturist from Simga, District Raipur.
Background of the Case
Anup Kumar Shukla had taken an agricultural loan of Rs. 3.25 lakhs from the District Cooperative Agricultural and Rural Development Bank, Simga in 2000 for purchasing a tractor. He mortgaged his entire 9.4-hectare irrigated land for the loan.
Due to unforeseen financial losses, Shukla defaulted on the loan. Without proper notice or following mandatory legal procedures, the bank auctioned his entire land on June 27, 2005, to two private respondents — Sampat Lal and Kamalkant — for Rs. 8.31 lakhs.
Shukla contested that he only received the auction notice on July 25, 2005, after the sale had occurred, and immediately sought time to repay. Despite raising objections and offering settlement, the Joint Registrar, Cooperative Societies confirmed the auction on November 18, 2005, without considering his pleas.
Legal Issues Involved
- Whether proper procedure was followed under the Chhattisgarh Sahakari Krishi Aur Gramin Vikas Bank Rules, 2008 for auction of mortgaged property.
- Whether provisions under Section 165(3) of the Chhattisgarh Land Revenue Code, 1959 were violated by selling land far exceeding the due loan amount.
- Whether there was collusion or procedural fraud between the auction purchasers and the bank authorities.
- Whether Shukla was given adequate opportunity to repay the dues before finalizing the sale.
- Applicability of distraint and proportional sale provisions under Chapter 4 and 5 of the Bank Rules, 2008.
Arguments and Representation
- Appellant (Shukla) was represented by Advocates B.P. Sharma and M.L. Sakat, who argued that:
- No proper notice was served before auction.
- Auction procedures, including public proclamation via loudspeaker or drumbeat, were bypassed.
- Full land worth over Rs. 20–25 lakhs was sold for Rs. 8.31 lakhs—equal to the dues, raising suspicions of collusion.
- As per Rule 19 of the 2008 Rules, only a portion of the land sufficient to recover the loan should’ve been sold.
- Respondent Bank was represented by Advocate Manas Bajpai.
- Respondents 4 and 5 (auction purchasers) were represented by Advocates Manoj Paranjpe and Pranjal Agrawal.
- State Respondent was represented by Government Advocate Sangharsh Pandey.
They contended that all statutory processes were followed and the petitioner had failed to pay even a single instalment in 5 years.
Court’s Key Observations
The Court found serious procedural lapses and noted:
“The entire episode of the transaction auction proceeding up to the confirmation of the auction sale smells about collusion between the private respondents/auction purchasers and the bank authorities.”
The Court cited the Supreme Court’s judgment in PHR Invent Education Society v. UCO Bank (2024), which held that an auction sale once confirmed can only be set aside in cases of fraud or collusion. It held such exceptional circumstances existed in this case.
It was also observed that:
“The sale of the entire mortgaged land for a sum just over the due amount, without first attempting recovery through sale of hypothecated tractor or proportional land, was in direct contravention of Rule 19 of CG Bank Rules, 2008.”
Further, Section 165(3) of the Land Revenue Code was cited, which limits recoverable interest on mortgage to 50% of the principal amount—violated in this case as the recovery exceeded double the principal.
Final Decision
- The writ appeal was allowed.
- The judgment of the Single Judge dated 25.10.2024 in WP No. 1326/2006 was set aside.
- The confirmation of auction dated 18.11.2005 and sale certificate dated 25.11.2005 were quashed.
- The Court directed Shukla to deposit the remaining loan amount after adjusting the Rs. 4.15 lakhs he had already deposited in compliance with an earlier interim order.
- It granted him one month to complete the payment.
