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Report No. 54

Order 21, rule 66

21.34. A point concerning Order 21, rule 66, which was discussed in the earlier Report1 requires consideration. A recommendation had been made in the 14th Report' to the effect that to avoid the difficulties caused by mistakes in the estimated value of the property as stated in the proclamation of sale, rule 66 should be amended on the-lines- of the Patna Amendment, so as to provide (in effect) that the court should state merely the estimated value of the property, if any, as given by the parties, and insert a statement that it does not vouch for the accuracy of either. It was considered by the Commission in the Report on the Code that it would be sufficient to adopt a simpler amendment, namely, that the proclamation should merely contain a statement that the estimated value is stated.

1. 27th Report, note on Order 21, rule 66 and draft rule.

2. 14the Report, Vol. I.

Recommendation

21.35. We agree with the view taken in the earlier Report on the Code, but we would suggest a small drafting change in the draft amendment suggested in that Report. Accordingly, we recommend that the following proviso should be added below Order 21, rule 66(2)(e)-

"Provided further that nothing in this rule shall be construed as requiring the court to enter in the proclamation its own estimate of the value of the property, but the proclamation shall include the estimates, if any, given by either or both of the parties1".

1. The first proviso to be added as recommended in the 27th Report will stand.

Order 21, rule 72

21.36. With reference to Order 21, rule 72, a point was considered in the earlier Report1. A recommendation had been made in the Fourteenth Report2 to the effect, that a decree-holder should be allowed to purchase property unless the court has prohibited him from doing so.3 The object of the recommendation was to avoid the delay that is frequently caused when the warrant of sale is returned unexecuted in the absence of bidders.

An amendment carrying out this recommendation was proposed in the draft Report on the Code which had been circulated. Comments received thereon, however, emphasised the need for the court being aware of any proposal by the decree-holder to bid. The earlier Commission thought, that there was force in this approach, and a decision was taken not to disturb the existing rule. We have considered this matter further, and have come to the conclusion that the approach in the earlier Report on the Code was correct. Hence, no change is recommended.

1. 27th Report, note on Order 21, rule 72.

2. 14th Report, Vol. I.

3. See also Civil Justice Committee (1955), Report, p 410, para. 24.

21.36. We have considered the more fundamental question if rule 72 should be retained at all. The object behind this provision is to ensure fairness in the auction. The decree-holder, if interested in purchasing the property himself, can, conceivably, keep back or discourage (or even mislead) prospective purchasers. Ordinarily, the fetching of a higher purchase price would be in his interest (as likely to satisfy his claim without further execution).

But, it should not be forgotten that when he is the purchaser, this consideration takes leave, and he-like every purchaser-would like the price to be low. To a certain extent, he has a hand in initiating the sale, though not so in theory. It is he who obtains the proclamation of sale; and, though the rule in Order 21 do not so require, it is he who is expected to assist, and even to guide, the process-serving staff in various matters concerning execution-e.g. affixation of the proclamation etc. He also estimates the price. For these reasons, it is better to keep the existing safeguard.

Order 21, rule 72A (New)

21.37. A new rule discussed but not recommended in the earlier Report1 may be usefully considered at this stage. The Commission, in that Report, noted that Order 21, rule 72A, had been added by the High Court of Bombay, to provide that if leave to bid is granted to a mortgagee, then, as regards him, a reserve price shall be fixed, (unless the Court shall otherwise think fit), which shall not be less than the amount due on principal, interest and costs in case the property is sold.

The history of the Bombay rule is interesting. The Subordinate Judge of Haveli wrote a letter to the High Court of Bombay in 1913, stating that this was the practice followed in the mufassil, and as the rule could not now be made under section 104, Transfer of Property Act, it should be made under Order 34. The rule Committee recommended that the old rule 20 of the Supplementary Civil Circular No. 11 should be restored.2 In the absence of such a rule, the mortgagee can (under a general permission to bid) recover in execution the balance from the mortgagor or from his estate, if the amount for which the property is sold is less than the principal, etc. due to him.

