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TMI Blog2008 (5) TMI 685X X X X Extracts X X X X X X X X Extracts X X X X ..... isis seems to have set in, forcing its closure on 30th 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 Industrial Peace (Timely Payment of Wages) Act, 1978 (hereinafter called the 1978 Act). A recovery certificate was thereafter issued 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 on 7th January 2005 which was endorsed by the Sub-Divisional Magistrate, Ghaziabad in his communication dated 10th February 2005, whereupon an attachment notice in Form 73-D was issued and a proclamation for the sale of the property on 23rd February 2005 was also ordered. The proclamation was however cancelled by the SDM, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set aside and that the entire auction proceedings dated 2nd May 2005 be quashed. The High Court in its interim order dated 20th September 2005 directed the SPL to deposit a sum of ₹ 50 Lacs within a period of 30 days and in the meanwhile, directed that the sale be not confirmed. Aggrieved by the order dated 20th September 2005, the employees of the SPL filed a Special Leave Petition and in its order dated 5th December 2005, this Court directed that if the writ petition was not disposed 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 with costs of ₹ 50,000/- and also passed strictures against the officers of the State Government who had been instrumental 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 & Anr. Vs. M/s. Swadeshi Plytex Ltd. & Ors.), SLP (Civil) No.2858/2006 (M/s. Swadeshi Polytex Ltd. Karamchari Kalyan Sangh vs. M/s. Swadeshi Polytex Ltd. & Ors.) and SLP (Civil) No.21002/2006 (State of U.P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner herein could also avail the alternative remedy by filing objections under rule 285(i) of the Rules. The Court accordingly rejected the prayer of the respondents before it that in view of the aforesaid writ petitions, the writ petition was not maintainable. 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 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 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 service on the defaulter. The Court also observed that auction sale was liable to set aside for the additional reason that a clear 30 days notice of the proposed auction had not been given even if the servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is the owner of the land over which the super-structure of SPL has been built. 5. In this background, the learned counsel for the appellants 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 to do so and that on the contrary, every attempt had been to forestall the payment. It has been pointed out that the had suddenly 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 surrounding areas. It has been pleaded that there was absolutely no irregularity in the procedure relating to the auction and the finding of the High Court that the sale price appeared to be undervalued was also not based on any relevant material. It has also been pleaded that no substantial injury had been caused to SPL, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 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 - (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) 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 functiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice that the learned Single Judge has examined the matter and has concluded that there was no material 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 demand 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 is not possible to serve it on 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 the procedure for sale had not been followed. It appears from the record that the notice of citations for appearance and demand had been issued on 11th January 2005 and on 1st April 2005, the Sub-Divisional Magistrate had passed an order for the valuation of the properties as well as for wide publicity of the au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Crores and odd. In the open market, rate of the property in question could fetch atleast ₹ 100 Crores. This is apparent from 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 ₹ 3000/- per sq.meter, by which calculation, cost of the land in question comes to ₹ 56.42 Crores approx., whereas the same has been sold only @ ₹ 1700/- per sq.meter, amounting to ₹ 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. 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 ₹ 11,000/- per sq.mt. The petitioner has suffered a substantial injury and loss in the auction held by the District Administration of a prime property situated at Kavi Nagar, Ghaziabad Industrial Area, Ghaziabad @ ₹ 1700/- per sq.mt. a true copy of the newspaper clipping dated 25.6.2005 is annexed herewith as Annexure No.27 to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 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 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 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 produced before us. The mortgaged assets of the Company could be sold on itemized basis or as a whole, whichever is found on valuation to be more profitable. No particul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of the sale proclamation. While dealing 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 (2004) 7 SCC 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 the State Financial Corporations Act, must be exercised bona fide. The presumption that public officials will discharge their duties honestly and 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 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 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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: "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 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 within 15 days. When there is no sale within the 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 of a de ..... 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