Section 61 of the AP Cooperative Societies Act, 1964 (for short, 'the Act')= As the borrower committed default in payment of the loan to the Bank, the Bank filed ARC.No.21 of 2000 against the borrower and the guarantor of his loan for recovery of Rs.22,73,848/- with interest from 01-01-2000 thereon under Section 61 of the AP Cooperative Societies Act, 1964 (for short, 'the Act') before the Divisional Cooperative Officer, Golconda Division/Arbitrator (for short, 'the arbitrator') for recovery of the outstanding loan. = Attachment before judgment in proceedings under the Act are governed by Section 73 of the Act r/w Rule 54 of the Rules framed under the Act. Section 73 of the Act states as follows : "73. Attachment of property before decision or order : - If the Registrar is satisfied on application, report, inquiry or otherwise that any person with intent to delay or obstruct the enforcement of any decision or order that may be made against him under the provisions of this Act, -- (a) is about to dispose of the whole or any part of his property; or (b) is about to remove the whole or any part of his property from the jurisdiction of the Registrar, the arbitrator or liquidator, as the case may be, he may unless adequate security is furnished direct the attachment of the said property, and such attachment shall have the same effect as if made by a competent Civil Court." Rule 54 states : "54. Mode of making attachment before judgment under Section 73 of the Act : - (1) Every attachment of property directed under Section 73 of the Act shall be made in the same manner as provided in Rule 52. (2) Where a claim is preferred to property attached under sub-rule (1), such claim shall be investigated in the manner and by the authority specified in Rule 52. (3) A direction made for the attachment of any property under Section 73, may be withdrawn by the Registrar of the district - (a) when the party concerned furnishes the security required, together with security for the costs of the attachment; or (b) when the liquidator determines under clause (c) of sub-section (1) of Section 66 of the Act that no contribution is payable by the party concerned; or (c) when the Registrar passes an order under sub-section (1) of Section 60 of the Act that the party concerned need not repay or restore any money or property or any part thereof with interest or contribute any sum to the assets of the society by way of compensation; or (d) when the dispute referred to in sub-section (1) of Section 61 of the Act has been decided against the party at whose instance the attachment was made. (4) Any attachment made under sub-rule (1) shall not effect the rights existing prior to the attachment, of persons not parties to the proceedings in connection with which the attachment was made, nor bar any person holding a decree against the person whose property is attached from applying for the sale of the property under attachment in execution of such decree. (5) Where the property is under attachment by virtue of the provisions of this rule and a decree is subsequently passed against the person whose property is attached, it shall not be necessary upon an application for execution of such decree to apply for reattachment of the property." 28. Rule 52 deals with procedure in execution of decrees, decisions or orders and sub Rule 21 (a) thereof deals with claims preferred/objections made to attachment of property made under sub Rule 11 after decree/decision/order. Rule 52 (21) (a) states: "(21) (a) Where any claim is preferred or any objection is made to the attachment of any property under this rule on the ground that such property is not liable to such attachment, the officer shall investigate the claim or objection and dispose it of on the merits." 