Desh Bandhu
Gupta Vs. N.L. Anand & Rajinder Singh [1993] INSC 363 (17 September 1993)
Ramaswamy,
K. Ramaswamy, K. Sahai, R.M. (J)
CITATION:
1994 SCC (1) 131 JT 1993 (5) 313 1993 SCALE (3)791
ACT:
HEAD NOTE:
The
Judgment of the Court was delivered by K.RAMASWAMY, J.- The appellant
judgment-debtor, was a tenant of Smt Shanti Devi, who applied on September 28, 1974 for eviction of him for committing
default in paying the rent. On September 30, 1974, she sold it to the first respondent who got impleaded himself in the
pending proceedings and also independently sought for eviction.
Pending
the proceedings the appellant deposited rent in the name of Shanti Devi which
now is ultimately found to be Rs 13,440. The decree for eviction made against
him was ultimately confirmed by this Court. The suit of the first respondent
for the affairs of rent was decreed for a sum of Rs 6,419.98. Pending eviction
proceedings, in the Writ Petition No. 830 of 1978 of the appellant, the High
Court of Delhi directed on September 6, 1979, after hearing both the parties,
138 and without prejudice to the contentions of the respondent, that the amount
deposited by him may be credited to the account of the respondent. The first
respondent filed E.P. No. 1974 of 1978 in the court of the Addl. Sub-Judge, Ist
Class for sale of the appellant's plot of land bearing plot No. 31/35, Punjabi Bagh,
New Delhi, a commercial area of an extent of
550 square yards to recover Rs 7780.33 which includes costs. On November 4,
1978 warrant of its attachment was issued under Order 21 Rule 54 in Form 24 of
Appendix 'E' of the Schedule to CPC. On becoming aware of that the appellant
filed an objection petition contending that since he had already deposited in
the Rent Control case Rs 13,440, more than the decretal amount, in the Rent Control Court, the decree stands satisfied and
became inexecutable. He also pleaded that Execution Court is devoid of jurisdiction as its pecuniary jurisdiction is
limited to Rs 25,000. Arguments were heard thereon.
Ultimately
on April 20, 1979 the Court passed the order thus:
"Order
dictated on this date. The decree- holder has moved an application under Order
21 Rule 66, CPC for warrant of proclamation of sale by public auction of the
property of JD- I. Accordingly allow the application of the decree-holder for
sale of the property of the J.D. as per the following programmes:
Court
door 3 May, 1979 Spot 17 May, 1979 Auction 6 July, 1979
Report 13 July, 1979." (original records were called for and this was the
only order found from the record)
2.
Admittedly the appellant was neither given notice nor was he present, nor aware
of passing of that order. On May 2, 1979
sale warrant under Order 21 Rule 66, CPC was issued.
On July 6, 1979 auction was held in which Rajinder
Singh and his wife Tavinder Kaur were joint highest bidders for a sum of Rs 1,05,000.
On becoming aware of the sale on August 10, 1979 the appellant immediately filed a petition under Order 21
Rule 90 CPC raising objection to the validity of the sale. On inspection of the
record he later on filed an application, which was allowed on payment of costs,
to impugn the sale under Sections 47 and 15 1, CPC. He pleaded that the sale
was collusive and fraudulent. The value of the site was Rs 3,50,000. It was
sold for inadequate price.
He was
not served with any notice either under Order 21 Rule 54 or under Order 21 Rule
66. There is no sale proclamation. No notice was issued before settling the
terms of the proclamation of sale. The sale proclamation neither specified the
place or time at which the sale was to be conducted, nor was it published in
the locality. He reiterated his plea of his prior deposit of more than the E.P.
amount, and the Execution
Court's lack of
pecuniary jurisdiction and that absence of wide publicity led to fetching of
less price. The so-called bidders were not genuine persons nor had the capacity
to purchase the property. Only the second respondent and his brother were the
participants and the bid was, therefore, a collusive one. The 139 Execution Court held that due procedure was
followed in bringing the property to sale. In view of Order 21 Rule 90(3) the
objections raised to the validity of the sale cannot be gone into. The price
fetched was an adequate one.
The
attachment order was served by affixing it on the site and there was no
collusion. Accordingly the application was rejected and the sale confirmed. The
appellate court, without going into all the contentions, considered the scope
of Order 21 Rule 90(3) and held that by its operation pre- sale illegalities or
irregularities do not vitiate the sale and dismissed the appeal. The High Court
dismissed the revision in limine. Thus this appeal by special leave.
3. Mr
Gupta, the appellant, an Advocate argued in person.
