Holding

The Supreme Court held that the auction was invalid because the loan contract was void due to minority and because proper notice was not served, and that Section 27 does not shield the purchaser’s title in such circumstances.

Summary

Kishori Lal, an agriculturist, obtained a loan from the District Land Development Bank in 1971 and mortgaged his agricultural land as security. He was a minor at the time of the loan, defaulted on repayment and the bank initiated recovery proceedings culminating in an auction of the mortgaged land. The Board of Revenue held that the auction notice was not properly served, statutory requirements under Section 18(2) of the 1966 Act and Rule 15(d) of the 1967 Rules were not complied with, and that the loan contract was void because the appellant was a minor. The High Court, however, set aside those findings, relying on Section 27 of the Act, and dismissed the Letters Patent Appeal on jurisdictional grounds. The Supreme Court held that the Board of Revenue’s factual findings are final, that Section 27 does not protect an auction where the underlying contract is void, and that the High Court erred in interfering; it allowed the appeals, directing the appellant to deposit the auction proceeds with interest, otherwise the appeals would be dismissed.

Issues considered

The validity of the loan contract entered into by a minor.
Whether the auction of the mortgaged land complied with the statutory notice requirements of Section 18(2) of the M.P. Sahkari Bhoomi Vikas Bank Act, 1966 and Rule 15(d) of the 1967 Rules.
The effect of Section 27 of the 1966 Act on an auction where the underlying contract is void.
The jurisdiction and maintainability of a Letters Patent Appeal when the writ petition is filed under Article 227 versus Article 226 of the Constitution.
The admissibility of documents proving minority at the stage of appeal.

Legislation cited

Constitution of Indias. Article 142, s. Article 226, s. Article 227

Subjects

minorityvoid contractauctionnotice requirementsection 27co-operative bankland revenueappellate jurisdictionletters patent appealArticle 226Article 227Article 142

Judgment

A KISHORI LAL
v.
SALES OFFICER, DISTRICT LAND DEVELOPMENT BANK AND ORS.

AUGUST 24,2006

B (S.B. SINHA AND DAL VEER BHANDARI, JJ.]

M.P. Sahkari Bhoomi Vikas Adhiniyam, 1966-Sections 18(2) and 27-
M.P. Sahkari Bhoomi Vikas Rules, 1967-Rule 15-Contract of loan-By
C agriculturist-land mortgaged as security-Failure to repay-Recovery
proceedings-Auction sale of mortgaged land-Agriculturist showing from
documents that he was minor on the date when loan was taken-First appeal
decided against the agriculturist-Second appeal decided in his favour by
Board of Revenue on the grounds of non-service of notice of auction, non-
compliance of statutory requirements and his being minor at the time of
D contract of loan-Writ Petition decided in favour of Bank by High Court-
letters Patent appeal held not maintainable-Jn appeal, held: In view of
non-service of notice of auction, non-compliance of statutory requirements,
and initial contract of loan being void ab initio by reason of the agriculturist
being. minor on that date, auction sale was not permissible-Direction to set
E aside auction on condition of agriculturist depositing the entire auction
money with interest-Constitution of India, 1950-Article 142.

Appeal-letters Patent Appeal-Maintainability-Held: Such appeal
would be maintainable if the Writ was filed either under Article 226 or 227-
Constitution of India, 1950-Articles 226 and 227.
F
Practice and Procedure-Finding of fact by statutory authority-Not
questioned before courts below-Question raised for the first time before
Supreme Court-Permissibility-Held: Not permissible.

Appellant an agriculturist, took a loan from the Bank. By way of security,
he mortgaged his agricultural holdings. On failure to repay the loan, recovery
proceedings were initiated. Auction was held of the mortgaged land and the
same was sold to auction purchaser. Appellant preferred appeal before the
authorities. He prc;duced two documents showing that he was minor at the
time when the loan was taken. Appeal was dismissed. Second appeal was
allowed by the Board of Revenue holding that auction notice was not served
274
KISHORI LAL, .. SALES OFFICER, DISTRICT LAND DEVELOPMENT BANK 275

upon the appellant; that statutory requirements of Section 18 (2) (b) of Land A
Development Bank Act, 1966 and Rule IS(d) of M.P.Sahakari Bhoomi Vikas
Bank Rules, 1967 were not complied with; that service of proclamation report
was not certified; and that the appellant was a minor at the time the contract
was entered into.

Writ Petition was filed by the Sales Officer of the Bank and the same B
was allowed by Single Judge of High Court holding that irregularities in the
auction cannot be a ground for impeaching the title of the auction purchaser
in terms ~fSection 27 of the 1966 Act; and that non-service of notice was a
procedural irregularity. Letters Patent Appeal was dismissed by Division
Bench of High Court holding that the same was not maintainable since Single C
Judge had exercised jurisdiction under Article 227 of the Constitution of India.

