RAM KISHUN AND ORS. versus STATE OF U.P. AND ORS.

Citation: [2012] 6 S.C.R. 105 · Decided: 24-05-2012 · Supreme Court of India · Bench: B.S. CHAUHAN · Disposal: Dismissed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

[2012] 6 S.C.R. 105 
RAM KISHUN AND ORS. 
v. 
STATE OF U.P. AND ORS. 
(Civil Appeal No. 6204 of 2009) 
MAY 24, 2012 
[DR. B.S. CHAUHAN AND DIPAK MISRA, JJ.] 
Contract Act, 1872 - s. 128 - Guarantor - Liability of - Held: 
A 
B 
Liability of the guarantor/surety is co-extensive with that of the 
debtor - The surety has no right to restrain execution of the 
C 
decree against him until the creditor has exhausted his 
remedy against the principal debtor. 
Contract Act, 1872 - s. 146 - Co-surety - Liability of - Held: 
Co-sureties are liable to contribute equally - In case there are 
D 
more than one surety/guarantor, they have to share the liability 
equally unless the agreement of contract provides otherwise. 
Financial institutions - Recovery of loans - Held: 
Financial institutions cannot be permitted to behave like 
property dealers and further to dispose of the secured assets 
in any unreasonable or arbitrary manner in flagrant violation 
of statutory provisions - A person cannot be deprived of his 
property except in accordance with the provisions of statute. 
E 
Public auction - Auction sale for recovery of loans -
F 
Valuation and reserve price - Duty to sell only such property 
or portion thereof as necessary - Held: Valuation is a question 
of fact and valuation of the property is required to be 
determined fairly and reasonably - There must be an 
applicatiOn of mind by the authority concerned while 
G 
approving/accepting the report of the approved valuer and 
fixing the reserve price, as failure to do so may cause 
substantial injury to the borrower/guarantor and that would 
amount to material irregularity and ultimately vitiate the 
105 
H 
106 
SUPREME COURT REPORTS 
[2012] 6 S.C.R. 
A subsequent proceedings - Law requires a proper valuation 
report, its acceptance by the authority concerned by 
application of mind and then fixing the reserve price 
accordingly and acceptance of the auction bid taking into 
consideration that there was no possibility of collusion of the 
B bidders - The authority is duty bound to decide as to whether 
sale of part of the property would meet the outstanding 
demand. 
c 
Public auction - Auction sale - Setting aside of, after 
confirmation - Held: Once the sale has been confirmed it 
cannot be set aside unless a fundamental procedural error 
has occurred or sale certificate had been obtained by mis-
representation or fraud. 
Public auction - Auction sale for recovery of loans -
0 
Appellants' land sold for three times the amount which was 
to be recovered - Held: In the facts and circumstances of this 
case, instead of putting the whole land, the sale of 113rd of 
this land could have served the purpose - Therefore, there 
had been material irregularity in putting the entire property to 
E auction - Since the auctioning authority had received 
Rs. 25, 0001- as sale consideration, after adjusting the 
outstanding dues of Rs. 8, 5001-, the balance amount of 
Rs. 16, 5001- ought to have been paid to the appellants -
Nothing on record to show that authorities had ever adopted 
F such a course - In view of the above, the auction sale stood 
vitiated and all the. consequential proceedings liable to be 
quashed - However, the buyer(respondent no.4) had been put 
in possession of the land more than two decades ago and he 
had made improvements - Such a possession should not be 
G disturbed at this belated stage - Nevertheless, the appellants 
permitted to move application before the Collectorlconcemed 
authority for recovery of the excess amount that had not been 
paid to them. 
One 'G' had taken bank loan for which the 
H appellants' father had stood as the guarantor. Since the 
RAM KISHUN AND ORS. v. STATE OF U.P. AND 
107 
ORS. 
loan amount was not cleared during the lifetime of 'G' and 
A 
the appellants, the bank initiated recovery proceedings 
and sent the matter to the District Collector who in turn 
issued a citation/recovery certificate. In order to make the 
recovery, land belonging to 'G' was put to auction which 
fetched certain sum. For recovery of the balance loan 
8 
amount, proceedings were initiated against the 
appellants. Their land was put to auction. Respondent 
No. 4 purchased the land. The sale was confirmed and 
sale certificate was issue.d by the Collector in favour of 
respondent No.4 and he was put in possession. 
C 
Appellants raised various objections thereagainst before 
the Commissioner, but their objections were rejected on 
the ground of inordinate 

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