Prabha Choubey (Smt.) vs Devi Prasad and Others

Nawal Kishore Agarwal, J.—Both the appeals i.e. MA Nos. 440/93 & 441/93 have been filed by the auction purchaser against the order dated 14.08.1993 passed by Third Additional District Judge, Durg, in execution case Nos. 8B/91 and 9B/91 whereby the executing court has refused to confirm the sale. Since common question of law and facts are involved in both the appeals, they are being disposed of by this common order leading case of which is MA No. 440 of 1993.

Facts necessary for disposal of these appeals are that: in execution of the decree passed in Civil Suit Nos. 8B/91 and 9B/91 amounting to Rs. 1,37,091.91, the judgment debtor''s house situated at Mohan Nagar, Durg, was put to auction.

The trial court, vide order dated 01.07.1992 permitted the decree holder to purchase the property in auction; sale proclamation was issued in accordance with provisions contained in Order 21 Rule 66 & 61 of CPC; auction notice was published in daily newspaper; reserve price was fixed at Rs. 1,50,000/- and after completing the formalities the auction was held on 05.07.1993 at Mohan Nagar, Durg, in presence of decree holder Gulab Chand Soni.

Auction purchaser Chandrashekhar Choubey was the highest bidder and the bid was knocked down in his favour at Rs. 1,77,000/-; he deposited 1/4th amount of Rs. 44,250/- on the same day and remaining amount of Rs. 1,32,750/- on 19.07.1993 i.e. within 15 days from the date of auction.

Objection in terms of Order 21 Rule 89, 90 & 91 were not raised by the persons entitled to raise such objection, however, the objection was raised by a stranger i.e. Brijmohan Bajaj saying the amount on which the bid was knocked down in favour of auction purchaser is shockingly inadequate and arbitrary, as according to him valuation of house in question was Rs. 5 Lakhs. He had also shown his readiness to purchase the property in question for consideration of Rs. 3 Lakhs.

The court below vide order dated 14.08.1993 refused to confirm the sale and directed for re-auction of the house in question.

Feeling aggrieved and dissatisfied with the above orders, the instant appeals have been filed by the auction purchaser Chandrashekhar Choubey.

This court vide order dated 14.09.1993 stayed the order impugned.

During pendency of appeal, auction-purchaser/Chandrashekhar Choubey, decree holder/Gulab Chand Soni and objector/Brijmohan Bajaj died and their legal representatives were brought on record.

Shri P.R. Patankar, learned counsel appearing for the auction purchaser/appellant, by placing reliance upon the judgments passed in cases of Pandit Sridat Vs. Mohar Singh and Another, , Gordhandas Ranchhoddas Vs. Ishvarbhai Chhanalal, , Ambujammal Vs. P. Thangavelu Chettiar and Another, and Rajender Singh Vs. Ramdhar Singh and Others, contended, if a sale cannot be set aside under the provisions of Order 21 Rule 89 to 91, sale in favour of purchaser must be confirmed under Order 21 rule 92 and mere inadequacy of price is not a ground to set aside the same and the trial court has committed manifest error in not confirming the sale.

On the other hand, Shri Malay Shrivastava, learned counsel appearing for the respondent/objector supported the order impugned and submitted, even though the objector was not entitled to raise objections under Order 21 Rule 89 - 91, but, it is the duty of the court to see that the price fetched at the auction is an adequate price even though there is no suggestion of irregularity or fraud. In support of contention, reliance has been placed upon the judgments passed in cases of Navalkha and Sons Vs. Ramanuja Das and Others, and Desh Bandhu Gupta Vs. N.L. Anand and Rajinder Singh,

Shri Yashwant Tiwari, learned counsel appearing for decree holder also supported the order.

I have heard the counsel appearing for the parties and perused the orders impugned including records of both the appeals.

The, trial court, observing, the final bid has been illegally knocked down by the sale Amin; the bid price is inadequate as the decree holder himself had shown the value of property in question as 3 Lakhs, refused to confirm the sale.

