This court dismissed an appeal challenging the dismissal of an application to set aside a property auction under Order XXI Rule 90 CPC. The court held that the lower court's finding that appellants did not adduce evidence regarding alleged irregularities precluded interference.
Civil Miscellaneous Appeal dismissed. No order as to costs.
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HONOURABLE SRI JUSTICE B. SESHASAYANA REDDY
CIVIL MISCELLANEOUS APPEAL No. 118 OF 2005.
DATED 11TH DECEMBER, 2009.
BETWEEN
Somi Reddy Adinarayana (died) and ors … Appellants
And
Hanumanthu Atchiyamma and ors …Respondent.s
HONOURABLE SRI JUSTICE B. SESHASAYANA REDDY CIVIL MISCELLANEOUS APPEAL No. 118 OF 2005.
JUDGMENT:
This Civil Miscellaneous Appeal is directed against the order dated 20.2.2004 passed in E.A.No. 28 of 2004 in E.P.No. 44 of 2001 in O.S.No. 43 of 1988 on the file of the Senior Civil Judge, Yelamanchili, Visakhapatnam, whereby and whereunder, the learned Senior Civil Judge dismissed the application filed under Order XXI Rule 90 of CPC.
The appellants are the legal representatives of Somireddy Adinarayana. The said Somireddy Adinarayana borrowed some money from one Somulu and executed mortgage deed. Since Somireddy Adinarayana failed to repay the money due under the mortgage deed, Somulu filed a suit basing on the mortgage deed. Preliminary decree came to be passed. The original borrower and creditors died and their legal representatives came on record. Final decree came to be passed on 30.8.1991. The decree came to be transmitted for execution to the Court of the Senior Civil Judge as
per the order in EA.No. 158 of 2000. The Execution Petition being E.P.No. 44 of 2001 came to be levied for sale of the mortgaged property for realization of the decreetal debt. The appellants/petitioners did not choose to enter appearance in the Execution Proceedings. A part of the mortgage property came to be put to auction since the amount realized for sale of it would satisfied the decree. The third respondent herein purchased the said property in the auction. Thereafter the appellants/petitioners filed E.A.No. 28 of 2004 under Order XXI Rule 90 CPC to set aside the sale held on 3.12.2003 on the ground of material irregularities. The material irregularities sought to be projected are, firstly the property was undervalued, secondly the existing well and coconut trees were not reflected in the sale proclamation. The decree holders filed counter resisting the application. Neither party chooses to adduce any evidence. The learned Senior Civil Judge, on considering the material brought on record and on hearing the learned Counsel appearing for the parties, came to conclusion that the appellants/petitioners failed to make out any valid ground to set aside the auction conducted on 3.12.2003 and thereby dismissed the application by order dated 20.2.2004. The said order is assailed by the appellants/Judgment Debtors in the present appeal.
Heard the learned Counsel for the appellants and the learned Counsel for the third respondent.
The learned Counsel for the appellants submits that respondents 1 and 2, who are decree holders played fraud on the Court by suppressing the existing well and coconut trees in the EP schedule property. A further submission has been made that the property had been auctioned for a through away price and the appellants/petitioners/Judgment debtors were not put on notice in the execution proceedings. In support of his contentions, reliance has been placed on the following decisions:
Jaikisandas Balchand Pamnaiii and Munijcipal Corporation of Greater Bombay[1] , Laxmi Devi Vs. Mukand Kanwa r[2] , M/s. Kayjay Industries (P) Ltd., Vs. M/s. Asnew Drums (P) Ltd[3] , Satyanarayain Bajoria Vs. Ramnarain Tibrewal[4] , Desh Bandhu Gupta Vs. N.L. Anand & Rajinder Singh[5] , Nani Gopal Paul Vs. T.Prasad Singh[6] , Khasim Bi Vs. T.G. Lakshmayya Thimmayya Setty, Partnership Firm, Adoni[7] , and, J.Malla Reddy Vs. Smt. I. Shantamma[8]
In the 1st cited decision, the High Court of Bombay held that material misdescription in sale proclamation with regard to the extent of land vitiates the same.
In the 2nd cited decision, the Supreme Court observed that in every case where a charge has become unenforceable against an auction purchaser by reason of the fact that it was not shown in the proclamation preceding the auction sale, it follows that the chargeholder has suffered substantial injury. Whether or not the injury suffered by the charge-holder is substantial must depend upon several relevant facts. How many properties have been sold at the auction sale; how many out of them were the subject matter of the charge; what is the extent of the claim which the charge holder can legitimately except to enforce against the properties charged, these and other relevant matters must be considered before deciding whether or not the injury suffered by the charge-holder is substantial.