29. A reading of the above provisions indicates that claim petitions to raise attachment before award are governed by Rule 54 and claim petitions to raise attachments after award are governed by Rule 52 (21) (a) of the Rules. Although sub-Rule (2) of Rule 54 states that a claim petition to raise attachment before award is to be investigated in the manner and by the authority specified in Rule 52, sub Rule (3) of Rule 54 specifies in what circumstances an attachment of property made before award/judgment under Section 73 may be withdrawn. Only in the circumstances mentioned in Clauses (a) to (d) of sub Rule (3) of Rule 54, attachment made before judgment may be withdrawn. In view of this, when an application to raise attachment before judgment is made under Rule 54 by a third party to an arbitration under Section 61 objecting to such attachment, it cannot be decided on merits as if it was an attachment after judgment applying sub Rule (21) (a) of Rule 52. In view of sub Rule (2) of Rule 54, only the manner of investigation into the claim can be done as specified in Rule 52 but the disposal of the claim to raise attachment before judgment can only be done as per sub Rule (3) of Rule 54. 30. But a perusal of the order dt.28-07-2004 in claim petition No.1/2001 in A.R.C.No.21 of 2000 indicates that the Arbitrator, without noticing the provisions of Rule 54 (3), followed Rule 52 (21) (a) and adjudicated the claim petition on merits instead of considering whether or not the attachment before judgment can be raised as per Clauses (a) to (d) of Rule 54 (3). The Arbitrator appears to have been swayed by the fact that the agreement of sale is prior in point of time to the mortgage in favour of the Bank and so it would prevail over the same. In taking such a view, the arbitrator went into the following issues: The parties have also stated that the agreement holders have filed O.S.No.9 of 2003 before the II Additional Chief Judge, City Civil Courts, Hyderabad for specific performance of the agreement of sale dt.28-02-1998 against the borrower and they have also impleaded the Bank therein and the said suit is pending.= (i) whether the agreement of sale dt.28-02-1998 in favour of the agreement holders is true and valid, (ii) whether any consideration was paid to the borrower by them, (iii) whether the agreement holders were in lawful possession of the property and (iv) whether the claim petition is maintainable in view of the provisions of the Transfer of Property Act, 1882. 31. In my opinion, considering the language of Rule 54, it was impermissible for the Arbitrator to have gone into issues (i) to (iii) and these issues could only be decided in O.S.No.9 of 2003 where the claim for specific performance of the agreement of sale dt.28-02-1998 made by the agreement holders against the borrower is being decided. It was also not permissible for the Arbitrator to go into issue (iv) as that issue could have been gone into only if it was a case of attachment after judgment to which Rule 52 (21) (a) applies.= This is because at present there is only attachment before judgment under Section 73 of the Act r/w Rule 54 (1) and as per sub Rule (4) of Rule 54, such attachment will not affect the rights existing prior to attachment, of persons not parties to the proceedings in connection with which the attachment was made, nor bar any person holding a decree against the person whose property is attached from applying for sale of the property under attachment in execution of such decree. Therefore it is clear that the order dt.11-05-2000 passed by the Arbitrator in A.R.C.No.21 of 2000 does not affect the rights of the agreement holders who are claiming interest in the property under the alleged agreement of sale dt.28-02-1998. = Both the arbitrator and the tribunal have not taken note of Rule 54(4) of the above Rules. Moreover, the agreement holders are admittedly strangers to the loan transaction between the Bank and the borrower. So in a proceeding between the borrower and the Bank initiated under S.61 of the Act, such persons are not proper or necessary parties merely because they claim to have an interest in the property mortgaged by the borrower to the Bank. Rule 54(4) clearly protects the interest of the agreement holders. Thus their orders are vitiated by error apparent on face of record. So W.P.No.13216/2009 is also allowed and the order dt.25.4.2008 in CTA No.66/2007 of the Tribunal confirming the order dt.24.3.2007 in I.A.No.5/2006 in ARC No.21/2000 of the arbitrator is set aside. 34. Accordingly, W.P.No.21151 of 2008, W.P.No.23718 of 2008 and W.P.13216/2009 are allowed. No costs.

