Klorofarma and Others vs Union Bank of India and Another

S. Sankarasubban, J.—This C.M.A. is filed against the Order in E.A. No. 373 of 1989 in E.P. No. 344 of 1985 in O.S. No. 253 of 1981 on the file of the 3rd Additional Sub Court, Ernakulam. E.A. was filed by the Petitioners for setting aside the sale under Order 21 Rule 90 of the Code of Civil Procedure. After the disposal of the E.A., Petitioners had preferred E.A. No. 1068 of 1991 to review the order. That was dismissed by order dated 11th February 1992. Against the dismissal of the review petition, a Civil Revision Petition was filed before this Court as C.R.P. No. 1907 of 1992. That Civil Revision was dismissed without prejudice to the Petitioner raising the contentions in the C.M.A.

Petition to set aside the sale was filed on the following averments. The sale was conducted in gross violation of the mandatory provisions of law and is therefore vitiated by material irregularities. The court was pleased to order proclaim and sale of the property on 5th January 1989. The case was posted to 23rd February 1989. The decree-holder prayed for time and the sale was adjourned to 16th March 1989. Again the decree-holder prayed for time and the sale was adjourned to 21st March 1989. Unless the judgment-debtor waives the right to sale under the same proclamation, no sale shall be conducted without afresh proclamation. The sale was adjourned beyond 30 days without any waiver. The decree-holder had played fraud by affixing Rule 66 notice to judgment-debtor Nos. 3 to 5. There was no such affixure and the publication is illegal. There is no tom-tom conducted to this case. The sale proclamation was made fraudulently. It was notified that the sale would be conducted at 12 p.m. on 23rd February 1989 at the Sub Court, Ernakulam. The sale was conducted by the Central Nazirat his office after 2 p.m. only. Hence, the property could not fetch the actual market value. Petition to set aside the sale was filed on 20th May 1989. The sale was conducted on 23rd February 1989. The judgment-debtors filed objection. P.Ws. 1 to 6 were examined. The Executing Court, after considering the oral and documentary evidence, was satisfied that there was no irregularity or fraud in publishing or conducting the sale. Thus, the petition was dismissed. It is against this the present C.M.A. is filed.

Thereafter, the Petitioner filed review petition. In paragraph 7, it is stated thus: "When the court has fixed the reserve price at Rs. 75,000 unless the court otherwise direct, the reserve price shall be not less than the amount due". In paragraph 8 of the review petition, it is stated thus: "The publication of sale showing the upset price at Rs. 40,000 is a material irregularity and amounts to fraud...."

Objection was filed by the auction purchaser. It was stated in paragraph 6 that the upset price was never fixed as Rs. 75,000. The property was sold for a price more than the upset price shown in the sale proclamation. Further, it was stated that there was no ground made to review. The review petition was dismissed by order dated 11th February, 1992. In paragraph 8 of the order, it is stated that the draft proclamation was filed showing the price at 40,000. No objection was filed by the Petitioner regarding the valuation shown in the draft proclamation. The property was sold for Rs. 60,000. In such a case, it can be seen that no substantial injury has been caused to the Petitioner. It also shows that there was no mistake apparent on the fact of the records. Thus, the E.A. to review was dismissed.

In paragraph 2 in the statement of fact of the memorandum of appeal, it is stated that in the draft proclamation the upset price was shown as Rs. 75,000. The proclamation was settled and upset price was fixed at Rs. 75,000. When the proclamation was published, the upset price was slashed down to Rs. 40,000 without an order from the court. The property was sold for Rs. 60,000.