In the 3rd cited decision, the Supreme Court observed that a Court sale is a forced sale and, notwithstanding the competitive element of a public auction, the best price is not often forthcoming. The Judge must make a certain margin for this factor. A valuer’s report, good as a basis, is not as good as an actual offer and
variation within limits between such an estimate, however, careful and real bids by seasoned businessman before the auctioneer are quite on the cards. Businessman makes uncanny calculations before striking a bargain and that circumstance must enter the judicial verdict before deciding whether a better price could be had by a postponement of the sale. It has been further observed that the expression ‘material irregularity’ in the conduct of the sale must be benignantly construed to cover the climax act of the Court accepting the highest bid. Indeed, under the Civil Procedure Code, it is the Court which conducts the sale and its duty to apply its mind to the material factors bearing on the reasonableness of the price offered is part of the process of obtaining a proper price in the course of the sale. Therefore, failure to apply its mind to this aspect of the conduct of the sale may amount to material irregularity.
In the 4th cited decision, the Supreme Court held that if the judgment-debtor was kept ignorant of the execution proceedings right from the date of execution application till sale and its confirmation, it amounts to fraud and in such a situation, substantial injustice and loss to the judgment debtor can be assumed.
In the 5th cited decision, the Supreme Court held that sale without notice to the judgment-debtor is nullity.
In the 6th cited decision, the Supreme Court held that appellate Court or Supreme Court has power to take suo motu judicial notice of the illegality and set aside the sale even after expiry of limitation period prescribed therefore.
In the 7th cited decision, a learned Single Judge of this Court held that sale conducted without issuing fresh proclamation of sale after rectification of defects amounts to vitiated by material irregularity.
In the 8th cited decision, a Division Bench of this Court held that irregularity in sale can be questioned even after issue of sale certificate. It has been further held that failure to deposit 25% of purchase amount by highest bidder on the date of sale as required by Rule 84 of Order 21 CPC renders the sale proceedings complete nullity of confirmation of sale made on payment of the said amount and balance purchase amount in extended time and consequent issuance of sale certificate has no effect.
The learned Counsel for the third respondent-auction purchaser submits that the sale has been confirmed and sale certificate has been issued and delivery also effected, and therefore, at this distance of time, any interference with the sale held on 3.12.2003 would cause much prejudice to the third respondent. A further submission has been made that the trial Court on going through the material brought on record came to conclusion that there are no material irregularities in putting the property to auction and therefore order impugned in the appeal does not warrant interference.
The question that falls for consideration is, whether the appellants/petitioners made out material irregularities in the auction held on 3.12.2003.
It is the contention of the appellants that they were not put to notice in the execution proceedings. This point was answered by the Executing Court based on the material available before it that despite the receipt of notice, the appellants/petitioners did not choose to appear and contest the matter. Therefore, the finding recorded by the Executing Court in this aspect does not warrant interference. The other material irregularity advanced by the
appellants/petitioners is that the property was undervalued. The appellants/petitioners did not choose to offer any evidence to show that the property had been undervalued. Indeed the trial Court sold a part of the property since the value of it would satisfy the decreetal debt. On segregating the property, the same had been put to sale and the same had been knocked down in favour of the third respondent who happens to be the highest bidder. The appellants/petitioners did not choose to adduce any evidence to show that the property had been put to sale suppressing the existing well and coconut trees therein. In such a situation, the trial Court justified in dismissing the application filed by the appellants/petitioners under Order XXI Rule 90 CPC. The impugned order of the trial Court does not call for interference.
The Civil Miscellaneous Appeal is accordingly dismissed. No order as to costs.
JUSTICE B. SESHASAYANA REDDY
Dated 11th November, 2009. Msnr.
[1] AIR 1991 Bombay, 341 [2] AIR 1965 SC 834 [3] (1974) 2 SCC 213 [4] (1993) 4 SCC 414 [5] (1994) 1 SCC 131 [6] (1995) 3 SCC 579 [7] 1999 (6) ALT 151 [8] 2009 (5) ALT 493 (DB)
2 issues framed by the court
Whether the appellants established material irregularities in the auction held on 3.12.2003 under Order XXI Rule 90 of CPC.
Whether the failure to put the appellants on notice in execution proceedings or undervaluation of property vitiated the sale.
Colour shows how this judgement treated each authority
Jaikisandas Balchand Pamnani and Municipal Corporation of Greater BombayReferred¶15
AIR 1991 Bombay, 341 · Who else cites this
Laxmi Devi Vs. Mukand KanwarReferred¶15
AIR 1965 SC 834 · Who else cites this
M/s. Kayjay Industries (P) Ltd. Vs. M/s. Asnew Drums (P) LtdReferred¶15
(1974) 2 SCC 213 · Who else cites this
Satyanarayain Bajoria Vs. Ramnarain TibrewalReferred¶15
(1993) 4 SCC 414 · Who else cites this
Desh Bandhu Gupta Vs. N.L. Anand & Rajinder SinghReferred¶15
(1994) 1 SCC 131 · Who else cites this
Nani Gopal Paul Vs. T.Prasad SinghReferred¶15
(1995) 3 SCC 579 · Who else cites this
Khasim Bi Vs. T.G. Lakshmayya Thimmayya Setty, Partnership Firm, AdoniReferred¶15
1999 (6) ALT 151
J.Malla Reddy Vs. Smt. I. ShantammaReferred¶15
2009 (5) ALT 493 (DB)
1 provisions across 1 enactments
Somi Reddy Adinarayana and ors
Hanumanthu Atchiyamma and ors
B. Seshasayana Reddy
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
