STATE OF U.P. & ORS.versusM/S. SWADESHI POLYTEX LTD. & ORS.

                          [2008] 9 S.C.R. 85


                      STATE OF U.P. & ORS.                          A
                                 v.
             M/S. SWADESHI POLYTEX LTD. & ORS.
                  (Civil Appeal No.3840 of 2008)

                            MAY16, 2008
                                                                    B
    [rARUN CHATTERJEE AND HARJIT SINGH BEDI, JJ.]

          Uttar Pradesh Zamindari Abolition & Land Reforms
    Rules, 1952- rr 246, 273A, 283, 285 and 285A-· Uttar Pradesh
    Zamindari Abolition and Land Reforms Act, 1950 - s. 327 -       c
    Sick company unable to pay wages due to its employees -
    Concerned authorities proceeded to recover amounts due, as
    arrears of land revenue, by way of attachment and sale of prop-
    erty belonging to company in auction - Auction purchaser, a
    Government agency - Company filed writ petition cha/Ieng-
                                                                     D
    ing the auction proceedings - High Court allowed the petition
    and also passed strictures against the officers of State Gov-
    ernment who had been instrumental in arranging the auction
    - On appeal, held: Issuance of sale proclamation and auction
    notice did not comply with the procedure prescribed under the
    Act and the Rules - Hence, auction sale vitiated and cannot E
    be maintained - However, High Court's direction that action
    should be initiated against the concerned officers not justified
    - Same accordingly expunged - Strictures - Expunging of - .
    Service Law.
'                                                              F
         Respondent, a sick company, was unable to pay
    wages due to its employees. The concerned authorities
    proceeded to recover the amounts due as arrears of land
    revenue by way of attachment and sale of property be-
    longing to Respondent-company in auction. U.P. State In-
                                                               G
    dustrial Development Corporation (UPSIDC), a Govern-
    ment agency, was the auction purchaser. Respondent-
    company filed writ petition challenging the entire auction
    proceedings. It contended that the issuance of the sale
                                  85                                H
    86       SUPREME COURT REPORTS                [2008] 9 S.C.R.


A proclamation and the auction notice did not comply with
  the procedure prescribed unde,r the Uttar Pradesh
  Zamindari Abolition and Land Reforms Act, 1950 and the
  Uttar Pradesh Zamindari Aboliti 1on and Land Reforms
  Rules, 1952. High Court allowed the writ petition with
B costs and also passed strictures against the officers of
  the State Government who had been instrumental in ar-
  ranging the auction. Hence thr~ present appeal.
         Dismissing the appeal, t.he Court
                                                                    F
c       HELD:1. From a bare rf:ading of the r.246 of the Uttar
  Pradesh Zamindari Abolition & Land Reforms Rules, 1952,
  it is clear that notice can 'oe served on the agent only if it
  is not possible to serve it on the actual defaulter. In the
  present case, no attempt whatever had been made to
  serve the notice to the actual defaulter and had been
D
  served on the Chow'kidai ~t the very initial stage. (Par(l
  1O] (97-F,G]
         2. There is yet another circumstance which indicates
  that the procedure for sale had not been followed. It is
E clear from the rer.:ord that the sale proclamation had been
  issued without any valuation of the properties and only
  the area of thr; vacant land had been specified therein.
  There was a r.lear violation of rs. 283 and 285. R.283 pro-
  vides for the. estimated value of the property to be deter-
F mined undr~r the provisions contained in Chapter XV of
  the Reven•1.1e Manual. The said Chapter specifies the pro-
  cedure fo,r valuation of the property in terms of other simi-
  lar prorierties. It is, however, clear from the record that
  the fig•1.1re of 27 Crores, the value of the property which is
G
  ment;,oned in the advertisement in the newspaper "Amar
  Ujal.a" appears to have picked up without any basis as it
  is not the case of the UPSIDC that the property had been
  va,lued in accordance with the provisions of the Revenue
  l\llanual or by a valuer or expert in the field. [Para 11] (97-
  'ri, 98-A-E]                                                      ..
H
          STATE OF U.P. & ORS. v. SWADESHI             87
                   POLYTEX LTD

     3. The question of valuation is of the utmost impor- A
tance as it is designed to ensure the best price for the
property and it is essential in this circumstance that wide
publication and notice of the proposed sale should be
given as per r.285-A which postulates a notice of 30 days
between the date of issuance of the sale proclamation and B
the date of auction. In the present case, however, the auc-
tion had been held on 2nd May 2005 though the sale proc-
lamation had been issued on 1st April 2005, and served
on the Chowkidar on 21st April 2005 and the publication
made in "Amar Ujala" on 22nd April 2005. The argument       c
that as SPL (Respondent-company) had suffered no
prejudice in the auction proceedings, the sale should not
be interfered with, cannot be accepted. [Paras 14, 15] [102-
D-F, 104-B]
     S.J.S.Business Enterprises (P) Ltd. vs. State of Bihar D
(2004) 7 sec 166 - relied on.
       4. There is yet another circumstance which vitiates
sale. r.285-D provides that 25% of the amount of the auc-
tion money shall be deposited at the fall of the hammer
and the remaining 75% within 15 days. The case of the E
appellants is that the Bank draft for 7.80 Crores had been
deposited by the auction purchasers on 2nd May 2005
i.e., the date of auction but the High Court found that as
the auction had been completed at 1.30 p.m., it would not
have been possible to have received the Bank draft from F
Kanpur 460 km. away on that date. This finding appears ·
to be correct. It is also found that the balance 75% of the
amount that had been deposited by various Bank drafts
on 18th May 2005 was also beyond the 15 days permis-
sible and the finding of the High Court based on the record G
is that though the drafts were dated 14th May 2005 but
they had, in fact, had been handed over to the concerned
authority only on the 18th May 2005. For this additional
reason as well, the auction sale cannot be maintained.
[Paras 16, 17] (104-B-E, 105~C]                             H
    88       SUPREME COURT REPORTS                [2008] 9 S.C.R.


