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Report No. 54

Order 21, rule 90 and deposit

21.43. With reference to Order 21, rule 90, the earlier Report discussed1 one point. A recommendation had been made in the fourteenth Report2 to the effect, that a person applying to set aside the sale under rule 90 should be required to deposit an amount not exceeding 123-1 per cent. of the purchase price, which amount can be utilised for awarding costs if the application fails. But the Commission (in its Report on the Code) stated that as the amount of such costs would not be very large, it was unnecessary to carry out this recommendation.

1. 27th Report, note on Order 21, rule 90 and deposit.

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

3. 14th Report, Vol. I.

Recommendation

21.43A. We have examined the matter further, and have come to the conclusion that the recommendation made in the 14th Report need not be carried out. We agree with the view taken in the Report on the Code.

Order 21, rule 90, and absence of attachment

21.44. Another point concerning Order 21, rule 90, which was discussed in the earlier Report may be noted.1

The Commission noted2 that the question whether absence of, or irregularity in, attachment is, a defect in the publication or conduct of the sale within Order 21, rule 90, had been discussed in several decisions. At one extreme was the view that attachment is not necessary at all, before sale. At the other extreme stood the view that sale without attachment is void. A third view was that want of attachment is an "irregularity" but it is not an illegality in publishing or conducting the sale. According to the fourth view, a sale is not a nullity merely because of a defect in the attachment or want thereof, but, if it causes 'substantial injury', it can be set aside under rule 90.

The Commission thought that the last view was the correct one. The object of attachment (it stated) is to bring the property under the control of the court, and, in the case of immovable property, one of the requirements is that the order of attachment should be publicly proclaimed. The main object of the proclamation is to give publicity to the fact that the sale of the proclaimed property is in contemplation. The publication of the attachment, is, thus a step leading up to the proclamation of the sale.

The Commission also considered the question whether it was necessary to insert a provision to clarify the position on the subject. In fact, in the draft Report which had been circulated, an Explanation had been proposed to rule 90 to the effect that absence of or defect of an attachment shall be regarded as an irregularity under this Rule. After some consideration however, it was decided that no such provision need be inserted.

1. 27th Report, note on Order 21.

1. Cf. Order 21, rule 64.

21.45. It appears to us that to put the matter beyond doubt, it may be advisable to insert a specific provision on the subject and the provision should be to the effect that mere absence of or irregularity in attachment shall not be a ground for setting aside the sale.

Recommendation

21.46. Accordingly, we recommend that the following Explanation should be inserted below Order 21, rule 90

"Explanation-The mere absence of or defect in attachment of the property sold shall not of itself be a ground for setting aside a sale under this rule."

Order 31, rule 92(3)

21.47. The question whether an auction purchaser at a court auction, on finding that the judgment debtor has no saleable interest in the property sold, has a right to sue for a refund of the purchase money on the ground of failure of consideration, has proved to be a controversial one.

Three different shades of view prevail on the subject-

(1) No such right is available.

(2) Such right is available.

(3) Such right is available, but only on limited grounds.

21.48. The first shade of view is represented by a full Bench decision of the Andhra Pradesh High Court,1 which holds that the auction-purchaser cannot, after the confirmation of the sale, maintain an application for setting aside the sale on the ground that the judgment-debtor had no saleable interest in the property sold.2

Referring to Order 21, rule 92, the Court held that after the sale is confirmed, and had become absolute, the auction-purchaser is precluded from bringing a suit to set aside the order confirming the sale. It was also held that Order 21, rule 93 empowers the purchaser to apply for payment only in cases where the sales are set aside under rule 92. Here the rule differs from section 315 of the Code of 1882 (its predecessor), which contained the provision that even when it was found that the judgment-debtor had no saleable interest in the property sold, the purchaser could receive back his purchase money. This was omitted in rule 83.

The Court held that-

(a) There is no scope for invoking the doctrine of "money had and received" since it could not be postulated that the executing creditor received money which he had no right to do, and, by a legal fiction, the receipt by him was for the use of the plaintiff.

(b) If no one had guaranteed the title of the Judgment-debtor to the property sold under a legal process and the purchaser had purchased only the judgment-debtor's interest therein for what it was worth, it could not be predicted that there was any failure of consideration for the purchase of that, or that the judgment-creditor either unjustly or inequitably had withdrawn the amount deposited by the purchaser. The question of failure of consideration would arise only if there was a convenient of title. In the absence of it, the principle of money had and received would be inapplicable, and the suit for return of money cannot be sustained on that ground.

(c) "Sales in invitum" do not involve a covenant of title.

(d) The purchaser accepts the property with its risks, and the rule of "caveat emptor" applies to these cases.

(e) As a necessary corollary, he has no right of recovery of the purchase price, except as contemplated by the provisions of Order 21, rule 91 read with rule 93.

