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Judgment
Srinivasan, J.—The first of these appeals arises out of C.S. No. 129 of 1982 filed by respondents 1 to 4 therein while the other appeal is
against C.S. No. 492 of 1982 filed by the appellant therein. It is convenient to refer to the parties by their rank in C.S. No. 129 of 1982. The
plaintiffs are four in number. Plaintiffs 3 and 4 are sons of the first plaintiff. The second plaintiff is a partnership firm, whose partners were originally
the first plaintiff and his mother Jagadambal Ammal who died on 13-10-1980. According to the deed of partnership, the firm does not get
dissolved by the death of a partner, but the heirs of such deceased person would get into the shoes of the deceased. According to the plaintiffs, the
interest of Jagadambal Ammal was bequeathed by her registered will dated 21-6-1971 to plaintiffs 3 and 4. The subject matter of dispute is a
property comprising land of an extent of 3 grounds and 726 sq.ft. and a superstructure thereon situated in No. 23, Miller''s Road, Kilpauk,
Madras-10. The first plaintiff was the owner of the said property and also of the adjacent properties having obtained the same under a deed of gift
settlement executed by his father on 28-9-1963. He sold the adjacent properties to his father in 1970 and retained the suit property. He leased the
land to the second plaintiff partnership firm on 24-1-1970 for the purpose of putting up buildings and doing business of letting out the same to
tenants and realising rents therefrom. Though it is said that the building was put up thereafter, there is evidence on record to show that major
portion of the building was constructed even in 1969 by the first plaintiff after obtaining permission from the Corporation of Madras. Some
additions would appear to have been made in 1970. The firm had incurred several debts and executed mortgages. In Order to discharge the same,
plaintiffs 1 and 2 along with Jagadambal, the first plaintiffs mother, executed a simple mortgage on 18.1.1980 in favour of the first defendant for a
sum of Rs. 55,000/- borrowed from him. On the same day, a second mortgage was executed by the same persons in favour of the second
defendant, who was a minor, represented by her father, for a similar sum of Rs. 55,000/- borrowed from her. A third mortgage was also executed
on that date in favour of the third defendant for a sum of Rs. 40,000/-. All the three simple mortgages contain clauses conferring power of sale on
the mortgagees u/s 69 of the Transfer of Property Act. The mortgagors committed default in payment of interest and notices were issued by the
mortgagees calling upon the mortgagors to pay the amounts due. In June 1981, the mortgagees entrusted the relevant documents to Auctioneers by
name M/s. Murry & Co, the fourth defendant in the suit, with a request to advertise sale of the premises in public auction. The fourth defendant
sent letters to the plaintiffs in the beginning of June 1981 informing them that the property will be sold in public auction as per the instructions of the
mortgagees. It appears that the mortgagors paid the arrears of interest and defendants 1 to 3 instructed the fourth defendant that they were
withdrawing the notices with a view to give one more chance to the plaintiffs to pay the interest regularly and instructed them not to proceed
further. There was further default on the part of the plaintiffs and a notice was issued on behalf of the defendants to plaintiffs 1 and 2 calling upon
them to pay the entire amount due forthwith and informing that in default the property would be brought to sale without the intervention of Court
(Vide Exs. P-7, P-8 and P-9). As there was no compliance, the fourth defendant was instructed by defendants 1 to 3 to advertise and sell the
property. The fourth defendant sent letters on 11-12-1981 to the plaintiffs informing them of the proposed public auction. Acknowledging receipt
of the said letters, the first plaintiff sent a reply on 20-12-1981 (Ex.D-14) stating that he would arrange to settle the entire amount to the
mortgagees and prayed for 15 days'' time to do so. He sent copies of the said letter to defendants 1 to 3. But he did not make arrangements to
settle the dues, though he paid some amounts towards interest due. On behalf of defendants 1 to 3, a letter was sent by the second defendant''s
guardian on 21-1-1982 to plaintiffs 1 and 2 informing them that the papers would be placed with the auctioneers for holding a public auction
(Ex.P-13). As there was no compliance with the said notice, the fourth defendant printed auction notices and sent copies thereof to the plaintiffs in
February 1982. There was proclamation by tom tom in the property on 2-2-1982. There was also advertisement in ''The Hindu'' and ''Dhina
Thanthi''. The auctions were to be held on 17-2-1982, 18-2-1982 and 22-2-1982 in pursuance to the first mortgage, second mortgage and the
third mortgage respectively. On 17-2-1982 the auction was not held as there was no bidder. According to the defendants, the plaintiffs sent their
henchmen to the place of auction and prevented any person from entering the premises to take part in the auction, which necessitated a complaint
to the police by the defendants. It is also the case of the defendants that on 18-2-1982 they had arranged for police protection and on seeing the
police officials, the plaintiffs'' men did not attempt to prevent any person from taking part in the auction. It is also the case of the defendants that
several persons came to the premises, but only three of them took part in the bid. The bid started at Rs. 3,00,000/-and there was keen
competition among the three bidders. Ultimately, the fifth defendant was proved to be the highest bidder for a sum. of Rs. 6.80,000/-. As per the
conditions of auction, he paid a sum of Rs. 1,70,000/-, being 25% of the bid amount. The balance was to be paid within 15 days therefrom.
In the meanwhile, the plaintiffs filed the suit C.S. No. 129 of 1982 on 4-3-1982. Along with the suit, they filed an application for an injunction
restraining defendants 1 to 4 from executing and registering the sale deed in pursuance of the auction held on 18-2-1982 to the fifth defendant till
the disposal of the suit. An order of interim injunction was passed by the Court and notice was directed to the defendants. Counsel for the plaintiffs
informed the defendants by his letter of the same date of the order of injunction passed by the Court (Ex.D-34). On that date, the fifth defendant
had sent a cheque to the fourth defendant for a sum of Rs. 5,10,000/- being the balance of sale price, but the cheque was returned to him on the
same day by the fourth defendant in view of the Court order.