The
first respondent, the decree-holder, is also an Advocate, but appeared through Mr
Gujral, learned senior counsel. The auction-purchaser was represented by Mr K. Madhava
Reddy, the learned senior counsel. The contention of Mr Gupta that the
Execution Court having been conferred with pecuniary jurisdiction up to Rs
25,000, had no jurisdiction to execute the decree against the property whose
value is Rs 3,50,000, is devoid of substance. Under Order 21 Rule 10 of CPC an
application for execution should be made to the court "which passed the
decree". Therefore, the value of the property sold at the execution is
more than Rs 25,000 does not take away the jurisdiction of the trial court. In Banwar
Lal v. Prem Latal this Court held that the value of the property sold in
execution is not relevant to determine the jurisdiction of the execution court.
Admittedly
the decree in execution for Rs 7780.33 is within the jurisdiction of the trial
court, which passed the decree. Equally the contention of Shri Madhava Reddy
that the mode of payment of money decree envisaged under Order 21 Rule 1 (1)
must be by deposit of the decree amount into the court is equally devoid of
force. Undoubtedly, literal reading of Order 21 Rule 1(1) provides that the
mode of paying decretal money is either by depositing in the Executing Court or
sending to the court by postal order or through bank draft or out of court to
the decree-holder by postal order or bank draft or any other mode where the
payment is evidenced in writing or as the court which made the decree otherwise
directs. The other sub-rules are not relevant for the purpose of this case. By
amending the rule in 1976 a right has been given to the judgment-debtor to pay
the decree debt either by depositing into the Executing Court or to send it by
other modes of payment with intimation to the decree-holder in latter cases so
that the liability to pay interest ceases from that date. It is an enabling
provision for the benefit of judgment-debtor.
Though
by literal construction the appellant should deposit the decretal amount into
the Executing Court for claiming the benefit of the discharge but anterior to
it, in the Rent Controller proceedings, the decree-holder had knowledge of
undoubted deposit of the amount made by the appellant. The liberty of
"without prejudice" given to the respondent by the High Court in the
writ petition was for the purpose of his defence, that the deposit in Shanti Devi's
name was not payment to him, after knowledge of his purchase, for the purpose
of default. But the parties being Advocates 1 (1990) 1 SCC 353 : AIR 1990 SC
623 140 adopted legalistic stands. The substance is that even before execution
was laid the amount was available towards satisfaction of the decree. The court
should have directed its attachment and payment made or directed the appellant
to withdraw that amount and deposit into the court, instead of launching the
tardy process of execution by sale of immovable property. When the factum of
deposit was disputed, this Court called for a report and the Addl.
Dist.
Judge, had in his report, stated that the appellant deposited about Rs 13,000
and odd and it was lying in credit in the Rent Controller proceedings. The
further contention that there were other liabilities which the appellant had
not discharged, bears no foundation. Even otherwise there was no order of
attachment of that amount by any court. The finding of the appellate court that
the deposit was not to the credit of the suit is also not legal. In our
considered view neither the stand of the first respondent nor the reasoning of
the courts below are tenable. When the arrears of rent for which the decree was
made was already in deposit to the knowledge of Anand in his eviction case and
when the appellant objected to the execution, the Executing Court either should
have directed the appellant to withdraw the money and credit the same to the
suit account before its attachment was made or it should have passed an order
under Order 21 Rule 23(2) which postulates thus: "Where such person offers
any objection to the execution of the decree, the court shall consider such
objection and make such order as it thinks fit". It is, therefore, the
mandatory duty of the Executing Court to consider such objection and to make an
order in that behalf. No such order has been made. It is true that in the
contempt application filed by the appellant against the first respondent, an
order was passed rejecting the appellant's contention that he had already
deposited the decretal amount. Objection should independently be considered
under Order 21 Rule 23. The order in the contempt petition is not a substitute
to an order under Order 21 Rule 23(2), CPC. The objections, therefore, are
still open to the appellant for being raised impugning the validity of the
sale. The procedure is the handmaid to justice. The substance of the matter, in
the given circumstances is that the deposit made in the eviction case be
considered to be one made under Order 21 Rule 1 (1)(a) into the suit out of
which the execution arose.
4. The
further contention of Shri Madhava Reddy that the appellant should have filed
an appeal against an action of the Execution Court in not considering the objections is also devoid of
substance. Had the court considered the objections and passed an order under
Order 21 Rule 23(2), it would be incumbent upon the appellant to carry the
order in an appeal. The omission to consider the objections is not appealable.