reported in http://judis.nic.in/judis_andhra/qrydisp.aspx?filename=10157
THE HON'BLE SRI JUSTICE M.S. RAMACHANDRA RAO          

W.P.Nos.21151 of 2008

23-07-2013

The A.P.Mahesh Co-op. Urban Bank and others....Petitioner.

1.The Divisional Co-operative Officer, Golconda and others......Respondents.

<GIST:

>HEAD NOTE:  

Counsel for the petitioner-Bank:Sri Muralinarayan Bung and Sri V.Srinivas,

Counsel for the 1st respondent:Learned Government Pleader

^Counsel for the respondents 2 to 6 :   Sri M.R.K.Chakravarthi, Advocate
    representing Sri M.V.Durga Prasad
?Cases referred

THE HON'BLE SRI JUSTICE M.S. RAMACHANDRA RAO          

W.P.Nos.21151, 23718 of 2008 & 13216 of 2009  

COMMON ORDER :    
       

        As common issues arise in these writ petitions, they are being disposed of
by this common order.
2. One C.Nageswara Rao (for short, "borrower") owned a house bearing No.8-3-
967/92 situated at Salivahana Nagar, Srinagar Colony, Hyderabad.
He created an
equitable mortgage of the above property in favor of LIC Housing Finance on 11-
09-1995 by depositing with it, the title deeds relating to it.
3. Subsequently
 he approached the AP Mahesh Cooperative Bank Limited (for short,
'the Bank') for clearing his loan outstanding with LIC Housing Finance and for
the purpose of business development of M/s.Quest Agrotech, an enterprise owned
by him.
On 23-06-1998, the Bank sanctioned to him a loan of Rs.18.56 lakhs.
The borrower paid the loan outstanding with LIC Housing Finance with the amount
released by the Bank, obtained the title deeds from LIC Housing Finance and deposited the same with the Bank on  30-07-1998, towards security for repayment of the loan amount released by the
Bank to him.
4. As the borrower committed default in payment of the loan to the Bank, the
Bank filed ARC.No.21 of 2000 against the borrower and the guarantor of his loan
for recovery of Rs.22,73,848/- with interest from 01-01-2000 thereon under
Section 61 of the AP Cooperative Societies Act, 1964 (for short, 'the Act')
before the Divisional Cooperative Officer, Golconda Division/Arbitrator (for
short, 'the arbitrator') for recovery of the outstanding loan.  
By order dt.11- 05-2000 in ARC.No.21 of 2000, the Deputy Registrar/Officer on Special Duty, AP
Mahesh Cooperative Bank Limited (for short, 'the Deputy Registrar'), in exercise
of his powers under Section 73 of the Act directed attachment before judgment of
the above property till the disposal of the said case pending before the
arbitrator.
This was done on the basis of information obtained by the Bank that
the borrower had executed a registered agreement of sale-cum-Irrivocable General Power of Attorney dt.06-01-2000 with one Mallikarjuna Rao in respect of the mortgaged property, without it's permission and that when the Branch Manager of the Bank inspected the mortgaged property, he found some portion of the above property in the occupation of someone else.
5. On the basis of the above order, the Bank also took possession of the above
property through the Senior Inspector/Sale Officer of the Co-operative
Department.
6. It is alleged that the borrower had entered into an oral agreement of sale on
20-02-1998 with one B.R.S.Chowdary, his wife -Nirmala Devi, son-
B.A.Chakravarthi, and daughters - Ms.B.Harini and Ms.Shanthi (for short,
'agreement holders') for sale of the above property for Rs.30.00 lakhs.
The
agreement holders contend that the borrower showed the original title deeds to
them, that he received Rs.25.00 lakhs towards part sale consideration on 20-02-
1998 under a receipt dt.20-02-1998.
He subsequently executed a written agreement
of sale on 28-02-1998 in their favour promising to register the property by 28-
02-1999 after obtaining the required income tax and other clearances and after
receiving the balance consideration.
They also contended that although the
agreement of sale recited that possession of the property would be given after
receipt of the sale consideration, the borrower sought time of almost one year
for obtaining all the required clearances and for completing the sale
transaction and therefore, at their request, he delivered possession of the
front portion of the above property on 30-03-1998.
It is alleged by the
agreement holders that subsequently, the borrower did not execute sale deed and
demanded by a letter dt.28-02-1999 that the agreement holders pay a further
amount of Rs.24.00 lakhs to him on account of alleged rise in the prices of
properties in the locality and that the said amount was paid to him on 20-05-
1999 under a/c payee cheques.  It is alleged by the agreement holders that the
borrower did not execute the sale deed and kept procrastinating.
