JUDGMENT
K.J. Joseph, J.
1. The question that arises for consideration in this original petition is, whether a member of a co-operative society, who availed of a non-agricultural loan after executing a declaration creating a charge on all his properties, would be legally justified in preventing the sale officer from proceeding with the sale of his other properties without proceeding against the mortgaged property for realisation of the amount covered in the arbitration award ? In other words, whether, under Sections
36 and 76 of the Kerala Co-operative Societies Act, 1969, read with Rules 51, 72, 74 and 75 of the Rules framed thereunder, the sale officer can legally proceed with the sale of other immovable properties of the defaulter first, without proceeding against the properties mortgaged for realising the amount covered in the arbitration award ? The answer is, yes, the sale officer can.
2. The facts necessary for the disposal of the original petition are as follows : The petitioner applied for a loan of Rs. 10,000 on April 23, 1986, for the construction and repairs of her house. She, along with her husband Chacko, executed a guarantee bond making a charge on all their properties for repayment of the loan amount. Along with the application, the petitioner had produced an encumbrance certificate for a period of 13 years from 1974 to 1986. The board of directors, as per the resolution dated April 25, 1986, sanctioned the loan. The petitioner, along with her husband, executed a mortgage in favour of the bank in respect of 64 cents of land comprised in survey No. 684/1 of Enanellur village. On May 26, 1986, the loan amount was disbursed to the petitioner. Since default was committed in repaying the loan amount, the bank filed A.R.C. No. 309 of 1988, under Section 69 of the Kerala Co-operative Societies Act against the petitioner and her husband as defendants Nos. 1 and 2. The arbitrator issued notice to both the petitioner and her husband, but they remained ex parte. No evidence was also adduced on their behalf. On March 25, 1988, the arbitrator passed exhibit P-1 award in favour of the first respondent-bank, awarding the entire claim made by the bank with interest and costs. The arbitrator also charged all the immovable properties of the defendants for the amount decreed. Neither the petitioner nor her husband took up the matter in appeal under Section 82 of the Act before the Cooperative Tribunal. Thereafter, the first respondent-bank initiated execution proceedings before the Assistant Registrar of Co-operative Societies, who appointed the second respondent as sale officer. The second respondent issued notice to the petitioner to pay the entire amount awarded as per
exhibit P-1. Though notice was served on the petitioner, she did not pay the amount. Thereafter, the second respondent issued another notice dated December 2, 1988, to the petitioner proposing proceedings against the property covered in survey No. 684/1 of Enanellur village. Then it was found that the said property was not available for attachment or sale for realising the amount covered by exhibit P-l award. The said property belonged to the husband of the petitioner. In the year 1961, he executed settlement deed No. 2760/61 of Moovattupuzha Sub-Registry assigning the entire property in favour of his son, Jose, but reserving a life interest in the said property. On November 13, 1961, possession was given to Jose. Thereafter, in the year 1964, Jose executed sale deed No. 2900/64 of Kotha-mangalam Sub-Registry alienating the property on consideration to a third party. The petitioner’s husband also joined in that transaction by selling the life estate reserved for him in favour of a third party. Thus, by 1964, neither the petitioner, her husband nor their son had any interest over the said 64 cents of land in survey No. 684/1. It was suppressing this fact, that a mortgage deed was executed in favour of the first respondent-bank by the petitioner along with her husband in respect of the said property. The encumbrance certificate produced by the petitioner also did not disclose the earlier settlement deed and the sale deed of 1961 and 1964, respectively. Therefore, the first respondent requested the second respondent to attach the 42 cents of land comprised in survey Nos. 688/5 and 688/6 of Enanellur village and also the movable properties belonging to the petitioner. Pursuant thereto, the second respondent attached the said 42 cents of land on January 28, 1989. Against the said attachment, the petitioner filed a petition under rule 90 of the Kerala Co-operative Societies Rules, 1969, before the second respondent, which was dismissed on May 6, 1992. Thereafter, the petitioner filed 0. S. No. 394 of 1992, before the Munsiff’s Court, Moovattupuzha. She also filed an interlocutory application to restrain respondents Nos. 1 and 2 from proceeding with the sale of immovable properties in survey Nos. 688/5 and 688/6, in spite of the specific bar of jurisdiction of the civil courts in such matters under Section 100 of the Kerala Co-operative Societies Act. Both are pending.