The auction warrant shows, the house in question was auctioned at Mohan Nagar, Durg in presence of decree holder by fixing reserved price as Rs. 1,50,000/-. The decree holder did not object the reserved price fixed in the matter. The judgment debtor was exparte. The final bid was knocked down at Rs. 1,77,000/-. Even after permission of the court to offer the bid, the decree holder did not participate in the auction proceeding. On the contrary, he also challenged the order impugned by filing Misc. Appeals which have been subsequently withdrawn. On an application filed by the decree holder, this court vide order dated 09.02.2004, permitted him to withdraw the decreetal amount. The objector himself has stated in the application, the price of the property as 5 Lakhs, but offered only 3 Laths that too he has not deposited in the court despite permission granted vide order dated 09.02.2004.

The Supreme Court in case of Desh Bandhu Gupta (Supra), has held: the estimate of the value of the property is a material fact to enable the purchaser to know its value. It must be verified as accurately and fairly as possible so that the intending bidders are not misled or to prevent them from offering inadequate price or to enable them to make a decision in offering adequate price.

The Supreme court in case of M/s Navalakha & Sons (Supra), while dealing with Rule 273 of Company''s Court Rules, 1959, and terms and conditions imposed by the company Judge and having found serious procedural lapse, has observed in para 5 & 6 as under:

Rule 273 of Companies (Court) Rules, 1959 is to the following effect: "Procedure at sale-Every sale shall be held by the Official Liquidator, or, if the Judge shall so direct, by an agent or an auctioneer approved by the Court, and subject to such terms and conditions, if any, as may be approved by the Court. All sales shall be made by public auction or by inviting sealed tenders or in such manner as the Judge may direct."

The principles which should govern confirmation of sales are well-established. Where the acceptance of the offer by the Commissioners is subject to confirmation of the Court the offerer does not by mere acceptance get any vested right in the property so that he may demand automatic confirmation of his offer. The condition of confirmation by the Court operates as a safeguard against the property being sold at inadequate price whether or not it is a consequence of any irregularity or fraud in the conduct of the sale. In every case it is the duty of the Court to satisfy itself that having regard to the market value of the property the price offered is reasonable. Unless the Court is satisfied about the adequacy of the price the act of confirmation of the sale would not be a proper exercise of Judicial discretion. In Gordhan Das Chuni Lal v. S. Sriman Kanthimathinatka Pillai it was observed that where the property is authorised to be sold by private contract or otherwise it is the duty of the Court to satisfy itself that the price fixed is the best that could be expected to be offered. That is because the Court is the custodian of the interests of the Company and its creditors and the sanction of the Court required under the Companies Act has to be exercised with judicial discretion regard being had to the interests of the Company and its creditors as well. This principle was followed in Rathnaswami Pillai v. Sadapathi Pillai and S. Soundarajan v. Roshan & Co. In A. Subbaraya Mudaliar v. K Sundarajan it was pointed out that the condition of confirmation by the Court being a safeguard against the property being said at an inadequate price, it will be not only proper but necessary that the Court in exercising the discretion which it undoubtedly has of accepting or refusing the highest bid at the auction held in pursuance of its orders, should see that the price fetched at the auction is an adequate price even though there is no suggestion of irregularity or fraud. It is well to bear in mind the other principle which is equally well-settled namely that once the Court comes to the conclusion that the price offered is adequate, no subsequent higher offer can constitute a valid ground for refusing confirmation of the sale or offer already received. (See the decision of the Madras High Court in Roshan & Co. case).

The Supreme Court in case of Janak Raj Vs. Gurdial Singh and Another, while dealing with Order 21 Rule 89 to 92, has held: ordinarily, if no application for setting aside a sale is made under any of the provisions of Rules 89 to 91 of Order 21, or when any application under any of these Rules is made and disallowed, the court has no choice in the matter of confirming the sale and the sale must be made absolute, and observed in para 4 as under:-

