Elamgulam Service Co.Operative Bank Ltd vs P.S. Mohanan Nair

The petitioner, a Co-operative bank, is the judgment-debtor and the respondent is the decree-holder.

The award passed against the petitioner has become final.

The respondent filed E.P.No. 80/2012 against the petitioner for realisation of the decree debt by sale of the property owned by the petitioner.

In an earlier round of litigation, as per the judgment dated 03.12.2015 in O.P (C) No. 2302/2015 (Ext.P6), this Court issued the following directions

to the execution court: (i) consider the objection of the petitioner regarding the appropriation of amounts paid by it, (ii) to show the encumbrance on the

property, if any, in the proclamation and (iii) fix the upset price on the basis of reliable materials.

Again, as per the judgment dated 06.01.2020 in O.P(C) No. 1841/2017 (Ext.P8), this Court directed the execution court to surge ahead with

execution proceedings in compliance with the directions given in Ext.P6 judgment.

Thereafter, the execution court passed Ext.P14 order dated 27.02.2020 settling the proclamation of sale.

The judgment-debtor has filed this original petition under Article 227 of the Constitution of India challenging the legality and propriety of Ext.P14

order.

Heard the learned counsel for the petitioner as well as the respondent.

The question to be decided is, whether the execution court, in passing Ext.P14 order, has complied with the directions given by this Court in Ext.P6

judgment.

Order XXI Rule 66(2)(d) of the Code of Civil Procedure, 1908 (for short 'the Code') mandates that, the amount for the recovery of which the sale

is ordered, shall be specified in the sale proclamation. Therefore, it is necessary that the execution court shall ascertain and show the decree debt due

from the judgment-debtor in the sale proclamation.

As per Ext.P14 order, the amount due from the petitioner to the respondent is determined by the execution court as Rs.88,88,103/-. But, it is not

known how the execution court ascertained this figure. In Ext.P14 order, it is only stated that the court calculated the amount as directed in the

decree.

As per Ext.P6 judgment, this Court had directed the execution court to consider the contention of the petitioner that the amount paid by it should be

adjusted towards the principal and not towards the interest. Ext.P14 order is silent on this aspect.

In Industrial Credit and Development Syndicate v. Smithaben H.Patel : AIR 1999 SC 1036, the Supreme Court has held as follows :

“We hold that the general rule of appropriation of payments towards a decretal amount is that such an amount is to be adjusted firstly, strictly in

accordance with the directions contained in the decree and in the absence of such direction, adjustments be made firstly in payment of interest and

costs and thereafter in payment of the principal amount. Such a principle is, however, subject to one exception, i.e., that the parties may agree to the

adjustment of the payment in any other manner despite the decree. As and when such an agreement is pleaded, the onus of proving is always upon

the person pleading the agreement contrary to the general rule or the terms of the, decree scheduleâ€​.

In Bharat Heavy Electricals Limited v. Avtar Singh : AIR 2013 SC 252, after referring to the Constitution Bench decision in Gurpreet Singh v.

Union of India: (2006) 8 SCC 457, the principles regarding appropriation of amount have been stated as follows:

“The general rule of appropriation towards a decretal amount was that such an amount was to be adjusted strictly in accordance with the directions

contained in the decree and in the absence of such directions adjustments be made firstly towards payment of interest and cost and thereafter towards

payment of the principal amount subject, of course, to any agreement between the parties. ...... If the payment made by the judgment- debtor falls

short of the decreed amount, the decree- holder will be entitled to apply the general rule of appropriation by appropriating the amount deposited

towards the interest, then towards cost and finally towards the principal amount due under the decree. Thereafter, no further interest would run on the

sum appropriated towards the principal. In other words if a part of the principal amount has been paid along with interest due thereon as on the date of

issuance of notice of deposit interest on that part of the principal sum will cease to run thereafter. In cases where there is a shortfall in deposit of the

principal amount, the decree- holder would be entitled to adjust interest and cost first and the balance towards the principal and beyond that the

decree-holder cannot seek to reopen the entire transaction and proceed to recalculate the interest on the whole of the principal amount and seek for

re- appropriationâ€​.

The execution court has to re-calculate the decree debt due from the petitioner to the respondent in the light of the principles mentioned in the

decisions referred to above.