Shri P. Sukumaran Nair, learned senior counsel appearing for the Appellants raised two points, firstly, that the decree-holder filed a proclamation schedule showing the value of the property as Rs. 75,000. Notice of the proclamation was given to the judgment-debtors. Since there was no objection regarding the valuation, the Executing Court, by order dated 28th January 1988, fixed the upset price or the valuation at Rs. 75,000. But unfortunately, in the final sale proclamation, the value was shown as Rs. 40,000. Hence, according to the counsel, there was a material irregularity in conducting the sale. The second contention raised by the counsel for the Appellant is that the court ordered on 5th January 1989 to proclaim and conduct the sale on 23rd February 1989. In the sale proclamation, it was stated that the properly will be sold by Central Nazir on 23rd February 1989 at 12 noon. On 23rd February 1989, the decree-holder prayed for time and the sale was adjourned to 16th March 1989. On 16th March 1989, again the decree-holder prayed for time and the same was adjourned to 22nd March 1989. Contention of the Appellants is that the sale was held on 22nd March 1989. The property was sold for Rs. 60,000. The property was Sold at 1.45 p.m. on 22nd March 1989 by the Ameen in the presence of Nazir. Contention of the Appellants is that since originally when the time fixed was 12''o clock, nobody was present when the property was sold. There was no publicity that the property would be sold at 1.45 p.m. and hence the property did not fetch the real value. It is further stated that the court below did not fix a time or place for the sale and hence, there is material irregularity.

Shri V. Sankara Raja, learned Counsel appearing for the second Respondent submitted as follows: The sale price fixed in the proclamation was Rs. 40,000 and not Rs. 75,000 as claimed by the Appellants. Further, the judgment-debtors were absent when the court settled the proclamation and sale of the property and they did not object when the valuation shown in the proclamation Was Rs. 40,000, It was further stated that the application for setting aside the sale does not show as to how the Appellants have sustained substantial injury by reason of irregularity or fraud and no proof has been given as to whether the applicants have suffered injury.

The main contention advanced by the counsel for the Appellants is that in the draft proclamation, the value of the property was stated by the decree-holder himself as Rs. 75,000 and the court accepted that application by order dated 28th January 1988. But subsequently, in the final proclamation, the value was shown as Rs. 40,000. There is material irregularity in conducting the sale. No doubt, the objection was not taken in that form in the petition to set aside the sale. But in the review petition, there is an indication of such ground. Instead of saying as the upset price, it was stated as reserve price. This is clear from grounds 7 and 8 in the petition. The court below has also adverted to this fact, but has taken the view that in the draft proclamation also the value shown is only Rs. 40,000.

We went through the records. The draft proclamation was filed by the decree-holder on 25th June 1985. In the column...it is stated Rs. 75,000, both in words and in figures. E.P. was also filed on 25th June 1985. Further, in the order sheet, the court has passed the following order: "Hence proclamation settled. Upset price fixed is Rs. 75,000. Proclamation and sell on 28th January 1988." It is seen from the proceedings that on 28th January 1988, the case was posted on different dates. The decree-holder had to get time for producing the encumbrance certificate etc. and finally on 5th January 1989, the court ordered proclamation and sale. Thus, from the proceedings, it is clear that the upset price was fixed at Rs. 75,000. Counsel for the auction purchaser was also not able to show us any proceedings by which the upset price was fixed at Rs. 40,000. Thus, from the records, it is clear that the upset price was fixed at Rs. 75,000. There is also no dispute that in the sale proclamation, the upset price was shown as Rs. 40,000.

In K.S. Nagendra Iyer and Another Vs. M. Varadaraja Pillai and Others, a passage has been quoted from the decision reported in Ramasesha Iyer v. Ramanujachariar AIR 1935 Mad 459, which is as follows:

It is a mis-statement of the value of the property which is so glaring in amount that it can hardly have been made in good faith, and which, however, it came to be made, was calculated to mislead possible bidders and to prevent them from offering adequate prices or from bidding at all.