Had an order been made on the objections and was allowed to become final,
perhaps Order 21 Rule 90(3) would operate against the objector. So the
objection would still be open to the appellant to reiterate in his petition
after the sale under Section 47 or Order 21 Rule 90.
5. The
further contention of Shri Madhava Reddy that the objection petition and the
appeal are not maintainable as the wife of Rajinder Singh, joint purchaser was
not impleaded eo nomine as respondent, too is devoid of 141 force. The
application to set aside the execution sale is primarily against the
decree-holder since he is a person at whose instance and benefit the execution
proceedings were initiated and the sale was held to discharge his decree debt.
Therefore, primarily he is the person entitled to be heard and since he is
in-charge of publishing the notices and to conduct the sale, it is he that lays
before the court the steps taken or the procedure followed in service of notice
or conducting the sale and to establish that they have been done properly,
regularly and in accordance with the law. The auction-purchaser gets a right
only on confirmation of sale and till then his right is nebulous and has only
right to consideration for confirmation of sale.
If the
sale is set aside, apart from the auction-purchaser, the decree-holder is
affected since the realisation of his decree debt is put off and he would be
obligated to initiate execution proceedings afresh to recover the decree debt.
Therefore,
in the proceedings under Section 47 or Order 21 Rule 90, the decree-holder is
the affected necessary party.
Though
the auction-purchasers need to be impleaded eo nomine as respondent as the
property was purchased jointly at the court sale, it is enough that one among
them had been impleaded as a party. It is not necessary to implead all the
joint purchasers.
6. The
contention of Mr Gupta that as Form 29 of Appendix 'E' prescribes that when an
auction-purchaser participated in the bid on behalf of a third party, he should
file his power or authority to bid at the auction on behalf of the third party,
and in its absence the sale itself is a nullity, is devoid of substance. The rigour
of the need to obtain power or authority arises only when he acts as an agent
but not when he had, per himself and other's behalf, participated in the bid.
Prudence requires that the sale officer should satisfy himself whether the
participant is a real or proxy bidder. It should exclude the proxy unless he
places before him the authority that in the event of the sale being knocked
down, he would be bound by the sale and terms thereof. The second respondent
admittedly participated and purchased the property not only on his behalf but
also on behalf of his wife. Therefore, the need to obtain such power from his
wife to bid on her behalf also is obviated.
7. Mr
Gupta contended *that under Order 21 Rule 54 the appellant had not been served
with the order of attachment.
Either
the appellant or the inmates of his house were always available at his
residence. It was said to have been affixed at the site and his enquiries
revealed that no such affixation at the site was made. It is an admitted
position that no personal service on the appellant was effected but nonetheless
evidence discloses that it was affixed at the site. The purpose of attachment
under Rule 54 is to make the judgment-debtor aware that attachment has been
effected and that he should not make any transfer or encumber the property
thereafter. It is in the interest of the decree- holder to have the notice of
attachment served personally on the judgment-debtor. Nevertheless the sale is
not void, though the omission to serve the copy of the order of attachment is
an irregularity. Since no encumbrance thereafter was created on the attached
property, non- 142 service of the copy of the order of attachment on the
judgment-debtor does not render the sale invalid.
8. It
is further contended that the property was not fully described except for
mentioning the plot number and the extent which is not consistent with the Form
No. 24 of Appendix 'E' which postulates that the property should be fully
described. It is seen that in the execution petition a plan with full
description was attached. The evidence is not clear whether the plan was
attached to the order of attachment or a copy thereof was attached to it. It
was for the benefit of the intending purchasers to inspect the property before
deciding to participate in the auction.
Nevertheless
so long as the property is identifiable, the omission of full description of
the plot also is only an irregularity. In any event the bidders were not
misled.
9.
However, there is considerable force in the contention of the appellant that
the procedure prescribed under Order 21 Rule 66 was flagrantly violated by the Executing Court.
We
have already noted the order of the court, to conduct the sale. For judging its
legality and validity, it would be desirable to have a bird's eye view of the
procedure for sale of immovable property in execution. On an application for
execution filed under Order 21 Rule 5 the court shall ascertain the compliance
of the prerequisites contemplated under Rule 17 and on finding the application
in order, it should be admitted and so to make an order, thereon to issue
notice under Rule 22, subject to the conditions specified therein. If a notice
was served on the judgment-debtor as enjoined under Order 5 but he did not
appear or had not shown cause to the satisfaction of the court, under Rule 23
the court "shall order the decree to be executed". If an objection is
raised to the execution of the decree, by operation of sub-rule (2) thereof,
"the court shall consider such objections and make such order as it thinks
fit".