1. 27th Report, note on Order 2, rule 72A (Born).

2. See discussion in Vrajlal v. Venkataswami, ILR 52 Born 459: AIR 1928 Born 123 (125) (Marten, C.J. and Blackwell, J.).

21.38. The question whether this amendment should be adopted was considered by the earlier Commission, but it felt that a rigid provision of such a nature was not necessary. It apprehended that to a certain extent, such a provision may detract from the remedy of the mortgagee under Order 34, rule 6 also. We have carefully considered the matter, and have come to the conclusion that the Bombay Amendment is a healthy one. We do not think that it will detract from Order 34, rule 6, because the decree-holder can, before seeking permission, consider whether the property is likely to fetch the total amount due to him.

Recommendation

21.39. We, therefore, recommend that the principle of Order 21, rule 72A, as inserted by the Bombay Amendment, should be adopted. Apart from the general rule1 requiring the decree-holder to obtain leave to bid, it is our intention that for the special case of mortgagee, leave should be required as above. The following new rule is, accordingly, recommended-

"72A. (1) A mortgagee of immovable property shall not bid for or purchase property sold in execution of a decree on the mortgage, unless the Court grants him leave to bid for or purchase the property.

(2) If leave to bid is granted to such mortgagee, then the Court shall fix a reserve price as regards the mortgagee, and, unless the Court otherwise directs, the reserve price shall be-

(a) not less than the amount then due for principal, interest and costs, in respect of the mortgage if the property is sold in one lot; and

(b) not less in respect of each lot (in case the property is sold in lots) than such sum as shall appeal to the court to be properly attributable to that lot in relation to the amount then due far, principal, interest and costs on the mortgage.

(3) in other respects, the provisions of sub-rules (2) and (3) of rule 72 shall apply in relation to purchase by the decree-holder under that rule."

1. Order 21, rule 72.

Order 21, rule 89-Period of limitation

21.40. An application to set aside a sale on deposit under Order 21, rule 89, has to be made within thirty days of the date of sale.1 It has been stated that this period proves to be too short in practice, and often causes hardship inasmuch as the judgment debtor cannot arrange for moneys within that time. Banks take a far longer period than one month in sanctioning advances, and it has been suggested that the period should, therefore, be increased. We find some force in this suggestion, and are inclined to accept it. No doubt, the law should take into account the position of the purchaser also; but, since five per cent. of the purchase money has to be paid to him under the rule, no serious prejudice is likely to be caused to him by an increase in the waiting period.

1. Limitation Act, 1963, Article 127.

21.41. Since section 5, of the limitation Act does not apply to applications in execution, a change in the law is needed if the above hardship is to be removed. As to the direction in which the law should be amended, there are two alternatives. One alternative is to give the court a power to extend the period of limitation, subject, of course to some maximum. The second alternative would be to increase the period-30 days-to say, sixty days. The first alternative could be achieved by inserting a proviso somewhat on the following lines-

"Provided that, where the Court is satisfied that the application could not for reasons beyond the control of the judgment debtor, be made within the period prescribed in that behalf by the Limitation Act, 1963, the Court may, by order and for reasons to be recorded, extend the said period by such further period as may be specified by it, so however, that the prescribed period and the extended period shall not exceed sixty days in the aggregate."

The second alternative could be achieved by amending Article 127 of the Limitation Act. We prefer the second alternative, which is simpler.

21.42. Although the problem has arisen with reference to applications by the judgment-debtor the amended period has to cover all applications, (i.e. those under Order 21, rules 90-91 also), because after the proposed amendment, the report will have to wait in every case for the increased period before conforming the sale.

Recommendation

21.42. Accordingly, we recommend that in the Limitation Act, 1963, in the Schedule, in the second column against entry 127, for the words "thirty days", the words "sixty days" should be substituted.1

1. To be carried out in the Limitation Act, 1963.



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