In Chethandosji Varu (Died) Digyadassan Rajendra Ramadasjee Varu Vs. The Board of Trustees Tirumalai, Tirupathi Devasthanams and Another, , it was stated that the reduction of the upset price without notice amounts to irregularity coming under Order 21, Rule 90. Even otherwise from the statement of the case, we are of the view that, when the upset price was reduced from Rs. 75,000 to Rs. 40,000, irregularity occurred, because, the upset price shown in the sale proclamation is nearly one half of the actual valuation shown in the draft proclamation. According to us, there has been material irregularity in publishing and conducting the sale. Learned Counsel for the Respondent then submitted that the court ordered proclamation and saie on 23rd February 1989. It was in the presence of the judgment-debtors and the judgment-debtor''s did not object when the valuation shown was Rs. 40,000. We cannot accept this plea. The draft proclamation was finalised with value at Rs. 75,000. The decisions cited by the learned Counsel for the Respondent, viz., Bhaskar Traders v. Kunjiraman 1987 (2) KLT 239 and Shila Pal and Others Vs. Comilla Banking Corporation Ltd. and Others, are cases to the effect that where at the time of settling the proclamation, if the judgment-debtor does not object to the same, he cannot later complain that the value fixed is low. But the facts of this case are different from the facts of those decisions.

Learned Counsel for the Respondent then contended that unless the Petitioner proves that he has suffered substantial injury, the sale need not be set aside even if there is material irregularity. It was further contended that''there is not even a pleading to that effect. Learned Counsel for the Appellant submitted that so far as the facts of this case are concerned, it is implicit that the Petitioners/Appellants have suffered substantial injury. In Smt. Laxmi Devi Vs. Sethani Mukand Kanwar and Others, the Supreme Court observed thus:

Before application made under Order 21, Rule 90 can succeed, the applicant has to show that the impunged sale was vitiated by a material irregularity or fraud in publishing or conducting it and as required by the proviso, it is also necessarily that he should show that in consequence of the said irregularity or fraud, he had sustained substantial injury. Therefore, the application ought to contain allegation in regard to the material irregularity as well as an allegation as to Substantial injury. But where substantial injury is alleged to be implicit in the material irregularity set out in the application, it would be too technical to hold that the application should be dismissed on the preliminary ground that no specific or express averment has been made as to substantial injury suffered.

In Sri Radhev Shyam v. Shyam Behari Singh (1970) 2 S.C.W.R. 362 it was held that what has to be established is that there was not only inadequacy of the price but that inadeqacy was caused by reasons of the material irregularity or fraud. In Putti Kondala Rao and Ors. v. Vellamanchili Sitarattamma and Anr. 1976 U.J. (S.C.) 165 the Supreme Court observed thus:

Sometimes, however, there may not be express allegations of substantial injury but the same may appear to be implicit from all facts and circumstances alleged.... The allegations in the petition could be read to imply substantial injury to the judgment-debtors.

Thus, on the basis of the above decisions, we cannot dismiss the petition to set aside the sale merely on the ground that there is no express allegation regarding substantial injury. On the facts and circumstances, we are satisfied that the Appellants have suffered substantial injury by the mistakenment of the value of the property in the sale proclamation.

The next ground urged by the learned Counsel for the Appellants is that the time and place was not fixed by the learned Judge when the property was ordered to be sold. The contention is as follows: On 5th January 1989 when the court ordered sale of the property, the date fixed for sale was 23rd February 1989. From the sale proclamation, it appears that the sale was to be effected by the Central Nazir in the court at 12 Noon. It appears that on 23rd February 1989, the sale did not take place and it was adjourned to 16th March 1989. On 16th March 1989 again it was adjourned to 22nd March 1989. From the records, it was found that on 22nd March 1989, the property was sold at 1.45 p.m. Learned Counsel urges that the sale at 1.45 p.m. was not fixed by the court and hence, there is material irregularity.

Under Order 21, Rule 69, the court may in its discretion, adjourn any sale hereunder to a specified day and hour, and the officer conducting any such sale may in his discretion adjourn the sale, recording his reasons for the adjournment. Rule 341 of the Civil Rules of practice states as follows: "All Court sales shall commence at 1.45 p.m. and the sale of any lots not completed before 3.15 p.m. shall be adjourned to 1.45 p.m. on the next Court day". On the basis of the decisions rendered by various courts, it is clear that omission to specify the time and place of the auction will amount to material irregularity under Order 21, Rule 90 of the Code of Civil procedure.