Thereafter
in the case of a decree for execution against immovable property an attachment
under Rule 54 should be made by an order prohibiting the judgment-debtor from
transferring or creating encumbrances on the property.
Under Rule
64 the court may order sale of the said property.
Under
Rule 66(2) proclamation of sale by public auction shall be drawn up in the
language of the court and it should be done after notice to the decree-holder
and the judgment- debtor and should state "the time and place of
sale" and "specify as fairly and accurately as possible" the
details specified in clauses (a) to (d) of sub-rule (2) thereof.
The
Civil Rules of Practice in Part L in the Chapter 12 framed by the High Court of
Delhi 'Sale of Property and Delivery to the Purchaser' Rule 2 provides that
whenever a court makes an order for the sale of any attached property under
Order 21, Rule 64, it shall fix a convenient date not being distant more than
15 days, for ascertaining the particulars specified in Order 21 Rule 66(2) and
settling the proclamation of sale. Notice of the date so fixed shall be given
to the parties or their pleaders. In Rule 4 captioned 'Settlement of
Proclamation of Sale, Estimate of Value' it is stated that on the day so fixed,
the court shall, after perusing the documents, if any, and the report referred
to in the preceding paragraph, after examining the decree-holder and
judgment-debtor, if present, and after making such further enquiry as it may
consider 143 necessary, settle the proclamation of sale specifying as clearly
and accurately as possible the matters required by Order 21 Rule 66(2) of the
Code. The specifications have been enumerated in the rule itself. The
proclamation for sale is an important part of the proceedings and the details
should be ascertained and noted with care. This will remove the basis for many
a belated objections to the sale at a later date. It is not necessary to give
at proclamation of sale the estimate of the value of the property. The proclamation
when settled shall be signed by the Judge and got published in the manner
prescribed by Rule 67. The court should authorise its officers to conduct the
sale.
Under
Rule 68 the sale should be conducted at "the place and time"
specified or the time may be modified with the consent in writing of the
judgment-debtor. The proclamation should include the estimate, if any, given by
either judgment- debtor or decree-holder or both the parties. Service of notice
on judgment-debtor under Order 21 Rule 66(2), unless waived by appearance or
remained ex parte, is a fundamental step in the procedure of the court in
execution. Judgment- debtor should have an opportunity to give his estimate of
the property. The estimate of the value of the property is a material fact to
enable the purchaser to know its value.
It
must be verified as accurately and fairly as possible so that the intending
bidders are not misled or to prevent them from offering inadequate price or to
enable them to make a decision in offering adequate price. In Gajadhar Prasad
v. Babu Bhakta Ratan 2 this Court, after noticing the conflict of judicial
opinion among the High Courts, held that a review of the authorities as well as
the amendments to Rule 66(2)(e) make it abundantly clear that the court, when
stating the estimated value of the property to be sold, must not accept merely
the ipse dixit of one side. It is certainly not necessary for it to state its
own estimate.
If
this was required, it may, to be fair, necessitate insertion of something like a
summary of a judicially considered order, giving its grounds, in the sale
proclamation, which may confuse bidders. It may also be quite misleading if the
court's estimate is erroneous.
Moreover,
Rule 66(2)(e) requires the court to state only nature of the property so that
the purchaser should be left to judge the value for himself. But, the essential
facts which have a bearing on the very material question of value of the
property and which could assist the purchaser in forming his own opinion must
be stated, i.e. the value of the property, that is, after all, the whole object
of Order 21, Rule 66(2)(e), CPC. The court has only to decide what are all
these material particulars in each case. We,, think that this is an obligation
imposed by Rule 66(2)(e). In discharging it, the court should normally state
the valuation given by both the decree-holder as well as the judgment-debtor
where they both have valued the property, and it does not appear fantastic. It
may usefully state other material facts, such as the area of land, nature of
rights in it, municipal assessment, actual rents realised, which could
reasonably and usefully be stated succinctly in a sale proclamation has to be
determined on the facts of each particular case. Inflexible rules are not 2
(1973) 2 SCC 629 : (1974) 1 SCR 372 144 desirable on such a question. It could
also be angulated from another perspective. Sub-rule (1) of Rule 66 enjoins the
court that the details enumerated in sub-rule (2) shall be specified as fairly
and accurately as possible. The duty to comply with it arises only after
service of the notice on the judgment-debtor unless he voluntarily appears and
is given opportunity in the settlement of the value of the property. The
absence of notice causes irremediable injury to the judgment-debtor. Equally
publication of the proclamation of sale under Rule 67 and specifying the date
and place of sale of the property under Rule 66(2) are intended that the
prospective bidders would know the value so as to make up their mind to offer the
price and to attend at sale of the property and to secure competitive bidders
and fair price to the property sold. Absence of notice to the judgment-debtor
disables him to offer his estimate of the value who better knows its value and
to publicise on his part, canvassing and bringing the intending bidders at the
time of sale. Absence of notice prevents him to do the above and also disables
him to know fraud committed in the publication and conduct of sale or other
material irregularities in the conduct of sale. It would be broached from yet
another angle. The compulsory sale of immovable property under Order 21 divests
right, title and interest of the judgment-debtor and confers those rights, in favour
of the purchaser. It thereby deals with the rights and disabilities either of
the judgment-debtor or the decree- holder. A sale made, therefore, without
notice to the judgment-debtor is a nullity since it divests the judgment-
debtor of his right, title and interest in his property without an opportunity.