7. In the meantime, the Bank had issued a caution notice dt.24-03-2000 in
"Eenadu" and "Deccan Chronicle" Daily Newspapers stating that the borrower had
mortgaged the property by depositing title deeds with the Bank, borrowed loan
from it and cautioning the public not to enter into any negotiations/agreements
with the borrower to purchase the property.
8. The agreement holders allegedly approached the Bank pleading that they have
an agreement of sale dt.28-02-1998 in their favour executed by the borrower in
respect of the above property, that they also paid full consideration to the
borrower and obtained possession from him and furnished documents in proof
thereof.
9. On 04-04-2000, the Bank filed ARC.No.21 of 2000 under Section 61 of the Act
and as stated above and obtained an order on 11-05-2000 attaching the above
property before judgment u/s.73 of the Act.
10. The agreement holders filed CTA.No.184/2000 before the AP Cooperative Tribunal, Hyderabad (for short, 'the Tribunal') under Section 76 of the Act
challenging the Order dt.11-05-2000 in A.R.C.No.21 of 2000 attaching the above property passed by the Deputy Registrar of Cooperative Societies/O.S.D. of the Bank. 
11. By order dt.16-02-2001, the said appeal was disposed of by the Tribunal
observing that the agreement holders are not parties to A.R.C.No.21 of 2000;
that the agreement holders have not become owners as there is no registered sale
deed passing title to them in respect of the above property; that under Rule 54
(1) of the AP Cooperative Societies Rules, 1964, attachment before judgment can
be made in the manner provided in Rule 52 thereof; that there is no ground to
raise the attachment made by order dt.11-05-2000 under Section 73 of the Act;
but the taking of possession of the property under the guise of the attachment
order dt.11-05-2000 cannot be sustained and therefore only that action of the
Bank is set aside.
 It held that it is open to the agreement holders to file a
claim petition under Rule 54 (2) of the above Rules and establish their bona
fide claim and if such an application is filed, the Deputy Registrar of
Cooperative Societies shall investigate in the matter as per Rule 52 and dispose
it of in 30 days.
12. The agreement holders therefore filed claim petition No.1 of 2001 before the
Arbitrator narrating the above facts and sought raising of the attachment of the
property made by the Deputy Registrar/O.S.D. of the AP Mahesh Cooperative Urban
Bank Limited, Hyderabad on 11-05-2000.
13. The Bank filed a counter opposing the claim petition and contended that the
agreement of sale in favour of the agreement holders did not create any right in
the property in their favour; that it is forged and fabricated and is not
genuine; that the agreement holders had no capacity to pay the amounts allegedly
paid by them; that they could not have paid it without taking registered
documents or at least documents of title; that the borrower had executed an
agreement of sale-cum-Irrevocable GPA dt.06-01-2000 with K.Mallikarjuna Rao, a
close relative of one of the agreement holders by name B.R.S.Chowdary and his
son B.A.Chakravarthi had attested as a witness to the said document; therefore
the agreement holders wish to cheat the Bank also; and the claim petition be
dismissed.
14. The borrower also filed a counter denying the execution of the agreement of
sale dt.28-02-1998 in favour of the agreement holders or receiving any
consideration from them.
 He also denied putting them in possession of the
property and contended that the said agreement of sale is fabricated, concocted
and created for the purpose of the claim petition to overcome the equitable
mortgage.  He contended that Sri B.R.S.Chowdary offered to give him financial
help and obtained his signatures on papers on which probably the agreement of
sale dt.28-02-1998 was created; that the transaction is actually only a loan
transaction and not a sale transaction in respect of the property.
 He admitted
that he received Rs.25.00 lakhs from Sri B.R.S. Chowdary but claimed that he had
repaid Rs.35.00 lakhs and sought the dismissal of the claim petition.
15. By order dt.28-07-2004, the Arbitrator allowed the claim petition No. 1 of
2001 by an elaborate order and revoked the attachment order dt.11-05-2000 in
respect of the above property attaching it before judgment.
16. Aggrieved thereby, the borrower filed CTA No.243 of 2004 and the Bank filed
CTA No.14 of 2008 before the Tribunal under Section 76 of the Act.
17. By order dt.25-04-2008, both the appeals were dismissed.  The Tribunal
directed the Arbitrator to dispose of the Arbitration Case as expeditiously
possible.
18. The Bank filed W.P.No.21151 of 2008 in this Court challenging the order