The application for injunction, viz., Application No. 798 of 1982, was contested by the defendants and a final order was passed in that
application on 27-4-1982. By the said order, the plaintiffs were directed to pay to the mortgagees a sum of Rs. 1,60,000/- plus Rs. 5,000/- as
interest for two months period as condition for injunction on or before 3-6-1982 in addition to the auction charges to the satisfaction of the
auctioneers. The order made it clear that if the conditions were not complied with, the injunction granted therein shall stand vacated. The order also
permitted the auction purchaser to withdraw the amount deposited with the auctioneers i.e., Rs. 1,70,000/- without prejudice to his rights. The
plaintiffs did not comply with the condition imposed by the said order. On 6-7-1982 defendants 1 to 3 wrote to the fifth defendant to deposit the
sale price with the fourth defendant as the order of injunction passed by the Court stood vacated, Accordingly, the amount was deposited. The
fifth defendant informed the fourth defendant that he was nominating his son the 6th defendant as the purchaser in whose name a sate deed could
be executed. Thereafter, the sale deed (Ex.D-50) was executed on 24-7-1982 by the second defendant in favour of the 6th defendant for a total
consideration of Rs. 6,80,000/. The same was intimated to the plaintiffs. It was followed by a notice from the 6th defendant''s lawyer (Ex.P-28) to
plaintiffs 1 and 2 calling upon them to deliver vacant possession of the premises. A reply (Ex.P-29) was sent by the plaintiffs contending that the
sale was not valid and binding on the plaintiffs. The 6th defendant thereafter filed the suit C.S. No. 492 of 1982 on 24-9-1982 for directing the
plaintiffs to deliver vacant possession of the property and pay mesne profits in a sum of Rs. 10,500/- from 24-7-1987 to the date of plaint and at
the rate of Rs. 7000/- per mensem from the date of plaint till the date of delivery of possession.
In C.S. No. 129 of 1982 initially the plaintiffs impleaded only five defendants. Defendants 1 to 3 were the mortgagees, the fourth defendant was
the auctioneer and the fifth defendant was the highest bidder in the auction. In Application No. 1083 of 1983 the 6th defendant was sought to be
impleaded as a party and the Court ordered the same on 9-8-1983. In the plaint as filed originally, after setting out the facts relating to the three
mortgages and the auction sale held on 18-2-1982, it was alleged that the property was worth Rs. 30,00,000/- to Rs. 35,00,000/- and that it was
situated in a very important locality in Kilpauk. It was stated that the bidder had not paid the balance of money and the conveyance had not been
executed in favour of the purchaser. It was averred that the power of sale u/s 69 of the Transfer of Property Act could not be granted successively
in favour of three mortgagees and after the execution of the first mortgage, there was no residue with the mortgagors to confer such a power on the
second and the third mortgagees. The allegation was that the conferment of power of sale in the second and third mortgages was invalid and the
auction sale held in pursuance thereof by the second mortgagee was null and void. It was alleged that no title passed on to the purchaser and the
plaintiffs were ready and willing to pay the amount due under the mortgages. The prayer in the suit was for directing defendants 1 to 3 to receive a
sum of Rs. 1,53,040/- and to redeem the suit mortgages and return the registered documents of mortgage dated 18-1-1980 or alternatively to
execute deeds of cancellation of the mortgages and return the documents of title.
The defendants filed their written statements contesting the claim of the plaintiffs on several grounds including the maintainability of the suit. The
6th defendant, after he was impleaded, filed a written statement adopting the written statement already filed by the fifth defendant and contesting
the maintainability of the suit. The second defendant, after attaining majority, filed a written statement adopting the written statement filed by the first
defendant earlier.
The first plaintiff entered the witness box on 29-1-1985. His deposition as P.W.1 concluded on 5-2-1985, after cross-examination and re-
examination. On 18-2-1985 the plaintiffs filed Application No. 755 of 1985 for amendment of the plaint by including two paragraphs as 14A and
17A and by adding one more prayer in paragraph 19. Though the application was opposed, the learned single judge passed a detailed order on
22-2-1985 granting the amendment on condition of payment of costs of Rs. 250/-. In paragraph 14A of the plaint, which was introduced on
amendment, it was alleged that the suit building consisted of three floors and 84 rooms. The rental income per month was about Rs. 11,000/- in
1982 and the market value of the property was about Rs. 30,00,000/- to Rs. 35,00,000/-. But it was sold only for a sum of Rs. 6,80,000/-. It
was stated, ""The price was so low as in itself to be evidence of fraud The sale of the property was not a bonafide transaction. The low price for
which the property was sold is evidence of unfair advantage. The second defendant has not acted in good faith. The second defendant should have
sold the property as a prudent owner intending to sell her own property."" It was also averred that all the three mortgages constituted a single
transaction and publication of three different auctions in respect of the three mortgages within a short period was made to cause confusion in the
minds of intending bidders. The auction notices did not refer to the dates of the mortgages and the amounts due thereunder. Notices were so
published as to deliberately cause a confusion in the minds of any genuine or bona fide intending bidders and thereby preventing sufficient number
of bidders participating in the auction. It was alleged that the said facts clearly establish that the sale was completely vitiated by fraud and the
plaintiffs were entitled to challenge the sale as a. fraudulent one and having it so declared or setting aside the same and redeem the mortgages. In
paragraph 17A, the plaintiffs valued the suit for the purposes of court-fees and jurisdiction at Rs. 6,80,000/- and paid Court-fee accordingly. In
the prayer paragraph 19, clause (iii) was introduced by which a prayer for declaration that the auction sale held on 18-2-1982 was void, being
vitiated by fraud and consequently to set aside the sale deed dated 24-7-1982 between the second defendant and the 6th defendant was added.
Thus, for the first time, the allegation of fraud was introduced by the plaintiffs in 1985 after the conclusion of the evidence of P.W.1. Necessarily,
the defendants were permitted to file additional written statements and they did so on 7-4-1985 and 9-4-1985. As a consequence P.W.1 was
recalled and he gave further evidence on the basis of the amended plaint. The plaintiffs examined a Civil Engineer as P.W.2 to speak about the
value of the property and a photographer as P.W.3 who took the photographs of the suit building. The defendants examined the second
defendant''s erstwhile guardian as D.W.1, an Assistant working in Murray and Co. the auctioneers, as D.W.2, the fifth defendant as D.W.3 and a
Civil Engineer as D.W.4. The plaintiffs marked as many as 45 documents on their side as Exhibits, while the defendants marked 59 documents.