The respondent had filed before the execution court Ext.P12 statement showing the balance amount due to him from the petitioner. As per this

statement, the amount due to him is Rs.92,00,813/-. Learned counsel for the petitioner has contended that the execution court did not consider Ext.P13

objection filed by the petitioner to Ext.P12 statement.

It is specifically stated in Ext.P14 order that the petitioner/judgment-debtor had not filed any objection to Ext.P12 statement filed by the

respondent. This Court had called for a report from the learned Sub Judge to ascertain whether Ext.P13 objection filed by the petitioner to Ext.P12

statement was before the court when it passed Ext.P14 order. Learned Sub Judge has reported that, when the case was taken up for hearing on

27.02.2020, that is, the date of Ext.P14 order, it was not brought to the notice of the court that Ext.P13 objection was filed and that no such objection

was before the court when it passed the order. Learned Sub Judge has also reported that, it was on verification of the records on receiving the

communication from this Court that it was found out that such an objection had been filed on 26.02.2020 by the petitioner to Ext.P12 statement.

There is no reason to disbelieve the contents of the report made by the learned Sub Judge. It was the duty of the counsel who appeared for the

petitioner in the court below to bring to the notice of that court that an objection to Ext.P12 statement had been filed by the petitioner. Having failed to

do so, there is no point in blaming the execution court in not considering such objection while passing Ext.P14 order.

However, now it has become necessary for the execution court to consider Ext.P13 objection dated 26.02.2020 filed by the petitioner to Ext.P12

statement and re-calculate the amount due from the petitioner to the respondent.

Regarding the direction of this Court in Ext.P6 judgment to show the encumbrance on the property in the sale proclamation, the execution court

has stated in Ext.P14 order that no encumbrance on the property, other than the attachment made in the present case, is revealed from the

encumbrance certificate produced.

Regarding the third direction in Ext.P6 judgment with regard to the re-fixation of the upset price, it is seen that the execution court has re-fixed the

upset price at Rs.1,02,00,813/-. The upset price has been fixed by the execution court after taking into consideration the valuation certificate dated

11.02.2020 issued by the Tahsildar concerned in respect of the land and also the valuation of the buildings shown in the report of the valuator

appointed by the court at the instance of the petitioner. The execution court has noted that the valuation of the building assessed by the valuator is

Rs.12,50,000/- while the decree-holder has valued the building at Rs.39,12,750/-. The execution court has taken into account the higher value shown

by the decree-holder for the building.

The contention of the petitioner that, the value of the land shall be estimated according to the report made by the private valuator and not

according to the valuation certificate given by the Tahsildar, cannot be accepted. The value of the land estimated by the Tahsildar is based on the fair

value of the land fixed by the Government as per the notification made in the official gazette and it has to be accepted.

Moreover, the expressions ""value of a property"" and ""upset price"" are not synonymous but have different meanings. The concept of upset price is

not synonymous with 'valuation of the property'. These two terms operate in different spheres. Valuation is a question of fact. Fixation of an upset

price may be an indication of the probable price which the land may fetch from the point of view of intending bidders. The term ""upset price"" means

lowest selling price.

Fixation of upset price is only a guiding factor (See Anil Kumar Srivastava v. State of U.P : AIR 2004 SC 4299).

The second proviso to Order XXI Rule 66(2) of the Code, which is newly introduced by Act 104 of 1976, expressly provides that, nothing in the

rule shall be construed as requiring the Court to enter in the proclamation of sale its own estimate of the value of the property, but the proclamation

shall include the estimate, if any, given by either or both of the parties.

Therefore, the proclamation of sale shall show the value of the property estimated by the judgment-debtor also. The execution court has to ensure

that the value of the property estimated by the judgment-debtor is shown in the sale proclamation.

Consequently, the original petition is allowed in part. The finding made by the execution court in Ext.P14 order with regard to the amount due from

the petitioner to the respondent is set aside. The execution court shall re-calculate the amount due to the respondent from the petitioner, after

considering Ext.P13 objection dated 26.02.2020 filed by the petitioner to Ext.P12 statement which was filed by the respondent, in the light of the

decisions of the Supreme Court in Industrial Credit and Development Syndicate (supra) and Bharat Heavy Electricals Limited (supra). The petitioner

is at liberty to raise all its contentions with regard to the calculation of amount before the execution court. The execution court shall also ensure that

the value of the property estimated by the petitioner/judgment-debtor is shown in the proclamation of sale as per the mandate in the second proviso to

Order XXI Rule 66 (2) of the Code.