Durga Prasad Shraff vs Mahadeb Lal Singhania and Others

Varma, J.—This is an appeal on behalf of one Durga Prasad Shraff who was a decree-holder and whose application under Order 21, Rule 90 for setting aside a sale held at the instance of respondents first party who were subsequent decree-holders was dismissed. It appears that on 18th April 1933 the appellant instituted a money suit against his judgment-debtors who are respondents second party in this case and that suit was numbered 65 of 1933. A number of properties were attached before judgment and these attachments took place on 3rd September, 6th September and 7th September 1933. He succeeded in obtaining a decree on 22nd March 1934 for a sum of Rs. 7,327-13-6 with costs. Then he started execution proceedings by an application dated 6th April 1934 which was numbered as Execution Case No. 65 of 1934. He again got the properties attached on 13th, 15th and 18th April 1934. Then on 21st May 1934 it appears that the respondents first party sued the respondents second party in the same Court for a sum of Rs. 10,508 based on a handnote and that suit was numbered as Money Suit No. 93 of 1934. This suit was however very quickly decided inasmuch as a compromise was arrived at and a decree was passed on the compromise on 30th June 1934 for Rs. 11,301. Execution was started in this case also on 23rd July 1934, and it was numbered as Execution Case No. 166 of 1934. Three properties belonging to the judgment-debtors were sold on 3rd December 1934 for Rs. 3,700. The appellant in this case having heard of this sale on 16th December 1934, filed the application under Order 21, Rule 90 on 21st December 1934. This application was dismissed on 22nd July 1935 and the present appeal is directed, against that order.

The grounds taken before the Court, below were that the properties were sold at a grossly inadequate price causing substantial injury to the applicant; that the processes were not properly served and that the decree-holder and the judgment debtors colluded with one another and the decree-holder purchased the property for the benefit of the judgment-debtors themselves. Now the execution Court went into these matters and came to the conclusion that the processes were not suppressed; that it was too late to go behind the decree in the execution proceedings; that no fraud had been made out, and he further held that there was nothing to indicate that the properties were sold for an inadequate price. On these grounds he rejected the application under Order 21, Rule 90.

Mr. K.N. Moitra appearing on behalf of the appellant has raised several points. First of all he says that as he was a person who had got the properties that were sold attached after his decree, he was a person interested in the properties and he could file an application under Order 21, Rule 90. This point has been conceded by Sir Sultan Ahmed appearing on behalf of the respondents.

There were several other points urged, for example, that the appellant had a prior right to put up the properties to sale in his execution, especially when he had got the properties attached before there was any suit or decree obtained by the respondents first party. There does not seem to be any authority for that proposition; but the next point urged deserves some consideration and that was whether there was any material irregularity inasmuch as the Court did not notify in the sale proclamation that there was an attachment subsisting in the execution of the decree obtained by the present applicant. So far as this point is concerned, as a proposition of law, I doubt very much if an attachment can be said to be an incumbrance or a charge upon the property. As was pointed out in Motilal v. Karrabuldin (1898) 25 Cal 179 an attachment means only this: that the party whose property is attached is not allowed to sell the property. It does not create any title. I am of opinion that it was not necessary to mention this attachment in the sale proclamation. There was another point with which I am afraid I cannot agree. Mr. Moitra referred to Section 64, Civil P.C., which prohibits any private transfer during the period of attachment. The section runs as follows:

Where an attachment has been made, any private transfer or delivery of the property attached or of any interest therein and any payment to the judgment-debtor of any debt, dividend or other moneys contrary to such attachment, shall be void as against all claims enforceable under the attachment.

Then there is an explanation which runs as follows:

For the purposes of this section, claims enforceable under an attachment include claims for the rateable distribution of assets.

Now this refers to private transfer or private delivery of property attached. Although Mr. Moitra tried his very best to argue before us with his usual ability that this rule can be extended to transfers or sales that took place under orders of the Court, I am of opinion that there is nothing to justify reading into this section anything which extends its meaning to this extent that even sales under orders of the Court are not allowed if a property is once attached.