A      5. Moreover, r.273-A makes the provision under Or.
  XXI, r.54 of the CPC applicable to proceedings for attach-
  ment which specifically provides for the judgment-debtor
  to attend Court on a specified date to take notice of the
  date which is fixed for setting the proclamation of the sale.
B Concededly, this procedure had not been followed. [Para
  12] [98-F]

         MM.Shah vs. S.S.A.S.Mahamad & Anr. 1954 SCR 108
    - relied on.
c         6. However the High Court's direction that action
    should be· initiated against the concerned officers is not
    justified and the same is accordingly expunged more par-
    ticularly as SPL's conduct as well does it no credit. The
    directions insofar as the costs are concerned are how-
0   ever maintained. [Para 20] [106-8,C]
         CIVILAPPELLATE JURISDICTION: Civil Appeal No. 3840
    of 2008
        From the final Judgment and final Order dated 3.1.2006
E of the High Court of Judicature at Allahabad in W.P. NO. 5160
  (MS) of 2005
                                  WITH
         C.A. No. 3839 of 2008
F      Dinesh Owivedi, Ashok H. Desai, R.F. Nariman, Rakesh
  Dwivedi, P.H. Parekh, D.K. Goswami, Manoj Kumar Dwivedi,
  Gunnam Venkateswara Rao, Kamlendra Mishra, Ravi Prakash
  Mehrotra, Oeepti R. Mehrotra, Garvesh Kabra, Ranjeeta
  Rohatgi, Sameer Parekh, Deeksha Rai (for M/s. Parekh & Co.)
G and Shrish Kumar Misra for the Appearing Parties.
         The Judgment.of the Court was delivered by
         HARJIT SINGH BEDl,J. 1. Leave granted.
        2. Respondent No.1, Mis. Swadeshi Polytex Limited (here-
H inafter referred to as "SPL ..., a company registered under the
                     STATE OF U.P. & ORS. v. SWADESHI                  89
                     POLYTEX LTD [HARJIT SINGH BEDl,J.]

    1'    Companies Act, 1956 and presently a sick unit has its regis-       A
         tered Office at Kavi Nagar, Industrial Area, Ghaziabad. Con-
         cededly approximately 33% of the shares of the SPL are held
         by Swadeshi Cotton Mills Limited, Kanpur (a unit of the Na-
         tional Textile Corporation, a Government Enterprise) about 28%
         and 15% by M/s. Paharpur Cooling Towers Limited and some            B
         financial institutions respectively, and the remaining 23% or so
 ...     by the general public. It is on record that the CMD of the Na-
         tional Textile Corporation Ltd. is holding the charge of SPL and
         steps are underway for the rehabilitation of the company. It ap-
         pears that till year 1996-97, SPL was doing reasonably well         c
         whereafter a financial crisis seems to have set in, forcing its
         closure on 301h September 1998. As SPL was unable to pay
         the wages due to its employees, several applications were filed
         by its workmen under the provisions of the Uttar Pradesh Indus-
         trial Peace (Timely Payment of Wages) Act, 1978 (hereinafter
                                                                             D
 >-      called the 1978 Act). A recovery certificate was thereafter is-
         sued under sub-section (1) of Section 3 of the 1978 Act and
         pursuant thereto, the Company was called upon to make good
         the wages due to the workmen and on its inability to do so, the
         authorities proceeded to recover the amounts due as arrears
         of land revenue. A report was thereafter submitted by the Amin      E
         on 7th January 2005 which was endorsed by the Sub-Divisional
         Magistrate, Ghaziabad in his communication dated 101h Febru-
         ary 2005, whereupon an attachment notice in Form 73-0 was
...,     issued and a proclamation for the sale of the property on 23'd
         February 2005 was also ordered. The proclamation was how-           F
         ever cancelled by the SOM, Ghaziabad and on re-consideration,
         an order dated 1st April 2005 was passed and the Tehsildar,
         Ghaziabad was directed to hold the auction on 2nd May 2005
         after giving wide publicity and after the properties had been
         properly valued. A fresh proclamation was accordingly issued        G
         by the Sub-Divisional Magistrate, Ghaziabad on 1st April 2005
~        itself, without disclosing the details of the properties or their
         estimated value as also the date of the auction. An auction no-
         tice was, however, published in "Amar Ujala" on the 22nd April
         2005 indicating that the estimate value of the properties was       H
    90        SUPREME COURT REPORTS                   [2008] 9 S.C.R.