The learned trial judge by his judgment dated 31-10-1985 passed a decree in C.S. No. 129 of 1982 declaring the auction sale held on 18-2-
1982 and the sale deed dated 24-7-1982 as invalid and that the plaintiffs were entitled to redeem the mortgages on payment of a total amount of
Rs. 2,51,132.41. The usual preliminary decree for redemption was passed. The other suit C.S. No. 492 of 1982 was consequentially dismissed.
The reasons given by the learned judge for holding in favour of the plaintiffs are three in number as follows:-
(1) There was no contract to execute a sale deed in favour of the nominee of the highest bidder. The mortgagee was, therefore, not entitled to
execute a sale deed in favour of the 6th defendant, who was not the highest bidder in the auction. Inasmuch as the sale deed was not executed in
favour of the fifth defendant, who was the purchaser at the auction, the sale was invalid. (2) The property was worth not less than Rs. 25,00,000/-
and it was sold for a very low price at Rs. 6,80,000/-. (3) The description of the property in the auction notices was confusing and it constituted a
material defect touching the hypotheca. It cannot be said that there was due publicity of the property to be sold. Consequently, the purchaser is not
entitled to the protection guaranteed u/s 69(3) of the Transfer of Property Act.
not entitled to execute a sale deed in favour of the 6th defendant, who was not the highest bidder in the auction. Inasmuch as the sale deed was not
executed in favour of the fifth defendant, who was the purchaser at the auction, the sale was invalid.
(2) The property was worth not less than Rs. 25,00,000/- and it was sold for a very low price at Rs. 6,80,000/-.
(3) The description of the property in the auction notices was confusing and it constituted a material defect touching the hypotheca. It cannot be
said that there was due publicity of the property to be sold. Consequently, the purchaser is not entitled to the protection guaranteed u/s 69(3) of
the Transfer of Property Act.
The learned judge rejected the contention of the defendants that the right of redemption of the plaintiffs was no longer subsisting after the execution
of the sale in favour of the 6th defendant by the second defendant. So also the other contention of the defendants that the suit for redemption was
not maintainable inasmuch as the plaintiffs had not deposited the amount due along with the plaint, was rejected.
Defendants 5 and 6 have preferred O.S.A. No. 28 of 1986 while the 6th defendant has preferred the other appeal O.S.A. No. 29 of 1986.
Counsel on both sides repeated the contentions urged before the learned trial judge and cited number of rulings in support of their respective
contentions.
Before adverting to the respective contentions on the facts of this case, it will be better to refer to the law relating to the power of sale u/s 69 of
the Transfer of Property Act and the right of redemption of the mortgagor in order that we can appreciate the facts and circumstances of this case
in a proper perspective with the appropriate background. u/s 69(1)(b) of the Transfer of Property, Act, a mortgagee shall, subject to the
provisions of the said Section, have power to sell or concur in selling the mortgaged property, or any part thereof, in default of payment of the
mortgage- money, without the intervention of the Court, where a power of sale without such intervention is expressly conferred on the mortgagee
by the mortgage deed. Under sub-Section (2), such power shall not be exercised unless and until notice in writing requiring payment of the
principal money has been served on the mortgagor, or on one of several mortgagors, and default has been made in payment of the principal
money, or part thereof, for three months after such service or some interest under the mortgage amounting at least to five hundred rupees is in
arrear and unpaid for three months after becoming due. Sub- Section (3) declares that when a sale has been made in professed exercise of such a
power, the title of the purchaser shall not be impeachable on the ground that no case had arisen to authorize the sale, or that due notice was given,
or that the power was otherwise improperly or irregularly exercised; but any person damnified by an unauthorized or improper or irregular exercise
of the power shall have his remedy in damages against the person exercising the power. Though the protection given to the purchaser under Sub-
section (3) is not fettered in any manner, Courts have interpreted the Section and laid down the law that the protection will be available only in the
absence of fraud.
The law in England has been summarised succinctly in Halsbury''s Laws of England, Fourth Edition, Volume 32, paragraph 726 at pages 333
and 334 as follows:-
Mortgagee not in fiduciary position:-A mortgagee is not a trustee for the mortgagor as regards exercise of the power of sale; he has been so
described, but this only means that he must exercise the power in a prudent way, with a due regard to the mortgagor''s interests in the surplus sale
money. He has his own interest to consider as well as that of the mortgagor, and so long as he keeps within the terms of the power, exercises the
power in good faith for the purpose of realising the security and takes reasonable precautions to secure a proper price, the court will not interfere,
nor will it inquire whether he was actuated by any further motive. This duty to obtain a proper price is owed also to subsequent mortgagees, but
not to a surety. A mortgagee is entitled to sell at a price just sufficient to cover the amount due to him, so long as the amount is fixed with due
regard to the value of the property.
It is sufficient if the mortgagee complies with the terms of the power and acts in good faith, but good faith requires that the property is not to be
dealt with recklessly. If the sale is in good faith and he charges himself with the whole of the purchase money, he may sell on the terms that a
substantial part, or even the whole, is to remain on mortgage. The mortgagee is apparently not bound to watch the market so as to sell at the
highest price. A building society exercising a power of sale, however, is a fiduciary vendor.
If the mortgagor seeks relief promptly, a sale will be set aside if there is fraud, or if the price is so low as to be in itself evidence of fraud, but not on
the ground of undervalue alone, and still less, if the mortgagor has in some degree sanctioned the proceedings leading up to the sale. However, if
the mortgagee does not sell with proper precautions, he will be charged in taking the accounts with any loss resulting from it.
In Davey v. Durrant (26 (New Series) Law Journal Reports - Courts of Chancery, page 830), it was held that a mortgagee with power of sale
is not bound to wait till a more advantageous sale could be effected; nor was he bound to advertise before proceeding to a sale. In Warner v.