As already stated, a perusal of the record will show that the time and place were fixed originally when the sale was posted on 5th January 1989 and subsequently, the sale was posted on 22nd March 1989. We don''t find from the records any order posting the property for sale at 1.45 p.m. No doubt, as per the Civil Rules of Practice, the property has to be auctioned between 1.45 p.m. and 3.15 p.m. But in this case, complication has arisen because earlier, the court posted the property for auction at 12 Noon. The argument of the learned Counsel for the Appellants is that since earlier the time fixed was 12 Noon, the intending bidders were under the impression that the sale would take place at 12 Noon. In the result, no publicity was given that the property would be sold at 1.45 p.m. We are satisfied on the facts and circumstances of the case that material irregularity "had been committed by conducting the sale at 1.45 p.m. without previously fixing the time. We also do not know how earlier, the court fixed the sale to be taken place at 12 Noon when the Civil Rules of Practice prescribes that it should be between 1.45 p.m. and 3.15 p.m. All Executing Courts will take this into consideration and shall post the sales between 1.45 p.m. and 3.15 p.m. We also feel that every time when the sale is posted, the court should fix time and place of the auction in order to avoid any irregularity.

Learned Counsel for the Respondent then submitted that in case this Courts sets aside the sale, his client is entitled to return of the purchase money with interest. He contended that the amount of Rs. 60,000 was deposited in 1989. and is lying in court without any interest. Learned Counsel also brought to our notice the decision in Thomas Joseph v. Catholic Cyrian Bank 1998 (1) KLT 986. Learned Counsel for the Petitioner opposed this. He submitted that the judgment-debtors are not liable to pay any interest. Under Order XXI Rule 93 of the Code of Civil Procedure, the purchaser shall be entitled to an order for repayment of his purchase money, with or without interest as the court may direct, against any person to whom it has been paid. In Hindi Pracharak Prakashan and another Vs. M/s. G.K. Brothers and others, , the Supreme Court directed the judgment-debtor to pay interest at 12 per cent to the auction purchaser. In this case, it has not been proved that there has been any collusion" between the decree-holder and the auction purchaser.

In the above view we are of the opinion that the auction purchaser is entitled to interest on the purchase money and we fix it at 10 per cent per annum on the basis of the decision in Thomas Joseph v. Catholic Syrian Bank 1998 (1) KLT 986.

It is now found that a total amount of Rs. 1,20,000 was deposited in the executing Court. This includes Rs. 60,000 realised on sale. Out of the above amount, it is seen that an amount of Rs. 63,000 had been withdrawn. The balance amount is Rs. 57,000. It is further seen that the above amount of Rs. 57,000 has lapsed to the Government. Thus, an amount of Rs. 57,000 is now available for payment to the auction purchaser.

In the result, the C.M.A. is disposed of as follows: The sale held on 22nd March 1989 in E.P. No. 344 of 1985 in O.S. No. 253 of 1981 is hereby set aside. E.A. No. 1068 of 1991 is allowed. The auction purchaser is entitled to withdraw the amount of Rs. 57,000 lying in deposit by making an application to the Executing Court and also necessary applications under Rule 396 of the Civil Rules of practice. The judgment-debtors are liable to pay an amount of Rs. 3,000 and interest at the rate of 10 per cent per annum on the sale amount within two months from today to the auction purchaser. If the above amount is not paid as stipulated above, the same will carry interest till the date of deposit. There will be a reduction of Rs. 3,000 towards the decree debt when the judgment-debtors pay Rs. 3,000 to the auction purchaser. The decree-holder is at liberty to bring the properties for sale again according to law after filing fresh proclamation schedule in case the judgment-debtors have not discharged the debts within two months from today.