A   about 27 Crores and that the transfer of the property pursuant        y

    to the auction would be made on the terms and conditions stipu-
    lated by the U.P. State Industrial Development Corporation (here-
    inafter called the UPSIDC) the present appellant. It is also the
    case of the appellant herein that the personal service of the sale
B   proclamation was also made on the Chowkidar of the SPL on
    21•t April 2005. The auction was in fact held on the stipulated
    day i.e. 2nd May 2005 and the UPSIDC was found to be the              ....
    highest bidder. The recovery certificate issued by the Deputy
    Labour Commissioner and the auction notice dated 22nd April
c   2005 was challenged by SPL by way of Writ Petition No. 35005
    of 2005 referring to the irregularities in the issuance of the sale
    proclamation and the auction notice and it was prayed that the
    proceedings be quashed. A reply was filed in response to the
    Writ Petition but the petition was ultimately dismissed with the
    observation that repeated attempts to recover the dues had
D
    failed on account of the recalcitrant attitude of SPL and that the    ....
    procedural defects which had been pointed out could be chal-
    lenged by filing objections under Rule 285 (i) of the Uttar Pradesh
    Zamindari Abolition & Land Reforms Rules, 1952 (hereinafter
    called the "Rules"). Several objections were accordingly filed
E   with respect to the auction and the preceding events, but the
    Commissioner, Meerut Division, in his order dated 24th June
    2005 dismissed the objections. Aggrieved by the order dated
    24th June 2005, SPL preferred a revision petition before the
    Board of Revenue under section 293 of the U.P. ZamindariAbo-
F                                                                          r
    lition and Land Reforms Act, 1950 (hereinafter called the "Act")
    read with Section 219 of the Land Revenue Act but this petition
    too was rejected by order dated 9th September 2005. This or-
    der was challenged before the Lucknow Bench of the Allahabad
    High Court in Writ Petition No.5160/2005 and it was prayed,
G   inter-alia, that the aforesaid order and the order dated 24th June
    2005 be set aside and that the entire auction proceedings dated
    2"d May 2005 be quashed. The High Court in its interim order
                                                                           "'
    dated 201h September 2005 directed the SPL to deposit a sum
    of Rs.50 Lacs within a period of 30 days and in the meanwhile,
H   directed that the sale be not confirmed. Aggrieved by the order
                  STATE OF U.P. & ORS. v. SWADESHI                    91
                  POLYTEX LTD [HARJIT SINGH BEDl,J.]

.,,   dated 201n September 2005, the employees of the SPL filed a A
      Special Leave Petition and in its order dated 5th December
      2005, this Court directed that if the writ petition was not dis-
      posed of in the course of the week, the interim order passed by
      the High Court would stand vacated. The High Court, however,
      in its judgment dated 3rd January 2006 allowed the writ petition B
      with costs of Rs.50,000/- and also passed strictures against
      the officers of the State Government who had been instrumen-
      tal in arranging the auction. It is against this order that three
      Special Leave Petitions have been filed which are SLP (Civil)
      No.3272/2006 (U.P. State Industrial Development Corporation          c
      & Anr. Vs. M/s. Swadeshi Plytex Ltd. & Ors.), SLP (Civil)
      No.2858/2006 (M/s. Swadeshi Polytex Ltd. Karamchari Kalyan
      Sangh vs. Mis. Swadeshi Polytex Ltd. & Ors.) and SLP (Civil)
      No.21002/2006 (State of U.P. & Ors. Vs. M/s Swadeshi Polytex
      Ltd. & Ors). All these matters are being disposed of by this judg- D
      ment with the basic facts being taken from the first mentioned
      appeal.
             3. The learned Single Judge, at the very first instance, dealt
      with the preliminary objections raised during the course of the
      hearing that in view of the Division Bench judgments of the High E
      Court dated 131nJanuary 2005, 4tn May 2005 and 261nMay 2005,
      it was not open to the SPL to contend at this stage that the re-
      covery proceedings including the procedure adopted was not
      maintainable in law. The Court observed that W.P. No.50571/
      2002 had been filed by M/s. Paharpur Cooling Towers Pvt. Ltd. F
      and Ors. in which SPL had been arrayed as respondent No.6
      and the proceedings relating to the issuance of the recovery
      certificates by the Deputy Labour Commissioner under sub-
      section (1) of Section 3 of the 1978 Act had been questioned,
      but the Division Bench had dismissed the Writ Petition observ- G
      ihg that as the petitioner therein i.e. M/s. Paharpur Cooling Tower
      Pvt. Ltd. was pursuing the matter with the Company Law Board
      and had availed of an alternative remedy, the writ petition was
      not maintainable. The Court also observed that the matter had
      been taken by M/s. Paharpur Cooling Towers Ltd to the Su-
                                                                            H
    92        SUPREME COURT REPORTS                  [2008] 9 S.C.R.


A preme Court and an interim order dated 7th February 2005 had           'r
  been made directing the petitioner to deposit a sum of Rs.5/-
  Crore in favour of the Registrar General of this Court, but this
  amount had not been deposited and the Special Leave Peti-
  tion had been dismissed on 24th February 2005. The Court ac-
B cordingly held that in this view of the matter, it was clear that no
  order against SPL had been made by this Court in the above
  mentioned SLP. The learned Judge then went into the scope
  and effect of W.P.No.35005/2005 filed by SPL impugning the
  auction notice dated 22nd April 2005 and observed that this
c petition had been dismissed with the observation that it would
  be open to SPL to avail of the alternative remedy available un-
  der rule 285(i) of the Rules. The Bench also noted that the third
  writ petition, filed by one Jitendra Khaitan (Writ Petition
  No.36736/2005) once again challenging the validity of the auc-
  tion notice dated 22nd April 2005 had been filed and this writ
D
  petition too had been dismissed with the observation, inter-alia,
  that in the light of the order in Writ Petition No.35005/2005, the     """
  petitioner herein could also avail the alternative remedy by fil-
  ing objections under rule 285(i) of the Rules. The Court accord-
  ingly rejected the prayer of the respondents before it that in view
E of the aforesaid writ petitions, the writ petition was not main-
  tainable. The Court then examined the submission as to whether
  the procedure envisaged for recovery of arrears under the Act
  and the Rules had been observed and in case they had been
  breached, the effect thereof and after examining the various
F provisions threadbare, held that the Act and Rules prescribed a         ~