Jacob (20 CD 220), Kay, J. explained the ruling of Vice-Chancellor Stuart in Robertson v. Norris (1 Giff. 421) and pointed out that the
mortgagee was not the trustee of the power of sale and it was a power given to him for his own benefit, to enable him better to realize his debt.
The learned Judge said that if he exercised the power bona fide for that purpose, without corruption or collusion with the purchaser, the Court will
not interfere even though the sale be very disadvantageous, unless indeed the price is so low as in itself to be evidence of fraud. On the facts, the
Court held that there was no evidence of mala fides or collusion. In Bettyes v. Maynard (49. N.S. 389), Lindley, L.J. said that merely because it
was harsh to uphold the right of exercise of power of sale, it was not sufficient to set it aside. He observed that unless the purchaser colluded with
the mortgagee so as to make the sale fraudulent, relief could not be granted to the mortgagor. In Haddington Island Quarry Company v. Alden
Wesley Huson and others (1911 A.C. 722), the Privy Council reversed the decree for redemption passed by the Court of Appeal on the ground
that there had been reckless disregard of the interests of the mortgagors in the conduct of the sale and, therefore, the sale was invalid. The Judicial
Committee held that the pleadings contained no charge of fraud or collusion or bad faith against the purchasers and, therefore, there was no
justification for holding that the sale was fraudulent. In Belton v. Bass, Ratcliffe and Gretton, Limited ((1922) 2 CD 449), Russell, J. referred to the
earlier judgments and reiterated the proposition that the mortgagee was not a trustee of the power of sale for the mortgagor and if he was entitled
to exercise the power, the Court could not look into his motives for so doing.
In Cucemere Brick Co. Ltd and another v. Mutual Finance Limited (1971) 2 All ER 633), the Court of Appeal dealt with a case in which the
mortgagor sued for an account against the mortgagees on the footing that the land would have fetched much more than the sale price if the
mortgagees had taken reasonable precautions in relation to the sale. While granting relief to the mortgagors, Salmon, L.J. observed:-
It is well settled that a mortgagee is not a trustee of the power of sale for the mortgagor. Once the power has accrued, the mortgagee is entitled to
exercise it for his own purposes whenever he chooses to do so. It matters not that the moment may be unpropitious and that by waiting a higher
price could be obtained. He has the right to realise his security by turning it into money when he likes. Nor, in my view, is there anything to prevent
a mortgagee from accepting the best bid he can get at an auction, even though the auction is badly attended and the bidding exceptionally low.
Providing none of those adverse factors is due to any fault of the mortgagee, he can do as he likes. If the mortgage''s interests, as he sees them,
conflict with those of the mortgagor, the mortgagee can give preference to his own interests, which of course he could not do were he a trustee of
the power of sale for the mortgagor.
He proceeded to consider the rulings in Kennedy v. de Trafford (1896) I Ch. 762 and Tomlin v. Luce (1889) 43 ChD 191 and held that a
mortgagee in exercising his power of sale does owe a duty to take a reasonable precaution to obtain the true market value of the mortgaged
property on the date on which he desires to sell it and for deciding whether he has fallen short of that duty, the facts must be looked at broadly and
he will not be adjudged to be in default unless he is plainly on the wrong side of the line. Cross, L.J. while concurring with the view expressed by
Salmon, L.J. pointed out that the question whether the mortgagor can or cannot have the sale set aside will depend on whether the purchaser had
notice of breach of duty on the part of the mortgagee. In that case, there was no prayer for setting aside the sale and the case was remitted for
inquiry as to damages. The same proposition of law was reiterated in Standard Chartered Bank Ltd. v. Walker and another (1982) 3 Eng 938.
Now we turn to the rulings of the Courts in India. In Purnananddas Jiwandas v. Jamnabai ILR 10 Bom 49, it was held that a mortgagee
purchasing the mortgaged property with the consent of the mortgagor, under the power of sale contained in the mortgage deed, acquires an
unimpeachable title derived from the power of sale, which is altogether distinct from and overrides his title as a mere incumbrancer.
In N. Ramakrishna Mudali Vs. The Official Assignee of Madras and Others, a Division Bench of this Court held that a private sale by a
mortgagee in exercise of power conferred by the mortgage deed is not affected by the doctrine of lis pendens embodied in Section 52 of the
Transfer of Property Act and is valid, though made during the pendency of a redemption suit filed by the mortgagor. It was also held that a
mortgagee who has such power may assign it with the mortgage to a third person and the latter can validly exercise it. It was further held that
where such power is exercised in part as to an indebtedness which it did not in truth cover, the sale is not invalidated, but the mortgagor is entitled
to damages u/s 69 of the Transfer of Property Act, if he can prove that he has been damnified. In Pichai Moideen Rowthar Vs. Chathurbuja Das
Kushal Das and Sons and Others, , a Division Bench held that a mortgagee with a power of sale is not a trustee of the power of sale and if he
exercises it bona fide for realising his mortgage debt, without corruption or collusion with the purchaser, the Court will not interfere even though the
sale be very disadvantageous, unless indeed the price is so low as in itself to be evidence of fraud.
In Govindaswami Naicker v. Pukhraj Sowcar (1940) II M.L.J. 281 = 52 L.W. 324, a mortgagor filed a suit for injunction restraining the
second mortgagee from bringing the suit properties to sale on the ground that he was an agriculturist entitled to have his debts scaled down and that
until it was done the property should not be brought to sale. As he failed to comply with certain terms imposed by the Court, the property was sold
to a third party by the mortgagee. The plaintiff sought to amend the plaint by impleading the purchaser as a party on the ground that he was a
nominee of the mortgagee and the purchase was fraudulent. The trial court rejected the application and this Court confirmed the same. It was held
that the doctrine of lis pendens would not apply so as to vitiate the sale and that the suits against the mortgagee and the auction purchaser were
entirely on different causes of action and they could not form subjects of a joint suit against the mortgagee and the purchaser.
In M.K. Ranganathan and Another Vs. Govt. of Madras and Others, , a Division Bench of this Court comprising Rajamannar C.J. and
Rajagopala Ayyangar, J. held that a mortgagee''s sale in exercise of the power reserved in that behalf in the mortgage is not liable to be impeached
on account of want of publicity or want of notice as required either by the instrument of mortgage or by the law.