3. Thereafter, on July 10, 1992, the second respondent attached the movable properties of the petitioner. The petitioner thereafter requested the second respondent not to proceed with the sale of movables and sought one month’s time to pay the entire amount covered by exhibit P-1 award, failing which she was agreeable to sell the property (42 cents) comprised in survey Nos. 688/5 and 688/6. Even thereafter, the petitioner did not turn up. Therefore, the second respondent gave a notice to her on July
9, 1993, proposing sale of the said properties in public auction, which was scheduled to be held on October 11, 1993. On October 11, 1993, the said properties were sold in auction in favour of the third respondent, who was the highest bidder among the four bidders present. Thereafter, the second respondent issued exhibit P-2 notice asking her to pay the entire amount with 5 per cent, of the auction amount within thirty days. On October 11, 1993, itself, the third respondent deposited 15 per cent, of the sale amount, as required under rule 81 of the Rules, and on October 25, 1993, he deposited the balance amount also.
4. On November 4, 1993, the petitioner preferred exhibit P-3 petition before the fourth respondent under rule 83 of the Rules to set aside the sale of the property held on October 11, 1993, and O. P. No. 15262 of 1993 before this court seeking the fourth respondent to be directed to dispose of exhibit P-3 and till then not to confirm the sale effected as per exhibit P-2. On November 11, 1993, the third respondent filed a petition before this court to get himself impleaded as an additional respondent in the said original petition. This court, as per the judgment dated November 18, 1993, in O. P. No. 15262 of 1993, directed the fourth respondent to consider and dispose of exhibit P-3 petition. The fourth respondent posted the matter for hearing on November 20, 1993. On that day, the first respondent filed exhibit P-4 objection before the fourth respondent stating that there was no illegality in proceeding against the other properties of the defaulter, since the petitioner had suppressed the execution of the settlement and the sale deed alienating the mortgaged property in favour of a third party. It was also stated therein that while executing the mortgage deed in the year 1986 in respect of the 64 cents of land in survey No. 684/ 1, neither the petitioner nor her husband had any right over the said property. It was in that circumstance, the second respondent took steps to attach the properties in survey Nos. 688/5 and 688/6 of Enanellur village belonging to the petitioner. The second respondent also filed an objection before the fourth respondent, evidenced by exhibit P-5, wherein he had stated the circumstances under which the 42 cents of land belonging to the petitioner was attached and sold in auction for recovering the amount covered by exhibit P-1 award. Thereafter, on March 21, 1994, the third respondent filed another petition before the fourth respondent to get the sale confirmed in his favour since he had already complied with all the statutory requirements, including the payment of the bid amount. Since the fourth respondent did not pass any orders thereon, the third respondent approached this court by filing O. P. No. 373 of 1995 which was disposed of by this court by directing the fourth respondent to pass final
orders in the matter on or before January 30, 1995. It was, thereafter, exhibit P-7 was passed on January 30, 1995, rejecting the claim made by the petitioner. In exhibit P-7, the fourth respondent found that the petitioner had no locus standi to file such an application under rule 93 of the Rules. The petitioner seeks to quash exhibit P-7 in this proceeding under article 226 of the Constitution of India.
Heard counsel on both sides.
5. Counsel for the petitioner contended that, as per exhibit P-1 award, the arbitrator ordered the recovery of the amount only in respect of the mortgaged property and that no charge was created on the 42 cents of land comprised in survey Nos. 688/5 and 688/6 and, therefore, the second respondent could proceed only against the mortgaged property. Counsel also contended that respondents Nos. 1 and 2 proceeded against the petitioner’s other properties, for which they had no authority under law and, therefore, the sale of the properties comprised in survey Nos. 688/ 5 and 688/6 was ab initio void. All the above points were considered elaborately by the fourth respondent while passing exhibit P-7 and negatived the same. I do not find any legal basis or factual justification for the petitioner to raise such a contention either before the fourth respondent or before this court in this proceeding.