In appeal to this Court respondent inter alia contended that Board of
Revenue could not have held that appellant was minor because the documents
on which reliance was placed, were inadmissible.
D
Allowing the appeals, the Court

HELD: 1. Single Judge of the High Court committed an error in
interfering with the findings of fact arrived at by the Board of Revenue. The
Division Bench of the High Court also wrongly dismissed the LPA without
noticing that an appeal would be maintainable if the writ petition was filed E
under Articles 226 and 227 of the Constitution oflndia. (281-B-C)

Sushilabai Laxminarayan Mudliyar and Ors. v. Niha/chand
Waghajibhai Shaha and Ors., (19931 Supp.I SCC 11, relied on.

2. The Board of Revenue under the M.P. Land Revenue Code is the final F
court of fact. Holding of auction is governed by the provisions of M.P. Sahkari ·
Bhoomi Vikas Bank Adhiniyam, 1966. The Board of Revenue, in regard to
service of notice, has clearly come to the. conclusion that the statutory
. !~equirements envisaged und·er Section 18(2) of the 1966 Act and Rule 15 of
M.P. Sahkari Boomi Vikas Bank Rules, 1967 have not been complied with, G
by reason whereof the appellant had not been served with the notice. He had
not been given an opportunity of hearing. (279-B-DI

3. In regard to the question of minority the appellant had filed two
documents before the Joint Registrar. Records do not show that any objection
as regards the admissibility thereof had been taken either before the court of H
276 SUPREME COURT REPORTS [2006] SUPP. 5 S.C.R.

A first appeal or before the Board of Revenue. The plea of admissibility at this
stage, therefore, is not available to them. The Board of Revenue, having regard
to the documents brought on record, opined that the appellant was aged about
15 years in the year 1971. The High Court did not address itself on the
question of minority of the appellant on the date of entering into the contract
B ofloan. (279-D-F(

4. As regards the question of service of notice, it is evident that there
has been no proper service of notice upon the appellant. High Court did not
arrive at a finding that there was a valid service of notice. However, it proceeded
on the basis that Section 27 of the 1966 Act validated such auction. Section
C 27 does not state that no notice is necessary to be served. It speaks of due
notice. Where a service has been effected but not in accordance with the
known procedure, the matter may be different. The appellant, in view of the
finding of fact arrived at, was not living in the village at all. Admittedly, no
notice was served, as one person refused to accept the same. Whether she
was a family member at all or not has not been proved. The auction purchaser
D did not question the findings of fact arrived at by tht Board of Revenue.
(280-D; 280-D-G(

5. Before the High Court a writ petition was filed only by the Sales
Officer. The auction purchasers, therefore, cannot question the findings of
fact arrived at by the Board of Revenue for the first time before this Court.
E Section 27 of the 1966 Act does not protect an auction sale when the initial
contract of loan was void ab initio. (280-H; 281-A)

6. With a view to do complete justice between the parties, the appellant
should be directed to deposit the entire auction money with interest thereupon
@6% per annum. This order is being passed under Article 142 of the
F Constitution of India. On such deposit being made, the auction shall stand set
aside and the possession of the property shall be restored to the appellant.
However, in the event the appellant fails and/or neglects to deposit the said
amount within specified period, these appeals shall stand dismissed.
(281-C-F]
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G CIVIL APPEL LA TE JURISDICTION : Civil Appeal No. 6164 of 1999.

From the Judgment and Ord<:r dated 22.9.1997 of the High Court of
Madhya Pradesh (Jabalpur Bench) in Misc. Petition No. 2795 of 1987.
WITH
H C.A. No. 6165 ofl999.
KISHORI LAL 1·. SALES OFFICER, DISTRICT LAND DEVELOPMENT BANK [S.B. S!NHA,J.j 277

Sandhya Goswami for the Appellant. A
Balraj Dewan for the Respondents.