  procedure for the recovery of arrears of land revenue and that
  before a recovery certificate could be issued, the defaulter was
   required to be effectively served, that the Rules in question were
   mandatory and required strict compliance and in conclusion
G highlighted that there was no material on record to show that
   any attempt had been made to serve the demand notice on
   SPL, and service on the Chowkidar was clearly not proper ser-         'r
  vice on the defaulter. The Court also observed that auction sale
  was liable to set aside for the additional reason that a clear 30
H days notice of the proposed auction had not been given even if
                        STATE OF U.P. & ORS. v. SWADESHI                   93
                        POLYTEX LTD [HARJIT SINGH BEDl,J.]
      '(
             the service on the Chowkidar was held to be appropriate. The        A
             Court also held that the sale proclamation issued on 2nd May
             2005 was not valid and did not comply with the provisions of
             rule 285, 286 and 283 of the Rules and that the proclamation
           ·that had been issued was only of Rs.1.10 Crores and did not
             provide for the full amount as envisaged under rule 245, which      B
 >-          provided an opportunity to the defaulter to make good the pay-
             ment so as to avoid the sale of the property. The Court also held
            that on facts, it was impossible for the auction-purchaser i.e.,
            the UPSIDC to have procured the Bank Drafts from the Punjab
             National Bank, Kanpur on the day of the auction so as to make       c
            the deposit of the 25% of the sale price at the fall of the hammer
            as the auction had been conducted at Meerut, about 460 Kms.
            away from Kanpur and that the balance 75% of the amount due
            on the auction had also been deposited late i.e. on 18th May
 >          2005 which again was contrary to rule 285-D of the rules. The
                                                                                 D
            Court also observed that it appeared that the property had been
            sold at a price far below its market price and in conclusion,
            passed strictures against the district authorities which had con-
            ducted the auction and sale of the property in question thus
            quashing the order dated gth September 2005 passed by the
            Board of Revenue, the order dated 24th June 2005 of the Com-         E
            missioner as well as the auction sale proceedings dated 2nd
            May 2005 conducted by the Tehsildar, Ghaziabad with costs of
            Rs.50,000 and all consequential relief, and a direction that it
...         would be open for the State Government to recover the costs
            from the salary of the officers who were responsible "for the        F
            auction of the property in question in such unruly manner" by
            holding an enquiry and that the Chief Secretary was advised to
            take appropriate action against the defaulting officers.
                 4. Before we embark on an examination of the conten-
                                                                              G
           tions raised by the learned counsel for the parties, we deem it
.,         appropriate to refer to certain supervening and material tac-
           tors. It is the admitted position that the workmen at whose in-
           stance the initial process of sale of the property had been initi-
           ated, have entered into ~n agreement dated 3rn January 2008
                                                                              H
    94       SUPREME COURT REPORTS                  [2008] 9 S.C.R.

                                                                       ')'
A with SPL and the entire due amount due to them and something
  more has since been paid. It is also clear that the auction-pur-
  chaser is the UPSIDC, which is a Government agency and is
  the owner of the land over which the super-structure of SPL has
  been built.
B       5. In this background, the learned counsel for the appel-
  lants has submitted that the findings recorded by the High Court      ;

  were erroneous as it was clear from the record that despite
  numerous opportunities given to SPL to make the payments
  due to their own workmen, no serious attempt had been made
c to do so and that on the contrary, every attempt had been to
  forestall the payment. It has been pointed out that the had sud-
  denly woken up to its obligations and made full payment after
  the decision in the writ petition to take advantage of the huge
  spurt in the price of real estate in Ghaziabad and the surround-
D ing areas. It has been pleaded that there was absolutely no ir-      ....
  regularity in the procedure relating to the auction and the find-
  ing of the High Court that the sale price appeared to be under-
  valued was also not based on any relevant material. It has also
  been pleaded that no substantial injury had been caused to SPL,
E as the recovery certificate initially had been issued in the year
  2002 and had been challenged by the associates of SPL or by
   SPL itself and despite the fact that in the case of the SLP filed
   by M/s. Paharpur Cooling Towers Ltd., this Court had directed
  that a sum of Rs.5 Crore be deposited before the Registrar
F General, the order had not been complied with and the SLP
                                                                        ~