6. Admittedly, the petitioner filed exhibit P-3 to set aside the sale under Rule 83 of the Rules. The finding of the fourth respondent that the petitioner had no locus standi has to be reversed, in the light of the statutory provision contained in Rule 83 of the Rules. Rule 83 says that an application to set aside the sale on the ground of irregularity or fraud can be filed by the decree-holder or any person entitled to share in a rateable distribution of the assets or whose interests are affected by the sale. Therefore, a person whose interests are affected by the sale is entitled to sustain an application to set aside the sale under Rule 83 of the Rules. Admittedly, the petitioner has sufficient interest in the property attached and sold in auction and, therefore, she is an interested party. On that ground alone, the finding of the fourth respondent that the petitioner has no locus standi is to be set aside and I do so, I hold that the petitioner is entitled to file such an application to set aside the sale.
7. But the question again is, whether, on any of the grounds stated by the petitioner in exhibit P-3 or before this court, she is legally entitled to get the sale set aside ? The petitioner has not specifically stated what exactly the irregularity is, in the matter of sale of the properties in question, and how and in what manner the fraud is committed in regard, to the
sale of the property. She has only generally stated that the sale is irregular and ab initio void. The only legal ground that was taken before the fourth respondent as well as before this court is that the second respondent has no jurisdiction to proceed with the sale of the other properties of the defaulter. Counsel for the petitioner also pointed out that the second respondent can proceed only against the property mortgaged and not against the other properties of the defaulter which were not mortgaged. To sustain such a contention, counsel for the petitioner relies on Sections 35 and 75 of the Act and Rule 71 of the Rules.
8. Section 35 of the Act stipulates that any debt or outstanding demand owing to a society by any member or past member or deceased member shall be a first charge, upon the crops or other agricultural produce of such member for the raising of which the loan was taken from the society by such member. Admittedly, under Section 35, the charge is created on the crops or other agricultural produce raised by the member on the land, if the loan is obtained for raising such crops or agricultural produce. Admittedly, the loan was taken not for that purpose. Therefore, Section 35 does not apply to this case. Moreover, creating a charge on the crops or agricultural produce will not be a bar to recover the amount disbursed to a member from all or any of his properties.
9. Section 75 of the Act which deals with the enforcement of charge, will not be of any assistance to the petitioner. Section 75 states that notwithstanding anything contained in Chapter IX or any other law for the time being in force, but without prejudice to any other mode of recovery provided in the Act, the Registrar or any person subordinate to him empowered by him in this behalf, may direct payment of any debt or outstanding demand due to the society by any member or past member or deceased member, by sale of the property or any interest therein, which is subject to a charge under Sub-section (1) of Section 35. As stated earlier, Section 35(1) deals with a charge on the crops or other agricultural produce for the raising of which the loan was taken. That will not in any way affect the jurisdiction of the second respondent in proceeding with the sale of the other properties of the defaulter for realisation of the decree amount.
10. Rule 71 of the Rules deals with the application for enforcement of a charge created under Sections 35 and 75 of the Act Rule ,71 also will not stand in the way of the second respondent in proceeding with the sale of the other properties of the defaulter. Under Section 36 of the Act, a member who makes an application for a loan to a society of which the majority of the members are agriculturists, shall make a declaration in
the prescribed form, which shall state that^the applicant thereby creates a charge on the land owned by him or on his interest in the land held by him as tenant and specified therein for the payment of the amount of the loan which the society may make to the member on application. Rule 51 states that a declaration under Clause (1) of Section 36 shall be made in Form No. 7. It was on the basis of the above statutory provisions, the petitioner had executed a declaration creating a charge on all her properties and, therefore, the second respondent was legally justified in proceeding with the matter on the basis of the statutory charge created under Section 36 of the Act. Under Section 76(c), every order made under Section 70 shall be executed by the Registrar or any other person subordinate to him empowered by the Registrar in this behalf, by the attachment and sale or sale without attachment of any property of the person or a society against whom the order has been passed. In the light of the above statutory provision, the second respondent was perfectly justified in proceeding against the properties of the petitioner.