In M.K. Pandarinathan and another v. L.Ct. L.Pl. L. Lakshmi Achi and others AIR 1955 NUC (Mad) 3917, a learned single judge of this
Court held that the motives actuating a mortgagee in exercising his power of sale will not be considered by a Court, but it is incumbent on the
mortgagee to act in good faith and that he must sell as a prudent owner intending to sell his own property with reasonable conditions. The learned
judge added that the mortgagee is not at liberty to look after his own interests alone and it is not right or proper or legal for him either fraudulently
or recklessly or wilfully to sacrifice the property of the mortgagors and that the exercise of the power of sale shall not be oppressive. It was held
that the mortgagee must use every exertion to sell the property at the best price, for, he is chargeable with the full value of the mortgaged property
sold, if for want of due care and diligence it has been sold at an under-value and that the Court wilt interfere if the price is so low as in itself to be
evidence of fraud. With respect to the learned judge, we are of the opinion that the proposition is widely stated and there is a confusion of ideas.
While one part of the observations relates to the relief of setting aside the sale, on the ground of fraud, in exercising the power of sale, the other
part relates to grant of damages to the mortgager for a sale at an inadequate price. The two aspects of the matter shall be kept apart and
considered independently. In our opinion, the judgment of the learned Judge in that case runs counter to the rulings of the Division Bench of this
Court referred to earlier.
In Clara Mookerjea alias Smt. Mathuri Devi and Another Vs. Surendra Manilal Mehta and Others, , it was held that where a mortgaged
property is sold by the mortgagee u/s 69 of the Transfer of Property Act during pendency of a suit for redemption, a purchaser who claims
absolute right in the hypotheca is a necessary and a proper party in a suit brought by the mortgagor for setting aside such sale on the ground of
fraud of mortgagee. In the course of the judgment, the learned judge has further observed that it would be a mistake and a misapprehension to
imagine that the mortgagee is omnipotent and that Courts are powerless to check and correct fraudulent acts. The learned judge has ruled that
''bonafide'' is the essence of the matter and any oblique motive, any underhand dealing or anything not consistent with the honest realisation of the
secured money, on the part of the mortgagee would sufficiently be destructive of all pretensions of bona fides. With respect it should be pointed
out that the observations made by the learned judge are obiter dicta and the only question to be considered before him was whether the purchaser
was a necessary or proper party in a suit for setting aside the sale. The matter arose before him in a Revision Petition against the order of the trial
court dismissing an application to implead the purchaser as a party to the suit for redemption. As a matter of fact, the judgment runs directly
counter to the view expressed in Govindaswami Naicker''s case (1940) II M.L.J. 281 = 52 L.W. 324, which was not obviously cited before the
learned judge. Probably, the learned Judge would have referred the matter to a Bench if the said judgment had been cited before him.
In P.S. Duraikannoo v. M. Saravana Chettiar and another AIR 1963 Madras 468 = 76 L.W. 534, a Division Bench held that the conditions
of auction went to the root of the conditions of the auction sale and time was of the essence of the contract and that the auction purchaser who had
failed to comply with the terms and conditions of the auction sale was not entitled to seek specific performance of the contract or for damages.
In P.L. Chakrapani Naidu Vs. T. Gopal Mudaliar and Others, Division Bench of this Court considered the law on the subject in detail and held
that the power of sale is. given to the mortgagee for his own benefit to enable him to realise his debt and the Court will not interfere merely to
prevent its exercise contrary to the wishes or interests of the mortgagor or even if the mortgagee is seeking some collateral object and not merely
the payment of his debt. The Bench observed that the Court will not inquire into the motives of the mortgagee for exercising the power so long as
he acts bona fide. The Court said that the mere use of the words ""fraud"" and ""collusion"" meant nothing and there must be positive proof of the
same and the burden of proving that a sale is invalid by reason of any infirmity or fraud or collusion was on the mortgagors. It is worthwhile
extracting the following passages in the judgment, which lays down the law emphatically:- ""In the case of a private sale, the mortgagee must act
fairly and with bona fides and reasonable care and try his best to secure the maximum price, but in the case of an auction sale there is no question
of the mortgagee taking any particular care or taking special efforts to secure a good price, because so long as he does not interfere with the
auction and entrust the sale of the property to an auctioneer and if there is a free auction, the mortgagor must take the risk of whatever price the
property fetches in the auction In the instant case, the mortgagee is not guilty of any fraudulent conduct. If a sufficient number of bidders were not
forthcoming, if better offers were not forthcoming, it is all because of the obstructive tactics pursued by the mortgagors. How can the mortgagors
expect bidders to assemble in large numbers when, in the morning of the 12th February, 1959, the mortgagors presented a petition for the
adjournment of the sale, which was disposed of only after the lunch interval on the 12th and when, side by side, the mortgagors had been
distributing pamphlets? The learned judge has overlooked that the mortgagors brought upon themselves all the trouble. It is not the law that the
mortgagee and the auctioneer should adjourn the sale merely because the property does not fetch a price, fair according to the mortgagors, and
there are not large number of bidders participating in the auction. Fraud and collusion cannot be proved by mere suspicion and there must be
convincing, acceptable evidence that the first defendant manoeuvred to have the property purchased in the name of the third defendant benami for
the former and that the former furnished the entire consideration.
We are entirely in agreement with the propositions laid down by the Division Bench. We may point out that in view of the said ruling, the
observations in M.K. Pandarinathan''s case AIR 1955 NUC (Mad) 3917 and Clara Mookerjea alias Smt. Mathuri Devi and Another Vs.
Surendra Manilal Mehta and Others, are not good law.
In Narandas Karsondas Vs. S.A. Kamtam and Another, the Court held that the mortgagee is not acting as the agent of the mortgagor in selling
the property in exercise of his power of sale. The Court pointed out that the mortgagee''s right is different from the mortgagor''s and that the
mortgagee exercises the same under a totally superior claim which is not under the mortgagor but against him. The Court held in the case that the
right of redemption of the mortgagor is not extinguished by a mere contract of sale and until the sale is completed by registration of a deed in favour
of the purchaser by the mortgagee in accordance with the provisions of the Registration Act, the mortgagor does not lose his right of redemption.