dt.25-04-2008 dismissing CTA.No.14 of 2008 filed by it.
19. The borrower filed W.P.No.23718 of 2008 in this Court challenging the order
dt.25-04-2008 dismissing CTA.No.243 of 2004 filed by him.
20. It is also to be noted that the agreement holders filed I.A.No.5 of 2006
before the Arbitrator in A.R.C.No.21 of 2000, to implead them as parties to it.
By order dt.24-03-2007, the said I.A. was allowed by the Arbitrator and the
agreement holders were impleaded as respondents in the A.R.C.  The Bank filed
CTA.No.66 of 2007 before the Tribunal challenging the said order.  By order
dt.25-04-2008, the said appeal was dismissed.  The Bank filed W.P.No.13216 of
2009 in this Court challenging the order                     dt.25-04-2008
dismissing CTA.No.66 of 2007.
21. The parties have also stated that the agreement holders have filed O.S.No.9
of 2003 before the II Additional Chief Judge, City Civil Courts, Hyderabad for
specific performance of the agreement of sale dt.28-02-1998 against the borrower
and they have also impleaded the Bank therein and the said suit is pending.
22. Heard Sri Murali Narayan Bung and Sri V.Srinivas, learned counsel for the
Bank, Sri S.V.Ramana, learned counsel for the borrower and Sri
M.R.K.Chakravarthi, advocate representing Sri M.V.Durga Prasad, learned counsel
for the agreement holders in these three writ petitions.
23. The learned counsel for the Bank contended that the Arbitrator erred in
allowing the application for impleadment filed by the agreement holders and in
raising the attachment before judgment dt.11-05-2000 made by the Deputy
Registrar under Section 73 of the Act; that the Tribunal erred in confirming the
same; that the agreement holders are not necessary or proper parties to the
A.R.C.No.21 of 2000 as they are not parties to the loan transaction between the
Bank and the borrower; assuming that they have an agreement of sale in their
favour, they cannot become parties to the proceedings under Section 61 of the
Act as only members of the Bank who have borrowed loan can be a party to such
proceedings.
They also contended that the agreement holders are not entitled to
seek raising of attachment before judgment made by the Deputy Registrar as such
agreement of sale, even if it is true, does not create any right, title or
interest in the property except a charge over it for the part consideration paid
under it; that the truth and validity of the execution of the agreement of sale
is being contested in O.S.No.9 of 2003 and therefore this Court should postpone
the hearing of the writ petitions till the said suit is finally decided; that
even otherwise, the Tribunal and the Arbitrator erred in considering the claim
petition on the merits as if it was a claim petition to raise attachment after
judgment under Rule 52 (21) (a) of the Rules instead of considering it under
Rule 54 read with Section 73, as it is a case of attachment before judgment;
that this is an error apparent on the face of record warranting interference by
this Court with the orders dt.25-04-2008 in C.T.A.No.243 of 2004 and C.T.A.No.14
of 2008 passed by the Tribunal confirming the order dt.28-07-2004 in claim
petition No.1/2001 in A.R.C.No.21 of 2000 passed by the Arbitrator.
24. The learned counsel for the borrower supported the Bank and prayed that the
writ petitions be allowed.
25. Per contra, the learned counsel for the agreement holders contended that the
orders impugned do not suffer from any error in law or fact or of jurisdiction
warranting interference by this Court under Article 226 of the Constitution of
India.  He contended that the impugned orders are based on valid reasons which
cannot be said to be perverse; that the attachment before judgment was rightly
raised by the Arbitrator and confirmed by the Tribunal in view of the fact that
the agreement of sale dt.28-02-1998 in their favour is prior in point of time to
the mortgage dt.30-07-1998 in favour of the Bank and would therefore prevail
over the claim of the Bank under the provisions of Section 48 r/w Section 92 of
the Transfer of Property Act, 1882; that they were rightly impleaded in the
Arbitration case A.R.C.No.21 of 2000 by the Arbitrator; and therefore the writ
petitions be dismissed.
26. I have noted the contentions of the respective parties.
27. Attachment before judgment in proceedings under the Act are governed by
Section 73 of the Act r/w Rule 54 of the Rules framed under the Act.
Section 73
of the Act states as follows :
 "73.   Attachment of property before decision or order : -
If the Registrar is
satisfied on application, report, inquiry or otherwise that any person with
intent to delay or obstruct the enforcement of any decision or order that may be
