George Augustine vs Jose. R. Erinjeri

The petitioner is the judgment-debtor and the respondent is the decree-holder.

The respondent initiated steps for realisation of the decree debt by sale of the property owned by the petitioner.

As per Ext.P3 order dated 18.02.2019, the execution court settled the proclamation of sale, by stating as follows:

“Heard both side. Verified the documents. Proclamation settled for Rs.1.80 crore. For Proclaim and sale on 23.03.2019.â€​

The petitioner filed Ext.P5 application before the execution court praying that Ext.P3 order may be recalled. The respondent filed objection to that

application.

As per Ext.P7 order, the execution court dismissed Ext.P5 application.

The judgment-debtor has filed this original petition under Article 227 of the Constitution of India, challenging the legality and propriety of Exts.P3

and P7 orders.

Heard learned counsel for the petitioner and also the respondent.

The decree-holder had filed a draft sale proclamation in the execution court. When the execution petition came up for hearing on 10.01.2019, the

counsel for the judgment-debtor submitted before the execution court that he had not received copy of the draft sale proclamation. Thereafter, a copy

of the draft sale proclamation was furnished to the counsel for the judgment-debtor.

There is dispute between the parties as to the date on which the copy of the draft sale proclamation was given to the counsel for the judgment-

debtor. According to the judgment- debtor, copy of the draft sale proclamation was furnished to him only on 01.02.2019, the next hearing date. But,

according to the decree-holder, it was furnished on 10.01.2019 itself.

However, the dispute regarding the date of furnishing the copy of the sale proclamation to the judgment-debtor is of not much relevance here

because the sale proclamation was settled by the execution court only on the next hearing date, that is, on 18.02.2019. By that time, the judgment-

debtor could have filed objection to the draft sale proclamation. Admittedly, he did not avail the opportunity to do so.

The petitioner has projected a cock and bull story in the original petition to justify his omission to file any objection to the draft sale proclamation.

According to him, on 01.02.2019, his counsel pointed out to the court below that the draft sale proclamation filed by the decree-holder did not mention

any upset price and then the court observed that the draft sale proclamation was defective and that it would dismiss the execution petition. It is alleged

that, at the request of the counsel for the decree-holder, then the court below adjourned the hearing of the execution petition to 18.02.2019 to enable

the decree-holder to file a fresh draft sale proclamation. According to the petitioner, his counsel was under the impression that a fresh draft sale

proclamation would be filed by the decree-holder and it was the reason for not filing any objection to the draft sale proclamation already received by

him.

Evidently, what is stated above is a story created by the petitioner to justify his omission to file any objection to the draft sale proclamation. The

very fact that the petitioner filed Ext.P5 application, only a month after the settlement of proclamation by the execution court and just a few days

before the date fixed for sale, indicates that the excuse offered as above for not filing any objection to the draft sale proclamation is the result of

afterthought. The execution court has rightly declined to accept the same in passing Ext.P7 order.

Now, the other legal contentions raised by the learned counsel for the petitioner shall be dealt with. Learned counsel for the petitioner has raised

the following contentions to challenge Ext.P3 order. (1) No notice under Order XXI Rule 66 of the Code of Civil Procedure, 1908 (for short 'the

Code') was served on the petitioner. (2) The existence of the residential building in the property was not mentioned in the sale proclamation. (3) The

draft sale proclamation filed by the decree-holder did not mention any upset price. (4) The upset price fixed by the execution court, as per Ext.P3

order, is not based on any materials. (5) No effective opportunity of hearing was given to the petitioner before settlement of proclamation by the

execution court.

Order XXI Rule 66(1) of the Code provides that, where any property is ordered to be sold by public auction in execution of a decree, the Court

shall cause a proclamation of the intended sale to be made in the language of that court. Order XXI Rule 66(2) of the Code provides that, such

proclamation shall be drawn up after notice to the decree-holder and the judgment- debtor and shall state the time and place of sale, and specify the

particulars mentioned in clauses (a) to (e) of the rule.