These are the chief points that were urged by Mr. Moitra, but the matter does not end here. There is one thing more that has to be taken into consideration and that is that the Court that sold these properties- in execution of the decree obtained by the respondents first party knew that there was this attachment. This is apparent from the order sheet in Order No. 11 of the present execution case, dated 1st October 1934. Now when the property was sold for Rs. 3,700 it appears that the poundage fee was paid on 3rd December 1934 and then the Court allowed a set-off as prayed for by the decree holders. All this happened on 3rd December 1934 and 4th January was the date fixed for the confirmation of sale; that is to say, it is clear from the order sheet that the decree-holders who purchased the property did not bring any money into Court. Now let us see how far this proceeding affects the present sale. Rule 84 of Order 21 runs as follows:

On every sale of Immovable property the person declared to be the purchaser shall pay immediately after such declaration a deposit of twenty-five per cent on the amount of his purchase money to the officer or other person conducting the sale, and in default of such deposit, the property shall forthwith be re-sold. (2) Where the decree-holder is the purchaser and is entitled to set off the purchase-money under Rule 72, the Court may dispense with the requirements of this rule.

No doubt the Court can dispense with the deposit of the purchase money; but it can do so subject to the provisions of Rule 72. Now Rule 72 says:

No holder of a decree in execution of which property is sold shall be precluded from bidding for or purchasing the property unless an express order to that effect is made by the Court. (2) Where a decree-holder purchases the property the purchase money and the amount due on the decree may, subject to the provisions of Section 73, be set off against one another, and the Court executing the decree shall enter up satisfaction of the decree in whole or in part accordingly.

Now we have to see what Section 73 says. Section 73 which is a section dealing with the question of rateable distribution of proceeds of an execution sale among decree-holders runs as follows:

(1) Where assets are held by a Court and more persons than one have, before the receipt of such assets, made application to the Court for the execution of decrees for the payment of money passed against the same judgment-debtor and have not obtained satisfaction thereof, the assets, after deducting the costs of realization, shall be rateably distributed among all such persons.

Then there are the provisos. Now here; in this case there was a decree in favour of the present appellant. He had initiated execution proceedings on account of which the properties were attached and amongst the attached properties were the properties that were ultimately sold to the respondents first party and till then the present appellant''s decree was not satisfied. On these facts Section 73 comes into play at once and the next thing to be done by the Court was that it should have rateably distributed the proceeds of the execution sale among the creditors. The decree-holders purchasers could not be allowed to set off the whole purchase money against their own debt as was done in this case. In this connexion I would like to refer to Order 21, Rule 85 as well. Rule 85 deals with the purchase money which must be deposited before the close of the 15th day from the sale of the property; and if this is not done, then Rule 86 comes into play which is imperative and says that the property shall be re-sold if the conditions contemplated by Rule 85 are not satisfied. In this particular case although there was a creditor whose debt was not satisfied and who had obtained a decree, the Court allowing a set off to the subsequent decree-holders has acted against the mandatory provisions of law. Sir Sultan Ahmed on behalf of the respondents first party has urged that setting off the purchase money cannot be a ground for setting aside the sale inasmuch as Rule 90 contemplates "material irregularity or fraud in publishing or conducting it." So far as I understood his argument it was this: that a sale cannot be set aside for material irregularity or fraud which takes place after the sale; but as I have mentioned above, it is clear from the facts narrated that material irregularity in conducting the sale also is a matter to be taken into consideration and here, as I have already pointed out, the Court has not followed some of the mandatory provisions of the CPC in conducting the sale inasmuch as it has allowed the subsequent decree-holders to set off the purchase money against their debt when the Court knew that there was another decree-holder who was entitled to a rateable distribution. In these circumstances I think that the proper order to pass is that the present sale should be set aside. The appeal will be allowed with costs and the property will be resold in pursuance of Rule 86.

Rowland, J.

I agree.