The jurisdiction to sell the property would arise in a court only where the
owner is given notice of the execution for attachment and sale of his property.
It is very salutary that a person's property cannot be sold without his being
told that it is being so sold and given an opportunity to offer his estimate as
he is the person who intimately knew the value of his property and prevailing
in the locality, exaggeration may at time be possible. In Rajagopala Ayyar v. Ramachandra
Ayyaar3 the Full Bench held that a sale without notice under Order 21 Rule 22
is a nullity and is void and that it has not got to be set aside. If an
application to set aside such a void sale is made it would fall under Section
47.
10.
Above discussion indicates a discernible rule that service of notice on the
judgment-debtor is a fundamental part of the procedure touching upon the
jurisdiction of the Execution
Court to take further
steps to sell his immovable property. Therefore, notice under Order 21 Rule
66(2), unless proviso is applied (if not already issued under Order 21 Rule
22), and service is mandatory. It is made manifest by Order 21 Rule 54(1-A)
brought on statute by 1976 Amendment Act with peremptory language that before
settling the terms of the proclamation the judgment-debtor shall be served with
a notice before settling the terms of the proclamation of sale. The omission
thereof renders the further action and the sale in pursuance thereof 3 AIR 1924
Mad 431 : ILR 47 Mad 288 :46 MLJ 104 145 void unless the judgment-debtor appears
without notice and thereby waives the service of notice.
11. In
the case before us, the Execution
Court had completely
overlooked compliance of the mandatory procedure, accepted ipse dixit of the
decree-holder even without calling Amin's report. The decree-holder in a
complaint given to the Income Tax Department got the site valued with an
approved valuer at Rs 3,33,333 but he valued in the E.P. at Rs 1,00,000. The
Court accepted it without indicating grounds for this preference and had given
a programme of sale. It did not bother even to consider the objections of the
judgment-debtor raised at the earliest of the need to proceed with the
execution when sufficient amount to meet the decree debt was already in
deposit. It is a case of non-application of judicial mind and abdication of
judicial duty. Though the insertion of an order judicially passed need not be
made in the sale proclamation but the record should indicate that a judicial
order has been passed showing that it had applied its mind to the need for
determining all the essential particulars, which would reasonably be looked for
by an intending purchaser. The relevant and material particulars should be
inserted in the sale proclamation as accurately and precisely as possible.
The
order should show that it considered the objections, if any, of the
decree-holders or the judgment-debtors, as the case may be. It should not
merely accept unhesitatingly the ipse dixit of one or either side or both.
12.
The contentions of S/Shri Madhava Reddy and Gujral that the appellant had not
given his valuation and that, therefore, it is not open to him to raise the
objections after the sale is unacceptable. Since the court had not given any
notice to the appellant which is mandatory, the need to submit his valuation
did not arise. Order 21 Rule 54, sub-rule (1-A) brought in by 1976 Amendment
Act mandates that the court should require the judgment-debtor to attend the
court on a specified date to take notice of the date to be fixed for settling
the terms of the proclamation of sale.
Form
24 of Appendix 'E' second para and the Court Rules also envisage the mandate.
It is a reminder to the court that it has a statutory duty to issue notice to
the judgment-debtor before settlement of the terms of proclamation of sale.
Then
only the proviso to Rule 66(2) comes into play dispensing with multiplicity of
notices and not dispensation of mandatory compliance of notice to the
judgment-debtor.
Had it
been a case where notice was served and the appellant lay by, without objecting
to the valuation given by the decree-holder, certainly that would be put
against the appellant to impugn the irregularities after the sale or the
under-valuation settled by the court in the proclamation of sale. The further
contentions of both the counsel that merely because there is no order under
Order 21 Rule 66(2), it cannot be construed that the Execution Court had not
applied its mind in settling the terms of the proclamation of sale, is one of
desperation. Except giving a schedule of dates for conducting the sale the
Execution Court totally abdicated its duty to scrupulously comply with the
mandatory procedure and did not apply its mind to the mandatory duty cast on it
by Order 21 Rule 66 to settle the terms of proclamation of sale, and proper publication
under Rule 67.