   had been dismissed proving a lack of intention on the part of
   the SPL or its associates to make the payment. It has finally
   been pleaded that the UPSIDC had deposited a sum of
   Rs.32.20 Crores in May 2005 and the sale had thereafter been
   confirmed in its favour and the possession transferred, and that
G
   if this amount plus interest of 18% was taken into account, the
   amount now due to the appellant would be almost 48 Crores, in
                                                                        ~
   case the order was to be set aside.
      6. The learned counsel for the respondents have, however.
H supported the judgment of the High Court. It has been espe-
                      STATE OF U.P. & ORS. v. SWADESHI                  95
                      POLYTEX LTD [HARJIT SINGH BEDl,J.]
    '1'
          cially emphasized that the workers due having been discharged      A
          by SPL, it did not lie on the State Government or a State Gov-
          ernment undertaking, the appellant herein, to still pursue the
          matter doggedly in this Court. It has been reiterated that the
          property in question had not been properly valued, as provided
          by rule 283 of the Rules and that the notice of the proclamation   B
          has also not been served on the SPL or on any of its functionar-
'>
          ies and had in fact been served to the Chowkidar and that too,
          about a week before the auction whereas a minimum notice
          period of 30 days ought to have been given. It has further been
          pleaded that the auction purchaser i.e., the UPSIDC had not        c
          deposited 25% of the sale price and/or the balance of 75% of
          the amount within 15 days, as required under rule 245 of the
          Rules and this too was a ground which was relevant in deter-
          mining the propriety of the sale of the auction.
~               7. As would be clear, the arguments pressed by the learned D
          counsel for both the sides pertain to the procedure adopted for
          the auction. Sub-section (1) of Section 3 of the 1978 Act pro-
          vides that in case the occupier of an industrial establishment is
          in default of payment of wages in excess of Rs.50,000/-, the
          Labour Commissioner may forward to the Collector a certifi- E
          cate under his signatures specifying the wages due from the
          establishment concerned and that the Collector shall accord-
          ingly proceed to realize the amounts due as arrears of land rev-
          enue. Admittedly the recovery certificate had been issued and
"'        sent to the Collector, Ghaziabad by the Labour Commissioner F
          under section 3(1) and it is in this situation that the proceedings
          against the SPL had been set in motion. Section 279 of the Act
          provides for the recovery of arrears of land revenue by various
          methods including an attachment and sale of the immovable
          property of the defaulter in respect of the arrears due. Section
                                                                              G
          280 stipulates that as soon as the land revenue had become
~         due, a writ of demand may be issued by the Tehsildar calling
          upon the defaulter to pay the amount within a specified time
          and under section 284, the property of the defaulter may also
          be attached. Section 327 provides for the modes of service of
                                                                             H
    96         SUPREME COURT REPORTS                  [2008] 9 S.C.R.


A   the notice on the defaulter and reads as under:                      ,...
         "327. Mode of service of notice.- Any notice or other
         document required or authorised to be served under this
         Act may be served either -

B        (a)   by delivering it to the person on whom it is to be
               served, or
                                                                           .-
         (b)   by leaving it at the usual or last known place of abode
               of that person, or

c        (c)   by sending it in a registered letter addressed to that
               person at his usual or last known place of abode, or

         (d)   in case of an incorporated company or body by
               delivering it or sending it in a registered letter
               addressed to the Secretary or other principal
D              functionary of the company or body at its principal       .....
               office, or
         (e)   in such other manner as may be laid down in the
               Code of Civil Procedure, 1908.

E        8. Section F of Chapter 10 of the Rules deals with the co-
    ercive procedure which can be adopted by the Collector to re-
    cover the amounts as arrears of land revenue.
        9. Rules 235 and 236authorize the Tehsildarto issue cita-
  tions, writs and warrants etc. as per the prescribed form               ~
F whereas Rules 241 and 245 provide as to how the citation is to
  be issued and writ of demand for the purpose of land revenue.
  Rule 246 provides for the service of the writ or citation shall, if
  possible, be made on the defaulter personally, but if service
  cannot be made on the defaulter, it can be made on the agent
G and sub-rule thereof further postulates that personal service shall
  be made by delivery to the defaulter or the agent of the foil of
  the writ of citation and with the sanction of the Collector such       .,,
  writs of demand may also be served as registered post. Rule
  247-A also refers to a warrant of arrest which may be executed
H by a duly authorized person for the recovery of the arrears anc1
                 STATE OF U.P & ORS. v. SWADESHI                    97
                 POLYTEX LTD [HARJIT SINGH BEDl,J]

      Rule 247-8 (1) deals with the situation that where a defaulter at A
     the time of his arrest pays the entire amount of arrears speci-
     fied in the warrant of arrest to the process-server or to autho-
     rized officer, the defaulter will not be arrested. Rules 272, 272-
     A, 272-8, 273, 273-A, 278 and 285-C deal with the procedure
     for the attachment of the land which is proposed to be sold and 8
     Rule 273-A postulates that the procedure envisaged in Order
"'   XXI, Rule 54 of the Code of Civil Procedure must be followed at
     the time of attachment. Rule 285-C also provides that in case
     the defaulter pays the arrears of land revenue in respect of the
     land proposed to be sold on any day before the fixed day of the c
     sale, the sale officer on being satisfied shall stay the sale. Rules
     282 and 283 when read together provide that in the proclama-.
     tion of sale to be issued in Form Z.A. 74, it will be incumbent on
     the Collector to give the estimated value of the property calcu-
     lated in accordance with the rules in Chapter XV of the Rev-
                                                                          0
     enue Manual.
           10. We now examine the primary arguments in the back-
     ground of the above provisions. The question arises as to
     whether the provisions for the attachment and sale of the prop-
     erty had been followed scrupulously, as would be necessary in E
     such a case. We notice that the learned Single Judge has ex-
     amined the matter and has concluded that there was no mate-
     rial on record to show that proper procedures had been
     adopted. A positive finding has been arrived at on facts that the
     Tehsildar or the Collector had even attempted to serve the de- F
     mand notice personally or by registered post on SPL, as called
     upon under Section 327 of the Act and Rule 246, as the notice
     had been served on the Chowkidar who could not be said to be
     an agent of SPL. It must also be noticed from a bare reading of
     the Rule 246 that the notice can be served on the agent only if it G
     is not possible to serve it o.n the actual defaulter. In the present
     case, we find that no attempt whatever had been made to serve
     the notice to the actual defaulter and had been served on the
     Chowkidar at the very initial stage.
        , 11. There is yet another circumstance which indicates that     H
    98        SUPREME COURT REPORTS                    [2008] 9 S.C.R.