RR-EX-PARTE

The Judgment of the Court was delivered by B
S.B. SINHA, J. The District Land Development Bank (hereinafter referred
to as 'the Bank') situated at Tikamgarh in the State of Madhya Pradesh is a
Co-operative Society registered under the Madhya Pradesh Co-operative
Societies Act, 1960 ('the 1960 Act', for short). Its functions are regulated by
M.P. Sahkari Bhoomi Vikas Bank Adhiniyam, 1966 ('the 1966 Act', for short). C
The appellant herein was an agriculturist. He obtained a sum ofRs.6,473.69p.
by way of loan from the said Co-operative Society on three different occasions.
The break-up of the amount of loan taken by him for three different purposes
is as under :

(i) A sum ofRs.1,300/- was taken on 5.5.71; and D
(ii) Rs.1,200/- was taken on 5.5.71 for the purpose of purchase of a
pumping set; and

(iii) A sum of Rs.3,973.69p. was taken on 25.8.71 for the purpose of
construction of well. E
By way of security of loan so taken, he had mortgaged with the Bank
his agricultural holdings comprising in Khasra Nos. 430, 431, 432, 43), 437,
439, 441, 442, 443, 444, 446 and 447 measuring I0.59 acres. Allegedly, he failed
to repay the said amount of loan. Recovery proceedings were, therefore,
initiated against him by the Bank. On the date when the loan was taken, the F
appellant was a minor. The lands mortgaged to the Bank were sold. A sale
certificate was issued in the name of auction purchaser Smt. Chandrakanta
Devi. An appeal preferred by him thereagainst before the Joint Registrar, Co-
operative Societies, Bhopal, was dismissed by an order dated 30.5.1986. A
second appeal before the Board of Revenue, however, succeeded. The Sales
Officer, District Land Development Bank filed a writ petition before the High G
Court aggrieved by and dissatisfied therewith which, by re(l.son of the
impugned judgment, has been allowed.

The contentions of the appellant, which found favour with the Board
of Revenue, are as under :-.
H
278 SUPREME COURT REPORTS (2006] SUPP. 5 S.C.R.

A (a) No notice of auction was served upon him;
(b) The statutory requirements of Section I 8(2)(b) of the Land
Development Bank Act and Rule 15(d) of the Rules framed
thereunder, known as M.P. Sahakari Bhoomi Vikas Bank Rules,
1967 ('the Rules', for short) were not complied with.
B (c) The service of the proclamation report was not certified by the
person who effected the service.
(d) He was a minor.

By reason of the impugned judgment, the High Court, however, reversed
C the said findings holding :-
(i) The irregularities in the auction cannot be a ground for impeaching
the title of the purchaser in terms of Section 27 of the 1966 Act;

(ii) Non-service of notice was a procedural irregularity.
D A Letters Patent Appeal filed by the appellant before the Division
Bench was dismissed holding that the same was not maintainable on the
premise that the learned Single Judge has exercised jurisdiction under Article
227 of the Constitution of India.

E Ms. Sandhya Goswami, learned counsel appearing on behalf of the
appellant would submit that the appellant having been found to be a minor,
the contract was void and in that view of the matte«, the impugned judgments
cannot be sustained.

Mr. Balraj Dewan, learned counsel appearing on behalf of the
p respondents, on the other hand, urged that the Board of Revenue committed
a serious error in holding that the appellant was a minor as it, in support

-
thereof, relied upon two inadmissible pieces of documents, namely, medical
certificate dated 22.7 .1985 and the mark-sheet of Higher Secondary Education
issued by the M.P. Higher Secondary Board, Bhopal. In any event, the said
documents being not public documents were not admissible in evidence and
G in that view of the matter, the High Court rightly set aside the order of the
Board of Revenue. It was furthermore urged that as the said documents were
filed for the first time before the Joint Registrar, Co-operative Societies, the
appellant could not be cross-examined and thus, they were inadmissible in
evidence.
H
KISHORI LAL r. SALES OFFICER, DISTRICT LAND DEVELOPMENT BANK [S.B. SINHA,J.] 279

The appellant herein does not deny or dispute that he had taken loan A
from the Co-operative Bank. It is also not denied or disputed that he had
mortgaged his agricultural lands by way of security for the loan taken. It is
also not in dispute that a proceeding was initiated against him for recovery
of the amount as he had not been able to pay the due instalments. The factum
of holding auction is also not disputed.
B
The Board of Revenue under the M.P. Land Revenue Code is the final
court of fact. Indisputably, holding of auction is governed by the provisions
of the 1966 Act. Some notices appear to have been served upon the appellant,
but, thereafter, service of notice on the appellant is said to have been effected
by affixing a notice on his house when he was not available. A purported C .
notice was also published in a newspaper. The Board of Revenue, in regard
to service of notice, has clearly came to the conclusion that the statutory
requirements envisaged under Section 18(2) of the 1966 Act and Rule 15 of
the Rules have not been complied with, by reason whereof the appellant had
not been served with the notice. He had not been given an opportunity of
hearing. The Board of Revenue opined that the authorities concerned did not D
consider these aspects of the matter. In regard to the question of minority,
as indicated hereinbefore, the appellant had filed two documents before the
Joint Registrar. The respondents may be right in their submissions that they
had the right to cross-examine the appellant, but it does not appear from the
records that any objection as regards the admissibility thereof had been taken E
either before the court of first appeal or before the Board of Revenue. The
said plea, at this stage, therefore, is not available to them. The Board of
Revenue, having regard to the documents brought on records, opined that
the appellant was aged about 15 years in the year I971. The High Court did
not address itself on the question of minority of the appellant on the date of
entering into the contract of loan. As regards the question of service of F
notice, the High Court opined :