After
April 20, 1979, the court had merely 146 ensured its publication on the court
notice board and on the site at the respective dates and no further. This Court
in Shalimar Cinema v. Bhasin Film Corpn.4 held that the court has a duty to see
that the requirements of Order 21 Rule 66 are properly complied with. It is
incumbent on the court to be scrupulous in the extreme. No action of the court
or its officer should be such as to give rise to the criticism that it was done
in a casual way. Therefore, a proclamation of sale drawn casualty without
compliance of the mandatory requirement and a sale held in furtherance thereof
is not a sale in the eye of law. We are of the considered view that the
procedure adopted by the court in non-compliance of Order 21 Rules 66 and 67 is
in flagrant breach of the mandatory provision. It is a nullity ab initio.
13.
Yet another contention of Mr Gupta is that the sale of the plot of 550 sq.
yards is in excess of the execution and the order to sell it is the result of
non-application of mind touching the jurisdiction of the court rendering the
sale void or manifestly illegal. Therefore, the need to invoke Order 21 Rule 90
does not arise and it can be set aside under Section 47 CPC.
14.
Proviso to sub-rule (4) of Rule 17 of Order 21 provides the procedure to
receive the application for execution of the decree. In the case of a decree
for payment of money, the value of the property attached shall, as nearly as
may be, correspond with the amount due under the decree. Rule 64 of Order 21
charges the Executing Court that it may order attaching of any property to the
extent that "such portion thereof as may seem necessary to satisfy the
decree would be sold". It is also enjoined under sub-rule (2)(a) of Rule 66
of Order 21 that where a part of the property would be sufficient to satisfy
the decree the same be sold by public auction. Form 27 of Appendix of the
schedule also directs the court auctioneer to sell so much of the said property
as shall realise the sum in the said decree and costs. The Code, therefore, has
taken special care charging the duty on the Executing Court and it has a
salutary duty and a legislative mandate to apply its mind before settling the
terms of proclamation and satisfy that if part of such property as seems
necessary to satisfy the decree should be sold if the sale proceeds or portion
thereof is sufficient for payment to the decree-holder or the person entitled
under the decree to receive the amount and so much of that property alone should
be ordered to be sold in execution.
In Ambati
Narasayya v. M. Subba Rao' this Court held that it is the duty cast upon the
court under Order 21 Rule 64 to sell only such property or a portion thereof as
may be necessary to satisfy the decree. It is a mandate of the legislature
which cannot be ignored. Therein for execution of a decree of a sum of Rs 2,000
and costs, the appellant's 10 acres land was brought to sale which was
purchased for a sum of Rs 17,000, subject to discharge of a prior mortgage of Rs
2,000. This Court held that without the court's examining whether a portion of
the property could be sold, the sale held was not in conformity with the
requirement of Order 21 Rule 64 and it was held to be illegal and 4 (1987) 4
SCC 717 : AIR 1987 SC 2081 5 1989 Supp (2) SCC 693 : AIR 1990 SC 119 147
without jurisdiction. The sale was set aside and the court was directed to put
the judgment-debtor in possession of the land and to refund the sale amount to
the auction-purchaser.
Further
direction was given to execute the decree in accordance with law. In Mangal
Prasad v. Krishna Kumar Maheshwari6 a shop was sold to realise a decree debt of
about Rs 29,000 and the sale price at the auction was Rs one lakh and odd. This
Court finding that it is excessive execution, set aside the sale and directed
return of the sale amount to the auction-purchaser with interest @ 12%.
In Takaseela
Pedda Subba Reddy v. Pujari Padmavathamma7 to recover the decree debt in two
decrees, the properties situated in two different villages were brought to
sale. In the first instance the property in 'D' village fetched a sum of Rs
16,880, which was sufficient to satisfy the decretal amount. The property in
'G' village was also sold which fetched a sum of Rs 12,000. This Court set aside
the sale of 'G' village. Admittedly the site in sale is to the extent of 550
sq. yards, situated in a commercial area around which the petroleum
installations are established.
Though,
as contended by Shri Madhava Reddy, that there may be building regulation for
division of the property into portions, but the court made no attempt to sell a
portion of the property, maybe 100 yards or 150 yards out of it, or whether
undivided portion thereof would have satisfied the decree debt. It could be
legitimately concluded that the court did not apply its mind at all to this
aspect as well.