                                                                           ,..
A the procedure for sale had not been followed. It appears from
  the record that the notice of citations for appearance and de-
  mand had been issued on 11th January 2005 and on 1•t April
  2005, the Sub-Divisional Magistrate had passed an order for
  the valuation of the properties as well as for wide publicity of the
B auction and sale of the property in question and the Tehsildar,
  Ghaziabad had been appointed as the auction officer and the
  auction had been fixed for the 2nd May 2005. It is clear from the
   record that the sale proclamation had been issued on 1st April
  2005 without any valuation of the properties and only the area
   of the vacant land had been specified therein and it was this
c notice   that had been served on the Chowkidar on the 21st April
   2005 and publication had been made in the newspaper "Amar
   Ujala" on the 22nd April 2005. There has, thus, been a clear vio-
   lation of the Rules 283 and 285 ibid. Rule 283 provides for tl=le
   estimated value of the property to be determined under the pro-
D
   visions contained in Chapter XV of the Revenue Manual. The
   said Chapter specifies the procedure for valuation of the prop-
   erty in terms of other similar properties. It is, however, clear from
   the record that the figure 27 Crores, the value of the property
   which is mentioned in the advertisement in the "Amar Ujala",
E appears to have picked up without any basis as it is not the
   case of the UPSIDC that the property had been valued in ac-
   cordance with the provisions of the Revenue Manual or by a                    '·
   valuer or expert in the field.

F       12. Moreover, Rule 273-A makes the provision under Or-              ..
  der XXI, Rule 54 of the CPC applicable to proceedings for at-
                                                                                 1
  tachment and Rule 1-A of Rule 54 specifically provides for the                 <!
  judgment-debtor to attend court on a specified date to take no-
  lice of the date which is fixed for setting the proclamation of the
  sale. Concededly, this procedure had not been followed. The
G
  learned counsel for the respondent has also disputed the valu-
  ation of the property by the UPSIDC and has referred us to the
  pleadings in the writ petition and in particular to paragraphs 26
  and 30 thereof. These paragraphs are reproduced below:
H         "That the auction was held on 2.5.2005 but in the furd
      STATE OF U.P. & ORS. v. SWADESHI                    99
      POLYTEX LTD [HARJIT SINGH BEDl,J.]

neelam no time of auction was provided. Even the A
description of the land sought to be auctioned, has not
been provided in the furd neelam. Six bidders, had
participated in the auction, out of which only U.P. State
Industrial Development Corporation was the major bidder
in competition with one M/s. Suder Steel Pvt. Ltd. The s
property worth Rs.56.00 Crores as per the rate list issued
by the U.P. State Industrial Development Corporation has
been auctioned for petty amount of Rs.32.00 Crores and
odd. In the open market, rate of the property in question
could fetch atleast Rs.100 Crores. This is apparent from c
the letter dated .26.4.2005 issued by Shri Mahak Singh,
District Manager, UPSIDC. The circle rate of the land of
the area fixed by UPSIDC is effective from 9.4.2005 is
Rs.3000/- per sq.meter, by which calculation, cost of the
land in question comes to Rs.56.42 Crores approx., D
whereas the same has been sold only @ Rs.1700/- per
sq.meter, amounting to Rs. 32.20 Crores, to the UPSIDC.
A true copy of the furd neelam letter dated 26.4.2005 issued
by District Manager, UPSIDC are annexed herewith as
Annexure No.23A & 24 to this Writ Petition.
                                                              E
That as per the newspaper clipping published in The Times
of India property section, New Delhi edition dated
25.6.2005, the land price in Kavi Nagar, Ghaziabad is Rs.
11,000/- per sq.mt. The petitioner has suffered a substantial
injury and loss in the auction held by the District F
Administration of a prime property situated at Kavi Nagar,
Ghaziabad Industrial Area, Ghaziabad @ Rs.1700/- per
sq.mt. a true copy of the newspaper clipping dated
25.6.2005 is annexed herewith asAnnexure No.27 to this
Writ Petition."
                                                                G
The replies to the paragraphs are given in SLP(C} No.3272
of 2006:
"That in reply to the contents of paras 23 to 25 of the writ
petition which are not correct, hence denied. It is submitted
                                                                H
    100       SUPREME COURT REPORTS                    [2008] 9 S.C.R.


                                                                           y
A         that the petitioner had full knowledge about the auction,
          and the auction has not held much higher to the present
          circle rate. It is further submitted that the rate offered and
          accepted by the deponent is of developed land whereas,
          the present land is a lease land on 99 years of which
8         already 35 years had expired and it is undeveloped area
          for which maximum rate has been got in the auction held
          on 2.5.2005."

        13. Shri Nariman, the learned senior counsel for the re-
  spondents, therefore, appears to be right in contending that the
C specific averments made by SPL in the writ petition have not
  been denied by the respondent and it was therefore open to
  SPL to contend that the property had not been properly valued
  and that the sum of Rs.27 crores represents not even half the
  market price. In Gajraj Jain vs. State of Bihar (2004) 7 SCC
D 151 while dealing with a case under the State Financial Corpo-
  rations Act, this is was what this Court had to say:
          "In the light of the aforesaid judgment of this Court, the
          issue which arises for determination is - whether
          Respondent 2 Corporation acted reasonably and in
E         accordance with Section 29 of the 1951 Act in transferring
          the assets of the Company on 19.3.2002 and in entering               •,
                                                                                I
          into agreement for safe with Respondent 4 on 26.4.2002.
          As stated above, Respondent 2 Corporation had a
          paramount first charge on the assets of the flour mill
F         whereas Central Bank of India had the second charge
          thereon. There is a difference between a charge and a
          mortgage. In the case of a charge under Section 100 of
          the TP Act, there is no transfer of interest in the property.
          A charge is not a jus in rem. It is jus ad rem. It creates a
G         right of payment out of the property/fund charged with the
          debt or out of proceeds of the realization of such property,
          a phrase used in Section 29(1) of the 1951 Act. A charge
          as defined under Section 100 of the TP Act may be
          enforced by safe [See Mulla: Civil Procedure Code (15 1h
H         Edn.). p.2420]. We have discussed the concept of charge
            STATE OF U.P. & ORS. v. SWADESHI                    101
            POLYTEX LTD [HARJIT SINGH BEDl,J.]