In Mohammed Ali v, Adbul Salam Sabeb (1982) I M.L.J. 425 = 95 L.W. 213 it was held that the conferment of a power of sale without
intervention of Court in a mortgage deed by itself will not deprive the mortgagor of his right to redemption and the same is not extinguished till the
completion of the sale by execution and registration of the sale deed. In that case, the mortgagor filed a suit for redemption after the auction sale
was held by the mortgagee, but before the execution of the sale deed. The suit was dismissed and the auction sale was held to he valid by the trial
Court. On appeal, the lower appellate court held that the auction was collusive and not valid. The appeal was allowed. The mortgagee and the
purchaser filed Second Appeals. But, after the dismissal of the suit by the trial court, a sale deed was executed and registered in favour of the
purchaser by the mortgagee. When the lower appellate court considered the appeal by the mortgagor, the sale had already been completed. This
Court held that the doctrine of lis pendens could not be applied to the sale and on the completion of the sale by execution and registration of the
document, the right of redemption of the mortgagor was extinguished and there was nothing for the mortgagor to redeem. In that view, this Court
allowed the Second Appeals and dismissed the suit. The Court had taken note of the ruling of the Supreme Court in Narandas Karsondas Vs.
S.A. Kamtam and Another, as well as the decision of the Bench of this Court in N. Ramakrishna Mudali Vs. The Official Assignee of Madras and
Others,
In K. Mohanakrishnan v. Seetha Natarajan and others 1991-2-L.W. 592 a Division Bench of this Court held that the mortgagee with a power
of sale is not a trustee and when the power is exercised bona fide without corruption or without collusion with the purchaser, the Court will not
interfere unless price is so low as itself to be in evidence of fraud. On the facts of the case, the Court found that the sale u/s 69 was pursuant to a
scheme by the mortgagee under which it was sold for a low value, not even enough to meet the claim of the simple mortgagee and, therefore, the
Court allowed the appeal filed by the mortgagor and declared the sale by the mortgagee to be null and void.
Thus, the settled position in law is that a mortgagee is not a trustee for the mortgagor and that the sale u/s 69 of the Transfer of Property Act
cannot be attacked by the mortgagor except when there is fraud or collusion between the mortgagee and the purchaser. If the price for which the
property is sold is so low as by itself will lead to an inference of fraud on the part of the mortgagee and the purchaser, the Court can interfere. But,
the burden is on the mortgagor to plead and prove such fraud or the gross inadequacy of price from which an inference can be drawn by the Court
of the fraud. In the absence of such proof, the Court cannot and will not interfere with the sale even if the sale price is lesser than the market value
of the property or there was want of publicity or want of notice as required by the instrument or that many bidders had not participated in the
auction.
Bearing the above principles in mind, if we approach the facts of this case, it is quite obvious that the plaintiffs have miserably failed to make
out a case for setting aside the sale in favour of the 6th defendant. We have already referred to the fact that the case of fraud was for the first time
introduced in the pleading only in 1985 after the evidence of P.W.1 was closed. We have searched in vain the entire plaint as it stood before the
amendment to find out an averment having any remote connection with fraud. Excepting to state that the bidder had not paid the balance of money
and the conveyance had not been executed till the date of suit and raising the plea of law that the power of sale conferred on the second and third
mortgagees was not a valid one, the plaintiffs made no attempt whatever to whisper even that there was fraud or collusion on the part of the
mortgagee. It should be remembered that the sale was held on 18-2-1992. The suit was filed on 4-3-1982, the date on which the purchaser was
bound to pay the balance of consideration as per the conditions of the auction. The plaintiffs had ample time to set out in the plaint the relevant
facts relating to the value of the property and the alleged gross inadequacy of the price fetched in the auction. They had also sufficient time to find
out the alleged fraud on the part of the mortgagees and include the necessary averments in the plaint. They did not do so either at the time of filing
the suit or at the time of impleading the 6th defendant as a party after the execution of sale deed in his favour. There is no explanation whatever on
the part of the plaintiffs as to their failure to set out those facts in the plaint as originally filed or at the time of impleading the 6th defendant.
The correctness and validity of the order of amendment passed by the trial judge in Application No. 755 of 1985 is challenged in these appeals
before us. The appellants have raised grounds in the Memorandum of Grounds that the application for amendment ought to have been dismissed.
(Vide Grounds 49 to 51). They are entitled to raise the said grounds by virtue of Section 105(1) of the Code of Civil Procedure.
In our opinion, the objection is well taken and the amendment ought not to have been allowed in the present case. The suit was initially filed for
redemption and in the plaint a specific averment is made in paragraph 14 of the plaint that they are ready and willing to pay the mortgage money.
The prayer is to direct the defendants to receive a sum of Rs. 1,53,040/- and return the documents. Along with the plaint, the plaintiffs filed
Application No. 798 of 1982. The Court passed an order on 27-4-1982 directing the plaintiffs to pay a sum of Rs. 1,65,000/- to the mortgagees
on or before 3-6-1982. The plaintiffs failed to comply with the condition and pay the amount. Thus, the order of injunction stood vacated as per its
own terms. Thereafter, the sale deed was executed by the second defendant in favour of the 6th defendant. Once the plaintiffs failed to comply
with the terms of the order of this Court and the sale deed was executed by the mortgagee, the right to redemption of the plaintiffs got extinguished.
Nothing survived in the suit. There was no question of amending the plaint thereafter by challenging the validity of the sale. As has been held by this
Court in Govindaswami Naicker v. Pukhraj Sowcar (1940) II M.L.J. 281 = 52 L.W. 324, the two causes of action were different and the claim
against the purchaser to attack the sale could not be combined with the claim for redemption in the same suit. The Supreme Court has also held in
Narandas Karsondas Vs. S.A. Kamtam and Another, that the right exercised by the mortgagee was a different and superior right. That also shows
that the cause of action is entirely different.
