Motors & Investments Ltd. Vs. The New Bank of India & Ors  INSC
1346 (29 October 1996)
29TH DAY OF OCTOBER, 1996 Present:
Mr. Justice K. Ramaswamy Hon'ble Mr. Justice G.B. Pattanaik A.K. Ganguli, Sr. Adv.
and V. Balachandran, Advs. with him for the appellant A.T.M. Sampath, Parmanand
Gaur, M.A. Chinnaswamy, Advs. for the Respondents.
O R D
following Order of the Court was delivered:
appeal by special leave arises from the judgment and decree of the Division
Bench of the Madras High Court made on October 24,1990 in OSA No.148/82. The first
respondent Bank laid the suit for the recovery of mortgage amount by sale of 44
acres of land out of 80 acres belonging to respondents 2, 3 and 7 in this
appeal. Pending suit, respondents 2 and 3 were adjudged as insolvents in
I.P.No.15/1978. In consequence, their right, title and interest held in the
land stood vested in the official assignee, the 4th respondent in this Court by
order dated July 18,1979 directed the official assignee to
sell their interest in 44 acres of land by public auction. Since no one was
coming forward to purchase the land in the auction, the appellant had offered
Rs.67,500/- and by order of the Court dated July 26,1982, the Court accepted the appellant's offer of Rs.77,500/-.
By proceeding dated August
18,1982, the learned
Single Judge confirmed the sale. Feeling aggrieved, on appeal, the 7th
respondent, in this Court respondent No.9, had offered a sum of Rs. 16,28,000/-
and respondent No.8 had offered a sum of Rs.1,50,000/- which was later raised
to Rs.2,50,000/- respectively. Treating it as offer, the Division Bench
directed the 9th respondent to deposit 10% of the upset price but he did not
deposit the same; the official assignee was also asked to file a report before
the Division Bench on the value of the land prevailing in the neighbourhood
varies between Rs.4,000/- and Rs.5,000/- per acre and the lands in question
would fetch as on December 10, 1990, a sum of Rs.3,35,000/- which was worked
out at the rate of Rs.7.600/- per acre. The High Court has set aside the sale
and directed re-auction of the land, fixing the upset price offered by the 8th
respondent and directed the sale in open auction accordingly.
proceedings in this court, 7th respondent had also offered to deposit a sum of
Rs.20,00,000/- and as per the direction of this Court the order was revoked.
When the appeal was dismissed by a short order, on being mentioned by the
learned counsel for the respondents to hear the matter on merits, order was
passed on July 24,1995 recalling the order dated July 17,1995 and setting out
the matter for disposal. Thus, this appeal by special leave is being heard.
learned senior counsel for the appellant , contended that while the appellant
had offered the consolidated sum of Rs.67,500/- since no one was coming forward
to bid at higher amount, the appellant offered the highest bid of Rs.77,500/-.
The learned single Judge, in view of the fact that the sale was postponed on
more than one occasion, considered it appropriate to confirm the sale.
Division Bench, having noticed that respondent No.9 had failed to deposit 10%
of his offer, was not justified in setting aside the sale and directing resale
of the property.
in this Court, the respondents have not complied with the offer of depositing
the amount within the time and it indicated that the respondents are only
intending to prolong the sale but they were not sincere to bid the highest
price, as offered by the appellant. Shri Sampath, learned counsel for the
respondents, contended that the report of the official assignee is self-evident
that the price of the lands in the neighbourhood varies between Rs.4,000/- and
Rs.15,000/- per acre. Therefore, the price fetched by the sale of 44 acres,
i.e., Rs.77,500/- is too meagre and inadequate. Accordingly, the Division Bench
was right in directing re-auction of the property fixing upset price offered by
the 8th respondent. Though the 7th respondent's conduct is not worthy of
credence, the fact remains that 44 acres of the land were sold for inadequate
this court is not inclined to interfere with the order passed by the Division
regard to the facts and circumstance of the case, the question is: whether the
confirmed action of sale by the learned single Judge is valid in law. It is now
well settled legal position that when the Court was inclined to bring the
property to sale, the endeavour of the Court should be to sustain the Court
sale. Equally though Court sale is compulsive sale, equal endeavour should be
made to fetch adequate price for the property sold so that the decree debt
would get satisfied and surplus, if any, could be paid over to the judgment debtor.
In this case, in the suit for redemption of the mortgage, decree has yet to be
passed. Since respondent Nos.3 and 4 have been declared insolvents, the right,
title and interest had by them in the property stood vested in the official
assignee and the official assignee was directed to put the properties to sale.
Resultantly, the properties have been brought to sale.
says that insolvency order was anulled but the same was disputed by Shri Ganguli.
Be it as it may, it is seen that 44 acres of land situated in Vadakkupattu in Chhangulput
District near about Chennai were brought to sale for a price Rs.77,500/-. It
appears to be highly inadequate and the learned single Judge, therefore, was
not right in confirming the same. The Division Bench has taken note of the
offer made by the 8th respondent at Rs.1,50,000/- which was subsequently raised
to Rs.2,50,000/- and directed to conduct the open auction. The Division Bench
also has taken into consideration the report submitted by the official assignee
that the market value in the neighbourhood lands ranges between Rs.4,000/ and
Rs.15,000/- per acre and the lands in question would be worked out at the rate
of Rs.7,600/- per acre, as in the years 1990. This circumstance would also
indicate that the sale of the land made in 1982 was too inadequate. Therefore,
an attempt should have been made by the learned single Judge to have the
property sold by public auction by inviting either tenders or open auction. The
Division Bench, therefore, was right in its conclusion in setting aside the
may be right in his contention that the appellant having deposited the money,
should be suitably compensated and no direction has been given by the Division
Bench in that behalf. In the event of any subsisting liability against the
estate of the respondents 2 and 3, to discharge any debts, it may be open to
the official assignee to bring such part of the properties which may be
sufficient to discharge the liability, to sale by public auction either by
inviting tenders or through appropriate procedure under Order XXI of the CPC
and then to conduct the sale in accordance therewith. In case the official
assignee has kept Rs.77,500/- in any interest earning secruity, the principal
amount together with interest is directed to be refunded to the appellant. In
case the amount was not kept in any deposit and was used to discharge
outstanding debt due by respondent Nos.2 and 3, the appellant is entitled to
get interest at 18% per annum on the amount deposited by the appellant and the
sale should be so conducted keeping in view the interest liability. From the
amount secured by sale, apart from discharging the liabilities fastened on the
lands, the interest also should be repaid to the appellant from the date of the
deposit till date of repayment to the appellant.
appeal is accordingly disposed of but in the circumstances without costs. It
may be open to the appellant to participate in the auction that may be
conducted by official consignee. In that event, it may be open to the appellant
to withdraw the amount.