11. Rule 72 enables the Registrar or person duly authorised by him to issue a certificate in favour of the sale officer to execute the award. Rule 74 deals with the procedure for execution of the decision, award or order and under Rule 74(2), the decree-holder is entitled to file an application before the sale officer for executing the award. The decree-holder may, under Sub-rule (2) of Rule 74, indicate in the said application whether he wishes to proceed against the immovable property mortgaged to the decree-holder or other immovable property or to secure attachment of any movable property. As stated earlier, in this case, the first respondent decree-holder had requested the second respondent to proceed against the immovable properties of the defaulter comprised in survey Nos. 688/5 and 688/6 of Enanellur village, since the 64 cents of land mortgaged by the petitioner along with her husband was not available for sale as it had already been alienated by the petitioner’s husband and their son in favour of a third party as early as in 1964 by registered documents. Thus, at the time when, the mortgage deed was executed on April 30, 1986, in favour of the first respondent decree-holder, neither the petitioner nor her husband had any interest over the said land, viz., 64 cents of land comprised in survey No. 684/1 of Enanellur village. The encumbrance certificate produced by them covered only from 1974 to 1986, which did not include the encumbrances made prior to 1974. Therefore, I see no irregularity or illegality in the second respondent selling the other properties of the petitioner in auction.
12. Again, under Rule 75 also, the second respondent was perfectly justified in proceeding against the immovable properties mortgaged to the decree-holder or other immovable properties belonging to the defaulter in execution of the award. As per Rule 75, unless the decree-holder has expressed a desire that proceedings shall be taken in a particular order as laid down in Sub-rule (2) of Rule 74, execution shall ordinarily be taken in the manner prescribed therein. As stated earlier, the decree-holder had specifically expressed its desire to proceed against the other properties belonging to the defaulter. Even under Rule 75, the decree-holder can proceed against the other immovable properties of the defaulter. Therefore, I see no legal force in the contention raised by counsel for the petitioner that the second respondent can proceed against the mortgaged property only.
13. Admittedly, the mortgaged property was not available for proceeding against, since it had already been alienated by sale deed No. 2900/ 64 of Kothamangalam Sub-Registry. Therefore, I find no illegality in proceeding against the other properties of the defaulter, who had obtained the loan by suppressing the material facts.
14. As stated earlier, the petitioner has not stated what is the irregularity in the sale conducted by the second respondent. She does not seem to have raised a case before the fourth respondent that the property was undervalued or it would have fetched more than obtained in auction. No collusion between the second respondent and the third respondent was also seen alleged in exhibit P-3 nor had there been any fraud in the sale of the property in question. I see no illegality or irregularity in exhibit P-7 warranting interference by this court under Article 226 of the Constitution of India. But the finding therein that the petitioner has no locus standi at all to file an application to set aside the sale is not justified under rule 83 of the Rules. But that will not be sufficient to set aside the sale, even if the petitioner has interest in the matter. She has not established any case for setting aside the sale either on the ground of irregularity,
illegality or fraud.
15. The petitioner, after availing of the loan from the first respondent-bank, did not pay a single paise towards the loan amount, which compelled the first respondent to file an arbitration case against the petitioner and her husband. They had mortgaged the property in the year 1986, over which they ceased to have interest as early as in 1964 by alienating it to a third party. Even after the award, the petitioner did not make any arrangement to pay the amount. Therefore, while setting aside the finding in
respect of the petitioner’s locus standi to file an application under Rule 83 of the Kerala Co-operative Societies Rules, I hold, in all other respects, exhibit P-7 is legal and no interference is called for in this petition under Article 226 of the Constitution of India.
16. The petitioner has suppressed the fact that she had filed O. S. No. 394 of 1992 before the Munsiff’s Court, Moovattupuzha, praying for an order of injunction restraining respondents Nos. 1 and 2 from proceeding with the recovery of the amount, even though, under Section 100 of the Kerala Co-operative Societies Act, the jurisdiction of the civil courts is barred in such matters. She has also suppressed the fact that the application filed to set aside the attachment was dismissed by the second respondent. Her case that the undertaking given by her on July 10, 1992, agreeing to repay the entire amount within one month or to proceed with the sale of 42 cents of land in survey Nos. 688/5 and 688/6 was obtained by coercion, compulsion, etc., is made for the first time before this court. She had no such contention before the fourth respondent in exhibit P-3 filed as early as on November 4, 1993. The petitioner has suppressed the fact that her husband and her son had executed the sale deed in favour of a third party in respect of the mortgaged property. Therefore, there are no bona fides on her part to approach this court complaining about the order passed by the fourth respondent. The petitioner has deposited an amount of Rs. 15,000 before this court, pursuant to the order of this court dated February 17, 1995, which shall be refunded to the petitioner on application to that effect either by herself or her counsel to this court.
17. The original petition is devoid of merit and hence it is dismissed with costs to the third respondent. Advocate’s fee is fixed at Rs. 1,000.