15.To
get over the difficulty, Shri Madhava Reddy has fallen back on Order 21 Rule
90(3) of the Code, which provides that "no application to set aside a sale
under this rule shall be entertained upon any ground which the applicant could
have taken on or before the date of which the proclamation of sale was drawn
up". Undoubtedly, this special rule was brought on statute by 1976
Amendment Act. It is like a "caveat emptor" that the judgment debtor
be vigilant and watchful to vindicate pre-sale illegalities or material
irregularities. He should not stand by to procrastinate the execution
proceedings. If he so does, Rule 90(3) forewarns him that he pays penalty for
obduracy and contumacy.
Equally
it is a reminder that the court should be strict to comply with the procedural
part under Rule 54(1-A) before depriving the judgment-debtor of the remedy
under Order 21 Rule 90 CPC. If he had notice from court and acquiesced by
taking no action before the date of sale, he would be precluded to assail its
legality or correctness thereafter.
It is
seen that the appellant had not been served with or given notice at the time of
drawing up the proclamation of sale and as a fact no proclamation of sale was
drawn up by the Executing
Court except
accepting the ipse dixit of the decree-holder. The procedure adopted by the Executing Court bristles with several
irregularities touching the jurisdiction of the court. They are not only
material irregularities causing substantial injustice but are in violation of
the mandatory requirements of the rules. In Kayjay 6 1992 Supp (3) SCC 31 : AIR
1992 SC 1857 7 (1977) 3 SCC 337 : (1977) 3 SCR 692 148 Industries (P) Ltd. v. Asnew
Drums (P) Ltd.' the sale proclamation was settled after notice to the parties
and after several adjournments. The respondent adopted dilatory tactics to
obstruct the sale. Therefore, the valuation in the report submitted in that
behalf was accepted and the properties were sold. This Court held that if there
was any material irregularities in the conduct of sale and if it causes
sufficient injury to the judgment-debtor the same could be set aside where the
court mechanically conducts the sale not bothering to see that the offer is too
low and the better price could have been obtained. If, in fact, the price is
substantially inadequate there is both material irregularity and injury. At the
same time the court should not go on adjourning the sale till a good price is
got as otherwise the decree-holder would never get the property of the judgment
debtor sold. This Court further held that there is always considerable
difference between the court sale price and the market price. The court sale is
a forced sale and notwithstanding the competitive element of a public auction,
the best price is not always forthcoming. The valuer's report though good as a
basis, is not as good as an actual offer and there are bound to be variations
within limits between such an estimate, however careful, and the real bids by
the seasoned businessman. Mere inadequacy of price cannot demolish a court
sale. Further, if the court sales are too frequently adjourned with a view to
obtaining a still higher price, prospective bidders will lose faith in the
actual sale taking place and may not attend the auction.
What
is expected of the court is to make a realistic appraisal of the factors in a
pragmatic way and if satisfied that in the given circumstances the bid is
acceptable it should conclude the sale. The court may consider the fair value
of the property, the general economic trend, the large sum required to be
produced by the bidder, the formation of a syndicate, the futility of
postponements and the possibility of litigation and several other factors
depending on facts of each case. If the court has fairly applied its mind to
the relevant considerations while accepting the final bid, it is not necessary
to give a speaking order nor can its order be examined meticulously.
In
that case the judgment-debtor himself was adopting dilatory tactics and the
property was sold after considerable delay and postponements. The sale was
upheld.
16. In
Janak Rai v. Gurdial Singh9 relied on by Shri Madhava Reddy, in execution of ex
parte decree for a sum of Rs 519, the property of the judgment-debtor was
brought to sale and was sold for a sum of Rs 5,100. Thereafter the
judgment-debtor made an application to set aside the ex parte decree. An
objection was raised to the sale on the ground that the value of the house was Rs
25,000 and it was auctioned for a sum of Rs 5000. The ex parte decree was set
aside. On application made by the auction-purchaser, the sale was confirmed. It
was contended that since the ex parte decree was set aside the confirmation of
sale need to be set aside, which was negatived by 8 (1974) 2 SCC 213 : (1974) 3
SCR 678 9 (1967) 2 SCR 77 : AIR 1967 SC 608 149 all the courts. In that
background it was held that confirmation of the sale was not illegal and the
inadequacy of the price was not a ground to set aside the sale. The ratio
therein has to be considered in the light of its own scenario. The facts in
this case are entirely different.
The
case of Chinnammal v. P. Arumugham10 also does not help the auction-purchaser.