      as it has a direct bearing on the interpretation of Section      A
      29 of the 1951 Act.
      In the present case, it has been urged that absence of
      valuation report and the reserved bid does not vitiate the
      sale. We do not find met in this argument. In the case of
      S.J.S. Business Enterprises (P) Ltd. it has been held that       8
      the financial corporation, in the matter of sale under Section
      29, must act in accordance with the statute and must not
      act unreasonably. In this case, the Corporation fails on
      both the counts. It has neither complied with the provisions
      of sub-sections (1) and (4) of Section 29, nor has it acted      C
      fairly. The test of reasonableness has been laid down in
      the above judgment in which it is held that reasonableness
      to be tested against the dominant consideration to secure
      the best price. Value or price is fixed by the market. In the
      case of a going concern, one has to value the assets             D
      shown in the balance sheet (Datta,S.: Valuation of Real
      Property,p.198). In our view, if the object of Section 29 of
      the Act is to obtain the best possible price then the
      Corporation ought to have called for the valuation report.
      This has not been done. There is no inventory of assets          E
      produced before us. The mortgaged assets of the
      Company could be sold on itemi.zed basis or as a whole,
      whichever is found on valuation to be more profitable. No
       particulars in that regard have been produced before us.
...    If publicity and maximum participation is to be attained        F
       then the bidders should know the details of the assets (or
       itemized value). In the absence of the proper mechanisam
       the auction-sale becomes only a pretence. Further, in this
       case, the Corporation advanced Rs.90 Lakh to the
       Company. At that time, it must have valued the assets.          G
       Nouch report has been produced. Lastly, in this case, the
       price of the assets is pegged to the dues of the Corporation
       and Central Bank of India. The assets are agreed to be
       sold to Respondent 4 not for the market price but against
       repayment of dues of the Corporation plus a promise to
                                                                       H
    102       SUPREME COURT REPORTS.                    [2008] 9 S.C.R.

                                                                            y
A         discharge the liability of Central Bank of India. Therefore,
          the Corporation, Respondent 2, has not acted reasonably.
          It has not taken any steps to secure the best price. In fact,
          it has failed to protect the interest of Central Bank of India,
          which is having the second charge on the assets
B         transferred to Respondent 4 as well as the mortgagor
          which would be entitled to the balance of the sale proceeds,
          if any. It was contended that as the bids were withdrawn,
          the offer of Respondent 4 was accepted. Even assuming
          for the sake of argument, that there were no offers except
c         the offer of respondent 4, it shows that value of the assets           ,.
          was Rs.198.8l) lakhs (i.e. Rs.28.85 lakhs + Rs.170 Lakhs).
          No reason has been given why Respondent 2 did not
          insist on downright payment of Rs.198.85 lakhs."
         14. The question of valuation is to our mind of the utmost
D importance as it is designed to ensure the best price for the
  property and it is essential in this circumstance that wide publi-
  cation and notice of the proposed sale should be given as per
  Rule 285-A which postulates a notice of 30 days between the
  date of issuance of the sale proclamation and the date of auc-
E tion. It can hardly be over emphasized that the proper valuation
  of the property and wide publicity of the proposed auction is
  intimately linked with the. price that the auction fetches. As al-
  ready mentioned above, the auction had been held on 2nd May
  2005. The sale proclamation had been issued on the 1st April
F 2005, and served on the Chowkidar on the 21st April 2005, the
                                                                            ).


  publication made in "Amar Ujala" on 22nd April 2005 whereas
  rule 285 itself postulates a notice period of 30 days to be counted
  from the date of issuance of the sale proclamation. While deal-
  ing with a similar situation, this is was what this Court had to
  say in S.J.S.Business Enterprises (P) Ltd. vs. State of Bihar
G
  (2004) 7 sec 166:
          "We are of the view that the sale effected in favour of
          Respondent 6 cannot be sustained. It is axiomatic that the
          statutory powers vested in State financial corporation under
H         the State Financial Corporations Act must be exercised
       STATE OF U.P. & ORS. v. SWADESHI                 103
       POLYTEX LTD [HARJIT SINGH BEDl,J.]

  bona fide. The presumption that public officials will A
  discharge their duties honestly ar;id in accordance with
  the law may be rebutted by establishing circumstances
  which reasonably probabilise the abuse of that power. In
  such event it is for the officer concerned to explain the
  circumstances which are set up against him. If there is no   s
  credible explanation forthcoming the court can assume
  that the impugned action was improper. (See Pannalal
  Binjraj v. Union of India, AIR at p.409.) Doubtless some of
  the restrictions placed on State financial corporations
. exercising their powers under section 29 of the State        c
  Financial Corporations Act, as prescribed in Mahesh
  Chandra v. Regional Manager, U.P.Financial Corpn. Are
  no longer in place in view of the subsequent decision in
  Haryana Financial Corpn. Vs. Jagdamba Oil Mills.
  However, in overruling the decision in Mahesh Chandra
                                                               0
  this Court has affirmed the view taken in Chairman and
  managing Director, SIPCOT v. Contromic {P) Ltd. and
  said that in the matter of sale under section 29, State
  financial corporations must act in accordance with the
  statute and must not act unfairly i.e. unreasonably. If they
  do, their action can be called into question under Article E
  226. Reasonableness is to be tested against the dominant
  consideration to secure the best price for the property to
  be sold. ·