1. Suryakanthamma v. Dorayya, AIR 1965 AP 239 (FB).

21.48A. The Court thought that perhaps the reason why the legislature (in enacting the Code of 1908) thought it fit, to take away the remedy of suit and to limit the scope of the relief envisaged was that the right of suit involves delay, uncertainty and often hardships to execution creditors, and that the quick and inexpensive remedy provided by the said rules afford adequate and equitable relief to the purchaser, by allowing him to get out of the difficulty before the confirmation of sale. But the right to recover the auction price, increase of fraud and misrepresentation which had induced the purchaser to buy the property, stands on a different footing. Such sales were held to fall outside Order 21, and would be within the provisions of the Indian Contract Act.

21.48B. As regards the second shade of view, reference may be made to a Madras Full Bench case1 which strikes a divergent note. Ramesam J., (who delivered the judgment of he Full Bench), observed:

"Taking the first question, viz., whether the respondent is entitled to a refund at all event by way of a suit the question depends upon the right of the parties as they flow out of the circumstances of the case, and not upon whether a provision for such a suit is made in the Civil Procedure Code. The Civil Procedure Code is a Code of objective law, and cannot create rights of section-though it may recognise them or take them away. Forgetting for a moment all technicalities and the Codes of Procedure, one would think on the facts that the auction purchaser should have a right of action for money had and received."

1. Macha Koundan v. Kolara Kundan, AIR 1936 Mad 50 (FB).

21.48C. A Calcutta case1 contains discussion which represents both the second and the third shades of view. The Court, while referring to the situation of the auction-purchaser, and the argument that he should have a right of suit, observed-

"If he did not possess such a right, he might be exposed to loss resulting from fraud or collusion at the sale between an execution-creditor and the judgment debtor, and yet remain without redress. But, against loss sustained in such circumstances, the law does not leave him defenceless, and the auction-purchaser may recover the purchase price which he had paid if he can bring himself within the equitable principles which justify a suit for money had and received upon the ground that, it is unconscionable that the defendant should retain the money as against the plaintiff. That, I think, is the true position of the auction-purchaser under the law upon principle and apart from any statutory right which he may possess.2 There is authority also for the view that where an auction-purchaser at a Court sale has suffered loss through the fraud of the execution creditor or the breach of any duty which the execution creditor owes to the auction-purchaser, he is entitled to receive compensation for the loss which thereby he has sustained."3-4-5

1. Rishee v. Manik Molla, AIR 1926 Cal 971 (973).

2. See Dorab Ally Khan v. Abdool Azeez, (1887) 3 Cal 806: 5 IA 16 (PC).

3. See Dayal Krishna Naskar v. Amirta Lal Das, 1902 ILR 29 Cal 370.

4. Parvathi Ammal v. Govindasami Pillai, 1916 ILR 39 Mad 803.

5. Balvant Raghunath v. Bala, AIR 1922 Born 205.

Recommendation

21.48D. Whatever be the correct view on the existing language, it appears to us that something should be done to improve the position. No doubt, to permit the auction-purchaser to sue for refund from the decree-holder, is to add to the troubles of the decree-holder, and thus to delay execution. But that seems to be the only possible alternative. As between the decree-holder and the auction-purchaser, if some one has to suffer, the former should suffer.

It may not be feasible for the court to inquire into the title of the judgment-debtor (at the time of the proclamation), in an elaborate manner; but that does not answer the basic question, namely, when a sale held by a Court and culminating in a certificate issued by the court is held to be a nullity for want of title, by reason of a defect discovered after expiry of the period for making objections under rule 91 etc., is it justice to dispose of the purchaser's grievance by saying that the purchaser purchased the property at his per? The decree-holder should reimburse him for the loss suffered by him, because it is the decree-holder at whose instance the sale was held. The abstract principle that there is no warranty at court sales fails to yield a just result in this case.

The auction-purchaser should have a right to sue the decree-holder. Where a third party challenges the judgment-debtor's title by filing a suit against the auction purchaser the decree holder and judgment-debtor should be necessary parties, and in that suit the court shall direct the decree-holder to refund the money to the auction-purchaser. If such a decree is passed the original execution proceedings shall be revived at the stage where the sale was ordered, unless the court otherwise directs. This provision is necessary to avoid complications as to limitation.

Recommendation

21.49. We, therefore, recommend that the following sub-rules should be added to Order 21, rule 92:

"(5) Where a third party challenges the judgment-debtor's title by filing a suit against the auction-purchaser, the decree-holder and the judgment-debtor shall be necessary parties to the suit;

(6) If the suit referred to in sub-rule 5 is decreed, the eburt shall direct the decree-holder to refund the money to the auction-purchaser, and, where such an order is passed, the execution-proceeding in which the sale had been held shall, unless the court otherwise directs, be revived at the stage at which the sale was ordered."



The Code of Civil Procedure, 1908 Back




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