There is no force in the contention of the petitioner that no notice under Order XXI Rule 66(2) of the Code was served on him before settlement

of the proclamation of sale. This is not a case in which a fresh execution petition was filed for sale of the property of the petitioner. The execution

petition was filed by the decree-holder in the year 2016. It also contained prayer for execution of the decree by the arrest and detention of the

judgment-debtor in civil prison. It was after exhausting the steps in that regard, the steps for execution of the decree by sale of the property of the

petitioner were initiated by the decree-holder. Admittedly, atleast on 01.02.2019, the judgment- debtor had obtained a copy of the draft sale

proclamation filed by the decree-holder. The execution court had then adjourned the execution petition to 18.02.2019 for settlement of proclamation.

In the aforesaid circumstances, the petitioner cannot contend that he had no notice of the settlement of proclamation of sale which was scheduled

to be held on 18.02.2019. The purpose or object of issuing the notice under Order XXI Rule 66(2) of the Code to the judgment debtor is to ensure that

while settling the proclamation of sale he would get an opportunity to dispute the correctness of the particulars furnished by the decree-holder. In the

instant case, a copy of the draft proclamation of sale was given to the petitioner and it was in the presence of his counsel that the execution court

adjourned the hearing to 18.02.2019 for settlement of proclamation. The mere fact that no notice was given to the petitioner in Form No.28 of

Appendix-E of the Code is of little significance because the information proposed to be given to the judgment-debtor in Form No.28 is only the date

fixed for settlement of proclamation.

There is also no merit in the contention of the petitioner that the draft sale proclamation filed by the decree- holder did not show the existence of

the residential building in the property. Ext.P2 is the copy of the draft sale proclamation. Ext.P4 is the copy of the sale proclamation which was

published. In the schedule of both Exts.P2 and P4, the description of the property is given and the existence of the residential building with its door

number is mentioned therein.

Another contention raised by the learned counsel for the petitioner is that the draft sale proclamation filed by the decree-holder did not mention the

upset price of the property. Learned counsel for the petitioner has not brought to the notice of this Court any provision which mandates that the draft

sale proclamation to be filed by the decree-holder shall contain the upset price of the property.

Rule 329(1) of the Kerala Civil Rules of Practice provides that, the decree-holder may apply at the adjourned hearing of the execution petition or

at any other time by written application in Form No.56 for sale of any attached property and along with such application, he shall produce a

proclamation of sale to be settled and approved by the Court as in Form No.57 or 58 as the case may be. Form No.58 in Appendix-I of the Civil Rules

of Practice is the prescribed form of the proclamation of sale in respect of immovable property. Form No.58 or the Schedule to it does not prescribe

mentioning the upset price of the property by the decree-holder.

Form No.29 of Appendix-E of the Code is the form prescribed in the Code for proclamation of sale. Form No.29 or the schedule to it also does not

contain any provision for mentioning the upset price of the property by the decree-holder. The schedule to Form No.29 contains a column for showing

the value of the property as stated by the decree-holder. It appears that the learned counsel for the petitioner has misunderstood the term 'upset price'

as synonymous with the value of the property.

Learned counsel for the petitioner contended that the upset price fixed by the execution court, as per Ext.P3 order, is not based on any reliable

materials.

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.

The provision contained in the second proviso to Order XXI Rule 66(2) of the Code makes it clear that the Court is not bound to fix the upset price

and show it in the proclamation of sale. Even before the Amendment of 1976, the Supreme Court had considered the question in Gajadhar Prasad v.

Babu Bhakta Ratan : AIR 1973 SC 2593. The Supreme Court has held as follows:

“The Court, when stating the estimated value of the property to be sold, must not accept merely the ipse dixit of one side. It is certainly

not necessary for it to state its own estimate. If this were required, it may, to be fair, necessitate insertion of something like a summary of a

judicially considered order, giving its grounds, in the sale proclamation which may confuse bidders. It may also be quite misleading if the

Court's estimate is erroneous. Moreover, Rule 66(2)(e) requires the Court to state only the facts it considers material for a purchaser to

judge the value and nature of the property himself. Hence, the purchaser should be left to judge the value for himself. But, essential facts

which have a bearing on the very material question of value of the property and which would assist the purchaser in forming his own

opinion must be stated. That is, after all, the whole object of Order 21 Rule 66(2)(e), Civil Procedure Code. The Court has only to decide

what all these material particulars are in each case. We think that this is an obligation imposed by Rule 66(2)(e). In discharging it, the Court

should normally state the valuation given by both the decree holder as well as the judgment debtor where they have both valued the

propertyâ€​.