made against him under the provisions of this Act, --
(a)     is about to dispose of the whole or any part of his property; or
(b)     is about to remove the whole or any part of his property from the
jurisdiction of the Registrar, the arbitrator or liquidator, as the case may be,
he may unless adequate security is furnished direct the attachment of the said
property, and such attachment shall have the same effect as if made by a
competent Civil Court."
Rule 54 states :
"54.    Mode of making attachment before judgment under Section 73 of the Act : -
(1)  Every attachment of property directed under Section 73 of the Act shall be
made in the same manner as provided in Rule 52. 
(2)     Where a claim is preferred to property attached under sub-rule (1), such
claim shall be investigated in the manner and by the authority specified in Rule
52.
(3)     A direction made for the attachment of any property under Section 73, may
be withdrawn by the Registrar of the district -
(a)     when the party concerned furnishes the security required, together with
security for the costs of the attachment; or
(b)     when the liquidator determines under clause (c) of sub-section (1) of
Section 66 of the Act that no contribution is payable by the party concerned; or
(c)     when the Registrar passes an order under sub-section (1) of Section 60 of
the Act that the party concerned need not repay or restore any money or property
or any part thereof with interest or contribute any sum to the assets of the
society by way of compensation; or
(d)     when the dispute referred to in sub-section (1) of Section 61 of the Act
has been decided against the party at whose instance the attachment was made. 
(4)     Any attachment made under sub-rule (1) shall not effect the rights
existing prior to the attachment, of persons not parties to the proceedings in
connection with which the attachment was made, nor bar any person holding a 
decree against the person whose property is attached from applying for the sale
of the property under attachment in execution of such decree.
(5)     Where the property is under attachment by virtue of the provisions of this
rule and a decree is subsequently passed against the person whose property is
attached, it shall not be necessary upon an application for execution of such
decree to apply for reattachment of the property."
28. Rule 52 deals with procedure in execution of decrees, decisions or orders and sub Rule 21 (a) thereof deals with claims preferred/objections made to attachment of property made under sub Rule 11 after decree/decision/order. 
 Rule 52 (21) (a) states:
"(21) (a)       Where any claim is preferred or any objection is made to the
attachment of any property under this rule on the ground that such property is
not liable to such attachment, the officer shall investigate the claim or
objection and dispose it of on the merits."
29. A reading of the above provisions indicates that
claim petitions to raise
attachment before award are governed by Rule 54 and claim petitions to raise
attachments after award are governed by Rule 52 (21) (a) of the Rules.
Although
sub-Rule (2) of Rule 54 states that a claim petition to raise attachment before
award is to be investigated in the manner and by the authority specified in Rule
52, sub Rule (3) of Rule 54 specifies in what circumstances an attachment of
property made before award/judgment under Section 73 may be withdrawn.
Only in
the circumstances mentioned in Clauses (a) to (d) of sub Rule (3) of Rule 54,
attachment made before judgment may be withdrawn.
In view of this, when an
application to raise attachment before judgment is made under Rule 54 by a third
party to an arbitration under Section 61 objecting to such attachment, it cannot
be decided on merits as if it was an attachment after judgment applying sub Rule
(21) (a) of Rule 52.
 In view of sub Rule (2) of Rule 54, only the manner of
investigation into the claim can be done as specified in Rule 52 but the
disposal of the claim to raise attachment before judgment can only be done as
per sub Rule (3) of Rule 54.
30. But a perusal of the order dt.28-07-2004 in claim petition No.1/2001 in
A.R.C.No.21 of 2000 indicates that the Arbitrator, without noticing the
provisions of Rule 54 (3), followed Rule 52 (21) (a) and adjudicated the claim petition on merits instead of considering whether or not the attachment before judgment can be raised as per Clauses (a) to (d) of Rule 54 (3).  
The Arbitrator
appears to have been swayed by the fact that the agreement of sale is prior in point of time to the mortgage in favour of the Bank and so it would prevail over the same.