If it is contended that the cause of action is the same for both the prayers, the plaintiffs ought to have prayed for the relief in the original plaint
itself as the auction sale had already been held. The averments relating to the alleged fraud could and ought to have been made in the original plaint
as they were available to the plaintiffs even then. If on the other hand it is contended that the execution of the sale deed is the cause of auction for
the amendment, it is a subsequent cause of action different from the original one which was for redemption and it could not have been combined in
the same suit.
However, we do not wish to reject the claim of the plaintiffs on the above ground or allow the appeals by setting aside the order of amendment
granted by the learned single judge. As the amendment had been allowed and evidence had been recorded thereafter including the recalling of
P.W.1, interests of justice require that we should dispose of the case on the merits of the contentions put forward by both sides. Hence, we do not
propose to interfere with the order of amendment made in Application No. 755 of 1985, though we are not satisfied with the correctness or
validity thereof, and even though the reasoning of the learned judge for granting the said amendment in the order passed by him on 22-2-1985 is
not acceptable.
But the learned judge has entirely overlooked that the Court has to test the veracity of the case of the plaintiffs which has been put forward at a
belated stage keeping in mind the absence of any explanation for the failure to set out the same at any earlier stage. The deposition of P.W.1 does
not contain any such explanation. Even though an averment was made in the original plaint that the property was worth between thirty to thirty-five
lakhs of rupees, a Civil Engineer was admittedly requested to inspect the building only in April 1985 after the amendment and a report was
obtained from him. It is quite obvious that evidence has been manufactured subsequent to the amendment for the purpose of buttressing the case
put forward in the plaint. Unfortunately, the learned judge has omitted to take into consideration this aspect of the matter while deciding the
credibility of the witnesses P.Ws. 1 to 3. The learned judge has also overlooked that the burden is entirely on the plaintiffs not only to prove the
alleged gross inadequacy of price but also the fraud alleged to have been played by the defendants. Even the paragraph introduced in the plaint
after amendment is only requiring the Court to draw an inference of fraud from the alleged inadequacy of price. Apart from that, there is no
averment setting out any particulars of fraud. Under Order 6, Rule 4 of the Code of Civil Procedure, in all cases in which the party pleading relies
on any fraud, particulars thereof shall be stated in the pleading. There is no averment whatever in the plaint even after amendment with reference to
any fraud on the part of the mortgagees or the purchaser. Thus, the only circumstance relied on by the plaintiffs in the plaint is that the property was
worth more than Rs. 30,00,000/- and it was sold for a paltry sum of Rs.6,80,000/- at the auction. Two other circumstances which are incidentally
mentioned in the plaint are that there were only three bidders at the auction on 18-2-1982 and there was no bidder on 17-2-1982. According to
the plaintiffs, one other circumstance is that there is a confusion in description of properties in the auction notices which do not set out the full
particulars of the building in question.
As regards the value of the property in 1982, there is no acceptable evidence before Court that it was worth more than Rs. 30,00,000/- or not
less than Rs. 25,00,000/-as has been found by the learned judge. In paragraph 14 A of the plaint there is an averment that the income per month
from the property was about Rs. 11,000/- in 1982. No evidence has been produced to prove the same. P.W.1, the first plaintiff has stated in his
chief-examination on 5-2-1985 that the rental income was Rs. 11,000/-per mensem in 1982. But on 23-4-1985 after he was recalled, he
preferred to say in the chief- examination that it was nearly Rs. 13,000/- in February 1982. Very strangely, the Court allowed the counsel to put a
question in the re-examination so as to clarify the inconsistency in the chief-examination and elicited from him that in some months some of the
tenants would not pay rent and, therefore, he mentioned two different figures on two different dates. The explanation is on the face of it spurious.
According to P.W.1 he is maintaining accounts and submitting returns to the income tax Authorities. He did not file any such document till he was
recalled in April 1985 after the amendment of the plaint. Even thereafter, he satisfied himself by filing some of the income tax notices and demands,
but failed to produce the accounts. The counsel for the defendants issued a notice on 24-4-1985 marked as Ex.P-42, to the counsel for the
plaintiffs requesting production of (1) Counterfoil of the bill book for rent receipts, (2) income tax Assessment Order and income tax returns for the
years ending 31-3-1981, 31-3-1982 and 31-3-1983, (3) Wealth tax returns for the year ending 31-3-1981, 31.3.1982 and 31-3-1983 and
Wealth tax assessment orders and (4) Estate duty Assessment Order and copy of the returns relating to the estate of the first plaintiff''s mother who
was a partner of the second plaintiff firm. Counsel for the first plaintiff sent a reply (Ex.P-43) on the same day stating that the plaintiffs are not
assessees for Wealth Tax or Estate Duty and that the income tax returns and assessment orders upto 1981 will be produced. The papers for the
subsequent period were stated to be with the Auditor. On 25-4-1985 the first defendant''s counsel wrote a letter (Ex.P-44) calling upon the
plaintiff''s counsel to cause production of the book containing the counter-foils of the receipts issued to various tenants in the year 1981-82 and the
relevant books of accounts. A reply was sent to the defendants'' counsel on 2-9-1985 (Ex.P45) i.e., about five months after Ex.P-44. By that
time, the evidence on the side of the plaintiffs was closed and the defendants'' witnesses were being examined. In that reply, the defendants''
counsel was informed that he could have inspection of the counterfoil of the receipt books for the period 1981-82 and the relevant books of
accounts, but significantly, none of them was produced by the plaintiffs and marked as exhibits in the case. Thus, the case of the plaintiffs that the
property was yielding as income of Rs. 11,000/- per mensem was not substantiated by any document. On the other hand Exs.P-32 and P-33,
which are the notices of demand u/s 156 of the income tax Act for the assessment years 1978-79 and 1979-80 respectively show that the total
income of the second plaintiff firm was Rs. 16,040/- in 1978-79 and the tax due was Rs. 67/-. For the year 1979-80, it was a case of ''Nil''
assessment and no amount was payable by way of tax. Significantly, what have been marked as exhibits are only the notices of demand and the
other papers attached to the notice being copies of the letter by the second plaintiff to the income tax Officer as well as Profit and Loss Account
etc. have not been marked as exhibits. From the two exhibits referred to above, no inference can be drawn that the income from the property was
Rs. 11,000/- per mensem as claimed by the plaintiffs.