(emphasis supplied).

However, in M/s Shalimar Cinema v. Bhasin Film Corporation : AIR 1987 SC 2081 ,the Supreme Court has held that though it may not be

necessary for the court to make a valuation and enter it in the sale proclamation in every case, it is desirable at least in cases of sale of valuable

property that the court make its valuation and enter it in the sale proclamation.

The decisions of the Supreme Court mentioned above were adverted to by this Court in Bahuleyan v. Moosa : 2006 (4) KLT 882 and it was held

therein as follows:

“If the estimate made by the Court is erroneous, the intending purchaser would be misled by such estimation and the likelihood of the

property being sold for a lesser price is on the higher side. The Supreme Court held that if the Court thinks it fit to fix the upset price, it is

always better to pass a judicially considered order stating the grounds. But, after the introduction of the second proviso to Rule 66(2), the

executing court is not bound to make an estimate of its own and fix the upset price. It is sufficient if the value of the property as estimated by

the decree holder and the judgment debtor are shown in the sale proclamationâ€​.

(emphasis supplied)

What the second proviso to Order XXI Rule 66(2) of the Code lays down is that, in a proclamation of sale, the estimate of the value of the

property as given by either or both the parties, should necessarily find a place. But, no duty is cast on the court to enter in the sale proclamation its

own estimate of the value of the property. The court making an estimate of the value of the property and entering it in the proclamation of sale would

become necessary only when an upset price has to be fixed for the property. Since the Legislature has now made it obligatory that the estimate of the

value of the property as given by either or both the parties should necessarily find a place in the proclamation of sale, the need for the Court to fix an

upset price may not arise in all cases. It is not mandatory or necessary that the execution court shall enter in the proclamation of sale its own estimate

of the value of the property. But, it is mandatory to state in the proclamation of sale, the estimate of the value of the property, if any, given by the

judgment-debtor and the decree- holder. At the same time, if the Court estimates the value of the property and fixes the upset price and mention it in

the sale proclamation, it shall be done by a judicially considered order.

At this juncture, it is also necessary to point out that in case of sale of mortgaged property, if leave to bid is granted to the mortgagee, Order XXI

Rule 72-A of the Code mandates that the Court shall fix a reserve price as regards the mortgagee and the reserve price shall be not less than the

amount due under the decree, unless the Court otherwise directs.

A question may arise, in the absence of upset price, in what manner the sale shall be held. The decision of the Madras High Court in V.A.S.

Yellappa Naidu v. G. Venugopal Naidu : AIR 1958 Mad 423 gives the answer. The sale shall commence at the higher price given by the Judgment-

debtor and in the absence of bidders, the price will have to be progressively brought down till it reaches the figure given by the decree-holder and

again raised up, depending upon the availability of bidders.

However, I find force in the other two contentions raised by the learned counsel for the petitioner that the execution court fixed the upset price

without any basis and also that the petitioner was not given an effective opportunity of hearing before the settlement of proclamation of sale.

This is a case in which the execution court has exercised its discretion to fix the upset price. As stated earlier, once the execution court decides to

fix the upset price, it shall be done by a judicially considered order.

In Ext.P3 order, the execution court has only stated that “verified the documents.†It is not known what documents were verified by the

execution court for fixing the upset price. Learned counsel for the respondent submitted that he had produced before the execution court the

notification issued by the Government fixing the fair value of the land. Ext.P3 order does not reveal that, while fixing the upset price, the execution

court has taken into consideration the fair value of the land fixed by the Government. Exts.P3 and P7 orders do not reveal that any notification in that

regard was produced before the execution court. What is stated in Ext.P7 order is only that the fair value of the property would be easily available in

the Government website and the Government has fixed the fair value of the property and that the court has fixed the upset price considering the

proximity and location of the property. Even if it is assumed that the execution court had verified the notification issued by the Government fixing the

fair value of the land for the area concerned, it is not known on what basis the value of the building in the property was ascertained by the court.

