Failure To Invoke Sections 37-A/38 Bars Collateral Challenge To Revenue Auction, Supreme Court Holds

A bench of Justices Satish Chandra Sharma and Vipul M. Pancholi heard an appeal against the Madras High Court’s dismissal of writ and review petitions challenging a public auction notice and subsequent sale of immovable property effected under the Tamil Nadu Revenue Recovery Act, 1864.

The Court dismissed the appeal and upheld the High Court’s concurrent findings that the auction held on 29.07.2005 and confirmed on 23.07.2008 could not be belatedly challenged because the appellant had failed to avail the statutory remedies under Sections 37-A or 38 within the prescribed 30-day period. The Court stated that the statutory scheme for setting aside sales under the Revenue Recovery Act was mandatory and self-contained. The Court, in its reasoning, observed: The Court also reiterated that courts should be cautious in granting interim relief that frustrates recovery of legitimate State revenues, observing that “The court should not take upon itself the responsibility of staying the recovery of amounts due to the State … unless a clear case of illegality is made out and the balance of convenience is duly considered.”

Background The dispute arose from alleged arrears on account of arrack and toddy shops run by the deceased husband of the appellant in 1972–73. An ex parte civil decree for recovery was obtained in 1987. Revenue recovery proceedings followed and, in 2005, the authorities issued auction notices to realize the certified dues. The appellant and other heirs filed writ petitions in the Madras High Court challenging the auction notices; the High Court granted limited interim protection but did not stay the conduct of the auction. The auction took place on 29.07.2005; the purchaser deposited the full sale consideration that day and the sale was subsequently confirmed on 23.07.2008. The appellant deposited sums pursuant to interim directions of the High Court but did not file any application under Sections 37-A (deposit and application to set aside sale) or 38 (challenge for irregularity/fraud) within 30 days of the sale.

The High Court dismissed the writ petitions and the later writ appeals and review application, holding that the statutory remedy was available and mandatory and that belated collateral challenges were barred by limitation. The Supreme Court agreed, applying the statutory text and precedents that caution against using interim relief to frustrate revenue recovery (citing Rajasthan Housing Board v. Krishna Kumari and State of M.P. v. M.V. Vyavsaya & Co.). The Court held that the deposits made pursuant to interim orders did not cure non-compliance with the statutory requirement of filing a Section 37-A application within 30 days, and found no material irregularity or fraud warranting interference under Section 38. The Court noted that the sale certificate had been issued, the property had been registered in the purchaser’s name, and subsequent transfers to bona fide purchasers had taken place. Accordingly, the Supreme Court upheld the Madras High Court’s judgment and order and dismissed the civil appeal; the High Court’s directions for refund of amounts deposited where appropriate remained operative.

Case No.: Civil Appeal No. 2322 of 2013 Case Title: Kolanjammal (D) thr Lrs. v. The Revenue Divisional Officer, Perambalur District & Ors. Appearances: For the Petitioner(s): Counsel not specified in the judgment For the Respondent(s): Counsel not specified in the judgment