''This can be achieved only when there is a maximum            F
public participation in the process of sale and everybody
has an opportunity of making an offer. Public auction after
adequate publicity ensures participation of every person
who is interested in purchasing the property and generally
secures the best price."
                                                               G
Adequate publicity to ensure maximum participation of
bidders in turn requires that a fair and practical period of
time must be given to purchasers to effectively participate
in the sale. Unless the subject-matter of sale is of such a
nature which requires immediate disposal, an opportunity       H
    104       SUPREME COURT REPORTS                    [2008] 9 S.C.R.


A         must be given to the possible purchaser who is required
          to purchase the property on "as-is-where-is basis" to
          inspect it and to give a considered offer with the necessary
          financial support to deposit the earnest money and pay
          the offered amount, if required."
B         15. We must, therefore, repel Mr. Dwivedi's argument that
    as SPL had suffered no prejudice in the auction proceedings,
                                                                           T'
    the sale should not be interfered with.

          16. There is yet another circumstance which vitiates sale.
c Rule 285-0 of the Rules that 25% of the amount of the auction
    money shall be deposited at the fall of the hammer and the re-
    maining 75% within 15 days. The case of the appellants is that
    the Bank draft for 7.80 Crores had been deposited by the auc-
    tion purchasers on 2"d May 2005 i.e., the date of auction but the
    learned Single Judge has found that as the auction had been
0
    completed at 1.30 p.m., it would not have been possible to have
    received the Bank draft from Kanpur 460 km. away on that date.
    This finding appears to be correct. We also find that the bal-
    ance 75% of the amount that had been deposited by various
    Bank drafts on 18th May 2005 was also beyond the 15 days
E   permissible and the finding of the learned Single Judge based
    on the record is that though the drafts were dated 14th May 2005
    but they had, in fact, had been handed over to the concerned
    authority only on the 18th May 2005. This Court in M. M. Shah vs.
    S. S.A. S. Mahamad & Anr 1954 SCR 108 has held as under:
F
          "Having examined the language of the relevant rules and
          the judicial decisions bearing upon the subject we are of
          opinion that the provisions of the rules requiring the deposit
          of 25% of the purchase-money immediately on the person
          being declared as a purchaser and the payment of the
G
          balance within 15 days of the sale are mandatory and
          upon non-compliance with these provisions there is no
          sale at all. The rules do not contemplate that there can be
          any sale in favour of a purchaser without depositing 25%
          of the purchase-money in the first instance and the balance
H
            STATE OF U.P. & ORS. v. SWADESHI                   105
            POLYTEX LTD [HARJIT SINGH BEDl,J.]

     within 15 days. When there is no sale within the A
     contemplation of these rules, there can be no question, of
     material irregularity in the conduct of the sale. Non-payment
     of the price on the part of the defaulting purchaser renders
     the sale proceedings as a complete nullity. The very fact
     that the Court is bound to re-sell the property in the event B
     of a default shows that the previous proceedings for sale
     are completely wiped out as if they do not exist in the eye
     of law. We hold, therefore, that in the circumstances of the
     present case there was no sale and purchasers acquired
     no rights at all."                                               c
    17. For this additional reason as well, the auction sale
cannot be maintained.
      18. In this view of the matter, we need not go into the argu-
ment raised by Mr. R.F. Nariman that in the facts of the case we      D
should not entertain this matter in the exercise of the discretion-
ary jurisdiction under Article 136 of the Constitution of India.
      19. We also notice from the last paragraph of the judg-
ment of the learned Single Judge appears to have been ex-
tremely annoyed with what he perceived to be gross irregulari-        E
ties on the part of the officers of the State Government con-
nected with the sale of the property and he had accordingly di-
rected as under:
     "Subject to above writ petition is allowed with cost
     quantifies to Rs.50,000/- Petitioner shall be entitled to        F
     withdraw Rs.25,000/- and rest of Rs.25,000/- shall be
     remitted to U.P. State Legal Services Authorities to utilize
     for providing legal aid to the litigants approaching Lucknow
     Bench of High Court. The cost shall be deposited within
     one month from today in this court by the District Magistrate,   G
     Ghaziabad. Registrar to ensure compliance. It shall be
     open for the State Government to recover the cost from
     the salary of the office/officers who are responsible to
     auction the property in question in such unruly manner by
     holding an inquiry. The Chief Secretary Government of            H
    106       SUPREME CO~T REPORTS                    (2008] 9 S.C.R.


A         U.P. is further directed to take appropriate action against
          the officers or employees who had acted in arbitrary
          manner while proceeding with the auction and sale of the
          property in question.
         Let a copy of the judgment be sent to the Chief Secretary,
8   Govt. of U.P. by the office within a week for appropriate action."
          20. We are of the opinion, however, that High Court's di-
    rection that action should be initiated against the concerned
    officers, is not justified and we accordingly expunge these di-
e   rections more particularly as SPL's conduct as well does it no
    credit. We, however, maintain the directions in so far as the
    costs are concerned. With this minor modification, the appeals
    are dismissed.
    8.8.8.                                      Appeals dismissed.