The execution court has a salutary duty and a legislative mandate to apply its mind before settling the terms of proclamation. If the court fixes an

upset price which does not reflect at least an approximately real value of the property, the intending bidder would be misled by the same and this

would, sometime, result in fetching a low price in the auction sale.

In Unni Madhavan Nair v. Sreenarayana Investment : 2009 (3) KHC 392 : 2009 (3) KLT 855 ,this Court had occasion to deal with an order

similar to Ext.P3 order herein. In that case, the impugned order read as “No payment. Upset price fixed Rs.7 lakhs. Proclaim and sell on

10/11/2008"". This Court set it aside, holding as follows:

“Evidently, the learned Sub Judge has not applied his mind to the materials placed in passing an appropriate order as contemplated

under Order 21 Rule 66 of CPC. The Court has a duty to see that the requirements of Order 21 Rule 66 CPC are properly complied with. No

action of the Court or its officers should be such as to give rise to the criticism that it was done in an indifferent or a casual way. ...... At any

rate, the order of settling the proclamation for sale should reflect that the Court has applied its mind to the matters necessarily to be gone

into and then it was settled. A reasoned order is not necessary but the order should reflect that the Court has applied its mind in

ascertaining the matters to be specified for the proclamation and it has been settled in accordance with the rule. A mere statement of fixing

the upset price and then an omnibus order 'proclaim and sale' as done in the present case is far from satisfactory and it indicates of non-

application of mindâ€​.

Ext.P3 order does not reflect that the execution court had applied its mind before fixing the upset price. It is liable to be set aside for this sole

reason.

Ext.P3 order, by which the execution court settled the proclamation of sale, was passed on 18.02.2019. Learned counsel for the petitioner

submitted that it was a 'hartal' day. This is not disputed by the learned counsel for the respondent. The petitioner has got a contention that his counsel

was not able to appear before the execution court on that day and the junior counsel had entrusted the case with another lawyer who was present in

the court for seeking adjournment. The petitioner alleges that the execution court settled the proclamation without hearing his counsel.

It is true that in Ext.P3 order it is mentioned that both sides were heard before settling the proclamation. But, I find no reason to disbelieve the

submission of the learned counsel for the petitioner that he could not appear before the execution court on 18.02.2019 due to 'hartal' and that he did

not get effective opportunity of hearing. At any rate, being a 'hartal' day, when the counsel for the judgment-debtor could not appear before the court

in person, the execution court should have adjourned the settlement of proclamation to another day, especially when it decided to fix upset price in

respect of a property worth lakhs, if not crores, of rupees.

Learned counsel for the petitioner has raised another contention that, Ext.P7 order states that the sale proclamation was duly published only on

18.03.2019 but the sale was conducted on 23.03.2019 without adhering to the time limit prescribed under Order XXI Rule 68 of the Code.

Learned counsel for the respondent would submit that the date of publication of the sale proclamation mentioned as 18.03.2019 in Ext.P7 order is a

clerical error and the actual date of publication is 18.02.2019. The submission in this regard may be correct. But, I do not intend to consider this

dispute in the present case. This original petition was filed before conducting the sale of the property. The sale of the property is not challenged in this

original petition. Therefore, it is unnecessary to consider whether the sale was conducted without adhering to the time limit prescribed under Order

XXI Rule 68 of the Code.

The discussion above leads to the conclusion that Ext.P3 order passed by the execution court warrants interference by this Court. Once Ext.P3

order is set aside, the sale, if any, conducted on the basis of it shall also cease to have existence.

Consequently, the original petition is allowed. Ext.P3 order is set aside. The petitioner shall file objection, if any, to the draft sale proclamation in

the execution court within a period of one month from today. The execution court shall post the execution petition on a specific day after the expiry of

the aforesaid period for settlement of proclamation of sale and proceed with the further steps in the execution petition in accordance with law and

complete the execution proceedings as expeditiously as possible.