"The respondent Kishorilal promised to deposit a sum of Rs. 700/
- on 25.4.75 and on account of this, the auction sale was postponed
and Kishorilal deposited a sum of Rs.700/- on 22.4.74 as promised.
This fact establishes that the proceedings for auction were in vogue G
since earlier i.e. before 25.4.75 and the auction sale was stayed on
account of the deposit of a sum of Rs.700/- by Kishorilal and
accordingly, the Board of Revenue found that the notices which were
served on Kishorilal were before 22.4.75 and completed their effect on
22.4.75. Thereafter on 30.3.76 in Form 8, a notice was issued and H
280 SUPREME COURT REPORTS [2006] SUPP. 5 S.C.R.

A Kishorilal was at Gwalior and as such, the notice was served on the
member of his family and the auction took place on 6.5.78 on which
date no body made any bid and thereafter, according to the order
sheet dated 21.5.1981, Kishorilal was contacted. This order sheet does
not contain anything regarding service of the notice for auctioh. The
process server has reported "Kishorilal is not found at his house and
B the members of the family refused to take notice." The notice was
pasted in front of the witnesses on the house, which obtained the
thumb impression of Laxmidevi. But who is this Laxmidevi is nowhere
mentioned. This is the basis for decision by the Board of Revenue
that on the note sheet dated 2.6.82 it has been mentioned that Kishorilal
C was not living in the village and the notice issued earlier in the year
1975 and the purpose of that notice was completed on 22.4.75.
Accordingly, the respondents have failed to comply with the provisions
of Section 18(2) of the Act."

From what has been noticed hereinbefore, it is evident that there has
D been no proper service of notice upon the appellant. The High Court did not
arrive at a finding that there was a valid service of notice.

The High Court, however, proceeded on the basis that Section 27 of the
1966 Act validated such auction. It reads as under :

E "27. Title of purchaser not impeachable for irregularities. When a sale
has been made in professed exercise of a power of sale under Section
19 and has been confirmed under Section 21, the title of the purchaser
shall not be impleachable on the ground that no case had arisen to
authorise !he sale or that due notice was not given or that the power
was otherwise improperly or irregularly exercised of the power shall
F have his remedy in damages against the Development Bank."

G
Section 27 of the Act does not state that no notice is necessary to be
served. It speaks of due notice. Where a service has been effected but not
in accordance with the known procedure, the matter may be different. The
appellant, in view of the finding of fact arrived at, was not living in the village
-
at all. He was living in Gwalior. Admittedly, no notice was served as one
person refused to accept the same. Whether she was a family member at all
or not has not been proved. We may notice, the auction purchaser did not
question the findings of fact arrived at by the Board of Revenue.

H Before the High Court a writ petition was filed only by the Sales Officer.
KISHORI LAL 1·. SALES OFFICER, DISTRICT LAND DEVELOPMENT BANK [S.B. SINHA, J.] 28 J

The auction purchasers, therefore, cannot question the findings of fact arrived A
at by the Board of Revenue for the first time before this Court. Section 27 of
the 1966 Act does not protect an auction sale when the initial contract of loan
was void ab initio.

The learned Single Judge of the High Court, in our opinion, committed
an error in interfering with the findings of fact arrived at by the Board of B
Revenue. The Division Bench of the High Court also wrongly dismissed the
LPA without noticing that an appeal would be maintainable ifthe writ petition
was filed under Article 226 and 227 of the Constitution of India as was held
by this Court in Sushilabai Laxminarayan Mudliyar & Ors. v. Nihalchand
Waghajibhai Shaha & Ors., (1993) Supp. I SCC 11. C
However, with a view to do complete justice between the parties, in our
considered opinion, the appellant should be directed to deposit the entire
auction money with interest thereupon @6% per annum. This order is being
passed by us under Article 142 of the Constitution of India. Such amount
should be deposited within eight weeks from this date before respondent D
No. I, Sales Officer. On such deposit being made, the auction shall stand set
aside and the possession of the property shall be restored to the appellant
herein. However, in the event the appellant fails and/or neglects to deposit
the said amount within the aforementioned period, these appeals shall stand
dismissed.
E
The appeals are allowed with the aforementioned directions. No costs.

K.K.T. Appeals allowed.

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