Before referring to the various decisions cited at the Bar and noted in the judgment appealed from, it may be useful to take into consideration the relevant provisions of the Code of Civil Procedure. So far as sales of immovable property are concerned, there are some special provisions in Order 21 beginning with Rule 82 and ending with Rule 103. If a sale had been validly held, an application for setting the same aside can only be made under the provisions of Rules 89 to 91 of Order 21. As is well known, Rule 89 gives a judgment-debtor the right to have the sale set aside on his depositing in court a sum equal to five per cent of the purchase money fetched at the sale besides the amount specified in the proclamation of sale as that for the recovery of which the sale was ordered, less any amount which may, since the date of sale, have been received by the decree- holder. Under sub-rule (2) of Rule 92 the court is obliged to make an order setting aside the sale if a proper application under Rule 89 is made accompanied by a deposit within 30 days from the date of sale. Apart from the provision of Rule 89, the judgment-debtor has the right to apply to the court to set aside the sale on the ground of a material irregularity or fraud in publishing or conducting it provided he can satisfy the court that he has sustained substantial injury by reason of such irregularity or fraud. Under Rule 91 it is open to the purchaser to apply to the court to set aside the sale on the ground that the judgment-debtor had no saleable interest in the property sold. Rule 92 provides that where no application is made under any of the Rules just now mentioned or where such application is made and disallowed the court shall make an order confirming the sale and thereupon the sale shall become absolute. Rule 94 provides that where the sale of immovable property has become absolute, the court must grant a certificate specifying the property sold and the name of the person who at the time of sale was declared to be the purchaser. Such certificate is to bear date of the day on which the sale becomes absolute. Section 65 of the CPC lays down that where immovable property is sold in execution of a decree and such sale has become absolute, the property shall be deemed to have vested in the purchaser from the time when it is sold and not from the time when the sale becomes absolute. The result is that the purchaser''s title relates back to the date of sale and not the confirmation of sale. There is no provision in the CPC of 1908 either under Order 21 Rule 1 or elsewhere which provides that the sale is not to be confirmed if it be found that the decree under which the sale was ordered has been reversed before the confirmation of sale. It does not seem ever to have been doubted that once the sale is confirmed the judgment-debtor is not entitled to get back the property even if he succeeds thereafter in having the decree against him reversed. The question is, whether the same result ought to follow when the reversal of the decree takes place before the confirmation of sale.

The Supreme Court in case of Rajender Singh (Supra), while considering the provisions of Order 21 Rule 90, has held: mere inadequacy of price is not a ground for setting aside the court sale.

The ratio of law laid down by the Supreme Court in cases of Janak Raj (Supra) and Rajender Singh (Supra) are squarely applicable to the facts and circumstances of the present case. Further, the respondents have failed to establish the price fetched at the auction was an inadequate price, and therefore, the ratio of law laid down by the Supreme Court in cases of Desh Bandhu Gupta (Supra) and M/s Navalakha & Sons (Supra) rendered considering the provisions of Rule 273 of the Company Rules, are not applicable to the facts and circumstances of the present case and are of no help to the respondents.

There may be cases in which, apart from the provisions of Rules 89 to 91, the court may refuse to confirm a sale, as, for instance, where a sale is held without giving notice to the judgment-debtor, or where the court is misled in fixing the reserve price or when there was no decree in existence at the time when the sale was held. Leaving aside cases like these, a sale can only be set aside when an application under Rule 89 or Rule 90 or Rule 91 of Order 21 has been successfully made.

The case on hand is neither a case where the judgment debtor was not summoned nor is a case where without giving notice to the judgment debtor, reserved price was fixed, therefore, the trial court was not correct in not confirming the sale only unproved ground of inadequacy of the price.

The court below was also not correct in holding: sale Amin not empowered to knock down the bid. Indisputably, the property was auctioned at Mohan Nagar, Durg and not at court premises. As per MP Amendment in Order 21 Rule 65, which is also applicable in the State of Chhattisgarh, the officer appointed by the court for auction is competent to declare the highest bidder as purchaser at the sale, provided that, where the sale is made in, or within the precincts of the Court-house, no such declaration shall be made without the leave of the court.

Here, indisputably, the sale is made outside the precincts of the Court-house i.e. at Mohan Nagar, Durg. The auction warrant and auction notice also reveal the court itself authorized the sale Amin under Order 21 Rule 66 to knock down the bid. Therefore, the ground taken by the trial court for refusing confirmation of sale that sale Amin was not authorized to knock down the bid is also on the face incorrect.

Considering the facts and circumstances of the case, I am of the view that the court below has committed gross error in not confirming the sale on the grounds stated in the orders impugned and the same are not sustainable in law.

For the reasons mentioned hereinabove, the appeals are allowed, the orders impugned, being not sustainable in law, deserve to be and are hereby set aside. The sale in favour of appellants stand confirmed under Order 21 Rule 92 of CPC. The trial court is directed to issue appropriate certificate in favour of appellants. No order as to costs. A copy of this order be placed on record of MA No. 441/93.