Therein it was found that pending appeal the money decree was executed and the
properties were brought to sale. The High Court allowed the appeal and set
aside the decree. Thereafter the Executing Court was moved to set aside the sale on diverse grounds
including the plea of inadequacy of price. The learned Single Judge set aside
the sale, but the Division Bench reversed the decision. On appeal, this Court
held that the auction-purchaser was not a bona fide purchaser. The auction-sale
in his favour was set aside and the restitution ordered. The court cannot lend
assistance to a person to retain the property of the judgment-debtor who has
since got rid of the decree. In that context it was held that the stranger
auction purchaser who is not a party to the decree is protected against the
vicissitudes or fortunes of the litigation and remains unaffected and does not
lose title to the property by subsequent reversal or modification of the
decree. The rights of bona fide purchaser who purchased the property in
ignorance of the litigation should be protected. The ratio in that case would
indicate that the purchaser must be a bona fide purchaser for adequate price
without knowledge of the pending litigation. If it is otherwise, it is liable
to be set aside. In that context it was held that the true question is whether the
stranger auction purchaser had knowledge of the pending litigation about the
decree under execution. If it is shown by evidence that he was aware of the
pending appeal against the decree, when he purchased the property, the court
cannot assume that he was a bona fide purchaser for giving him protection
against restitution.
His
knowledge about the pending litigation would make all the difference in the
case. Though he may be stranger to the suit, but he must be held to have taken
a calculated risk in purchasing the property. Far from helping the
auction-purchaser this goes against him. Mr Gupta contended that Rajinder Singh
is not a bona fide purchaser. His brother is the adjacent owner of the site in
question. The second respondent and his brother only made the bids and
participated in the sale. Rest of the people had no capacity to purchase the
property. The sale, therefore, is only a fraudulent and collusive one. Though
we find some substance in what Mr Gupta contends, we need not to go into that
question on the facts of this case. Suffice to state that all is not well. It
is true that there is a distinction between irregularity and material
irregularity in conducting the sale and it must be established that by reasons
of illegalities or irregularities in conducting the sale, the judgment-debtor
has sustained substantial injury.
In Dhirendra
Nath Gorai v. Sudhir Chandra Ghosh11 this Court held that non-compliance of
Section 35 of the Bengal Money Lenders Act does not render the sale void. It is
only an irregularity. The judgment- 10 (1990) 1 SCC 513 11 (1964) 6 SCR 1001 :
AIR 1964 SC 1300 150 debtor having had the knowledge did not file any
objection.
He did
not attend the court for drawing up of the proclamation of the sale. On those
circumstances the sale was held not liable to be set aside.
17.
Under Section 47 all questions relating to execution, discharge or satisfaction
of the decree should be determined by the Executing Court alone. The pre-sale illegalities committed in the execution
are amenable to the remedy under Section 47. Post-sale illegalities or
irregularities causing substantial injury to the judgment-debtor are covered
under Order 21 Rule 90. Sub-rule (1) thereof covers the field of material
irregularities or fraud in publicity or conducting the sale. Sub-rule (2)
enjoins proof thereof and the court should find that by reason thereof the
applicant sustained substantial injury. The total absence of drawing up of the
proclamation of sale and settlement of its term by judicial application of mind
renders the sale a nullity being void. It is covered by Section 47. The non-
application of mind whether sale of a part of the property would satisfy the
decree debt is a material irregularity doing substantial injury to the
appellant attracting Order 21 Rule 90. In either case the sale is liable to be
set aside. It is true that there is distinction between mere irregularity and
material irregularities and the sale is not liable to be set aside on proof of
mere irregularity. It must be material irregularity and the court must be
satisfied that on account thereof substantial injury was sustained by the
appellant. The sale of 550 sq. yards for recovery of a paltry sum of Rs
7,780.33, without selling a portion thereof, caused substantial injury to the
appellant.
18.
The sale is set aside. The confirmation of sale is also set aside. The
appellant is directed to withdraw the sum of Rs 7,780.33 paise within six weeks
from today from the court of the Rent Controller and deposit it towards decree
amount. The Rent Controller should order payment.
The
Subordinate Judge on deposit, should thereon record full satisfaction and pay
over the same to the first respondent.
The
appellant is free to withdraw the balance amount from the court of the Rent
Controller. The auction-purchaser Rajinder Singh is free to withdraw his Rs 1,05,000
and interest accrued thereon from the bank deposit as ordered by the court. The
Registry should take such steps as are necessary to enable him to withdraw the
said amount. The appeal is allowed, but with no costs, as the appellant argued
in person.
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