 In taking such a view, the arbitrator went into the following issues:
 (i) whether the agreement of sale dt.28-02-1998 in favour of the agreement
holders is true and valid,
(ii) whether any consideration was paid to the borrower by them,
 (iii) whether the agreement holders were in lawful possession of the property
and 
(iv) whether the claim petition is maintainable in view of the provisions of the
Transfer of Property Act, 1882.
31. In my opinion, considering the language of Rule 54, 
it was impermissible for
the Arbitrator to have gone into issues (i) to (iii) and 
these issues could only
be decided in O.S.No.9 of 2003 where the claim for specific performance of the agreement of sale dt.28-02-1998 made by the agreement holders against the borrower is being decided.  
It was also not permissible for the
Arbitrator to go into issue (iv) as that issue could have been gone into only if it was a case of attachment after judgment to which Rule 52 (21) (a) applies.
It is not permissible to do so when it is a case of attachment before judgment under Section 73 to which Rule 54 (3) applies.  
Therefore the Arbitrator could
have only considered
whether the claim petitioners/agreement holders have made
out a case for withdrawal of attachment before the judgment under clauses (a) to (d) of sub Rule (3) of Rule 54 and nothing else.  
Therefore I am of the opinion
that the order dt.28-07-2004 in Claim Petition No.1 of 2001 in A.R.C.No.21 of 2000 is clearly unsustainable for the above reasons.
32. When the said order was challenged before the Tribunal in C.T.A.No.243 of
2004 by the borrower and in C.T.A.No.14 of 2008 by the Bank, the Tribunal also
did not consider the scope of enquiry in a claim petition to raise attachment
before judgment governed by Rule 54 (3) and committed the same mistakes
committed by the Arbitrator in the order dt.28-07-2004 challenged before it.
Thus orders                 dt.25-04-2008 in C.T.A.No.243 of 2004 and
C.T.A.No.14 of 2008 are vitiated by error apparent on face of record. So the W.P
No.s 21151/2008 and 23718/2008 are allowed and orders dt.25-04-2008 in
C.T.A.No.243 of 2004 and C.T.A.No.14 of 2008  confirming the order dt.28.7.2004
in Claim petition no.1/2001 in ARC no.21/2000  are set aside.
33. It is made clear that the observations made in the said orders are liable to
be ignored by the Arbitrator while deciding A.R.C.No.21 of 2000 and by the Civil
Court while deciding O.S.No.9 of 2003.
It is also made clear that in the event
the A.R.C.No.21 of 2000 is allowed, the agreement holders are entitled to file a
claim petition under Rule 52 (21) (a) and any findings made in the above orders
shall be ignored while considering such a claim petition, if filed by the
agreement holders.
This is because at present there is only attachment before
judgment under Section 73 of the Act r/w Rule 54 (1) and as per sub Rule (4) of Rule 54, such attachment will not affect the rights existing prior to attachment, of persons not parties to the proceedings in connection with which the attachment was made, nor bar any person holding a decree against the person whose property is attached from applying for sale of the property under attachment in execution of such decree.  
Therefore it is clear that the order
dt.11-05-2000 passed by the Arbitrator in A.R.C.No.21 of 2000 does not affect the rights of the agreement holders who are claiming interest in the property under the alleged agreement of sale dt.28-02-1998. 
In view of
this the arbitrator could not have impleaded the agreement holders vide orders
dt.24.3.2007 in I.A.no.5/2006 in ARC No.21/2000 and the Tribunal in CTA
No.66/2007 erred in confirming it.
Both the arbitrator and the tribunal have not taken note of Rule 54(4) of the above Rules.
Moreover, the agreement holders are
admittedly strangers to the loan transaction between the Bank and the borrower.
So in a proceeding between the borrower and the Bank initiated under S.61 of the Act, such persons are not proper or necessary parties merely because they claim to have an interest in the property mortgaged by the borrower to the Bank. 
Rule 54(4) clearly protects the interest of the agreement holders. 
Thus their orders
are vitiated by error apparent on face of record. 
So W.P.No.13216/2009 is also
allowed and the order dt.25.4.2008 in CTA No.66/2007 of the Tribunal confirming
the order dt.24.3.2007 in I.A.No.5/2006 in ARC No.21/2000 of the arbitrator is
set aside.
34. Accordingly, W.P.No.21151 of 2008, W.P.No.23718 of 2008 and W.P.13216/2009    
are allowed. No costs.
 ___________________________________    
JUSTICE M.S. RAMACHANDRA RAO        

Date : 23-07-2013

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