Ramaswami Reddiar vs The Official Receiver of South Arcot and Another

Horwill, J.—This is an appeal against the order of the District Judge of South Arcot setting aside a sale by the Official Receiver of items 1 to

10 of an insolvent''s property on the 6th May, 1938.

The Official Receiver in the due course of his administration of the assets of the insolvent held a sale on the 30th August, 1937 which was duly

advertised. The highest bidder was the appellant; and the sale was knocked down in his favour for Rs. 113, of which he deposited Rs. 32 at once

and a further Rs. 81 on the 13th September, 1937. In accordance with the practice of the Official Receiver, he said that the sale in the appellant''s

favour would be subject to such further bids as might be offered by creditors. He appears to have sent notices to the other creditors telling them

that if they did not make any higher bids, the sale would be confirmed in the appellant''s favour. On the 4th September, 1937 the respondent sent

an offer to the Official Receiver which reached him on the 6th September, 1937. The money should have been deposited within seven days of the

6th September, 1937, that is, on or before the 13th September, 1937. The money was not, however, paid, and the Official Receiver, apparently

not fully aware of the various bids that had been made and of the circulars he had issued, confirmed the sale in the appellant''s favour on the 30th

November, 1937. On the 16th February, 1938, the respondent deposited the Rs. 120 which was the amount of the offer that he had made. The

Official Receiver, on the 24th March, 1938, noted in Ex. A that Vasudeva Reddiar (respondent) had offered Rs. 120 and he added that notice

should go to all creditors and bidders for them to show cause why the higher offer should not be accepted. He later made a note to the effect that

Vasudeva Reddiar''s offer was made for items 1 to 8, which had already been sold, that items 16 and 17 were not included in the list of assets

disclosed by the insolvent, and that he would therefore take no further steps to call for higher bids. On the 6th May, 1938 he executed a sale deed

in favour of the appellant. The respondent carried the matter to the District Court u/s 68 of the Provincial Insolvency Act and asked the Judge to

set aside the sale to the appellant on the ground that there had been no confirmation of the sale, that the Official Receiver had called for offers, and

that in accordance with the memo of the Official Receiver he had deposited Rs. 120. He asked that the sale should be confirmed in his favour. The

learned District Judge, while concluding that the sale was really confirmed in the appellant''s favour on the 30th November, 1937, held that that

sale was irregular, in that the Official Receiver had made it clear that he had no intention to confirm the sale in the appellant''s favour if there were

higher bidders among the creditors. The appellant has therefore brought the present appeal against this order of the District Judge.

We find it difficult to understand how the confirmation of the sale in the appellant''s favour can be said to be irregular. The Official Receiver was

under no contractual obligation either to the respondent or to any other person to accept their offers; and he might well have refused to confirm the

sale in some other person''s favour unless his bid was substantially higher than that of the appellant. Actually, it would appear from the note to Ex.

A, that the Official Receiver was ignorant of the fact that he had already sold the items to the appellant; but whether he was aware of it or not, he

was justified in confirming the sale in favour of the appellant--especially as the bid of the respondent was only Rs. 7, higher than that of the

appellant. Although the District Judge had power to set aside the sale and to pass an order in favour of the respondent yet he should not have done

so lightly after there had been a legal conveyance of the property in favour of the appellant. We are of opinion that there was no sufficient ground

for setting aside the sale in favour of the appellant.

It is unnecessary to discuss in detail the contention of the learned Counsel for the appellant that the application of the respondent was time-

barred. The petition, the order on which is appealed against, was filed on the 2nd July, 1938, which was the re-opening date after the summer

vacation. The sale was on the 30th August, 1937, the confirmation on the 30th November, 1937, and the execution of the sale deed on the 6th

May, 1938. All of these acts by the Official Receiver could be the subject of an application u/s 68; for they were the acts of the Receiver against

which the respondent was aggrieved. He had a cause of action not only on the 30th November, 1937, therefore, but on the 6th May, 1938, also.

21 days after the 6th May, 1938 terminated during the summer vacation, and his petition was presented on the re-opening day. It was therefore in

time.

Both the appellant and the respondent are innocent victims of a system which we do not consider to be in the best interests of creditors. The

auction held by the Official Receiver should be final; but it would appear that after an auction is held, the Official Receiver circularises the other

creditors, and if he then receives a higher bid, the creditors and the bidders are informed of that bid also. This process apparently continues until no

higher bid is received. We consider this system to be objectionable. Clearly, persons will not come forward and bid for the property at a public

auction if the highest bid is not to be accepted. This practice has led to the confusion which has resulted in injustice to both the parties in the

present case.

The appeal is allowed with costs in both the Courts.