In the cross-examination P.W.1 has said that in 1969, he filed Wealth tax return and that his share was valued by him approximately at Rs.
1,50,000/-. A copy of the said return was not produced. Nor has he produced the Wealth Tax Assessment Order in spite of his statement in the
deposition that he would produce the same According to P. W.1, the land was leased out under a registered lease deed to the second plaintiff firm.
The lease deed has not been produced. According to his deposition, the rent payable for the land was Rs. 1900/- per year. According to him, the
net income of the partnership was nearly Rs. 3000/- per month. He has admitted that the value of the property was stated to be Rs. 2.75 lakhs
when the Estate Duty return was submitted on the death of his mother. It is to be remembered that his mother died in October 1980. When P.W.1
was asked in the cross- examination as to the value of the property as shown in the books of the partnership firm, he replied that it was Rs.
6,52,000/-. He added that it was written only as construction expenses in the books of accounts. He claimed that regular accounts were
maintained for the firm, but none was produced, though he asserted that he was prepared to produce accounts.
The only other evidence relied on by the plaintiffs to prove the value of the property is the report of the Civil Engineer, P.W.2, and his
deposition. As we have pointed out already, the evidence of P.W.2 cannot be taken for granted as his services were specifically availed by the
plaintiff to buttress his case after the amendment of the plaint in 1985. The report of the Engineer, P.W.2, is somewhat curious. While calculating
the value of the property, the Engineer has taken the value of buildings and the value of lands separately. After that, he has chosen to value the
compound wall, ceiling fans, tube lights, teak-wood table, teak-wood cots, and tools separately. The strangest aspect of the report is that he has
valued the provision of parking facility for seven cars at the rate of Re. 1/- per hour for a period of 20 years and multiplied it by 1/2, thus arriving at
a figure of Rs. 3,02,400/- therefor. In his deposition he has not thought it fit to explain as to how he valued the provision for parking cars
separately and included the same in the value of the property. A perusal of his evidence shows that he is interested in supporting the case of the
plaintiffs and he would not have even inspected the property. He has valued the land at Rs. 2,40,000/- per ground. In order to arrive at the said
value, he has taken into consideration a sale deed relating to another property situated at 76, Millers Road, comprising land of an extent of 2400
sq.ft. and a building thereon. The sale deed is dated 28-4-1982. None connected with the sale deed has been examined in Court. P.W.2 has not
also made enquiries with the parties to that sale deed. He has himself prepared a working sheet and purported to calculate the value of the building
in the said property at Rs. 1,07,000/- and deducted the same from the total consideration viz., Rs. 3,50,000/- under that document. Thus, he
arrived at the value of Rs. 2,53,000/- for land of an extent of 2400 sq.ft. He adopted that as the basis for valuing the land at the suit site at Rs.
2,40,000/- per ground. We are unable to accept the evidence of P.W.2 as truthful. He has admitted that he did not inspect the property which is
the subject matter of Ex.P38. He has not explained as to how he chose to mention the particulars of the building on the said property in his
working sheet Ex.P39 and calculated the value thereof. He has not mentioned the class or type of construction. His deposition shows that he
speaks to many of the matters not on his own knowledge but only on hearsay. His evidence is wholly unbelievable. Ex.P38, the sale deed relating
to No. 76, Millers Road has also not been proved. Nobody connected with the document has been examined as a witness. P.W.2 has not stated
the distance between the property which is the subject matter of Ex.P38 and the suit property.
P.W.3 is only a photographer who claimed to have taken photographs of the suit property in February 1985. His evidence is of no
consequence. The photographs which are marked as Ex.P-40 series do not support the claim of the plaintiffs that the property was worth more
than Rs. 30,00,000/-. Thus, there is absolutely no evidence whatever on the side of the plaintiffs to prove the value of the suit property to be Rs.
25,00,000/- and above as has been found by the learned judge; nor is there any evidence to make out that the property has been sold for such
inadequate price that an inference of fraud can be drawn therefrom.
Reliance is sought to be placed by the learned judge as well as the plaintiffs'' counsel on the evidence of D.W.4, the Engineer examined by the
defendants. Some parts of his deposition are taken out of context and sought to be used as if they support the case of the plaintiffs. The learned
judge finds that the evidence of D.W.4 is mast unsatisfactory. We do not think it necessary to place any reliance on the evidence of D.W.4 or the
report (Ex.D-57) filed by him regarding the value of the property. For his turn, he has referred to two sale deeds marked as Exs.D-58 and D-59.
One of them, viz., Ex.D-59 relates to the very adjacent property viz., Door Nos. 21 and 22, Millers Road. But, in the absence of examination of
any of the parties connected with the documents, we cannot place any reliance on the same. We are prepared to proceed on the footing that the
evidence of D.W.4 is not acceptable as regards the value of the property. Learned counsel for the plaintiffs attempted to rely upon the statement of
D.W.4 that the P.W.D. rate for a building with cement mortar RCC slab was Rs. 1010/- per sq. metre and for a country type construction Rs.
880/- per sq. metre. Learned counsel contended that D.W.4 had adopted only Rs. 575/- per sq.metre even though the minimum rate of P.W.D.
for a country type of construction was Rs. 880/- per sq.metre. It is not necessary for us to go into the details of the report given by D.W.4, viz.,
Ex.D-57, as we have stated already that we will proceed on the footing that his evidence is totally to be eschewed.
The burden is on the plaintiffs to prove the value of the property and the gross inadequacy of the price secured at the auction sale and when
they have failed to discharge the burden, nothing will turn upon the reliance placed on the inconsistencies in the evidence of the defendants. We
have no hesitation to hold that there is absolutely no evidence on record to prove that the sale price of Rs. 6,80,000/- for which the property has
been sold to the 6th defendant by the second defendant is so inadequate as to enable the Court by itself to draw an inference of fraud.
It is contended that the description of the property in the auction notices is confusing inasmuch as two Schedules are given as if two properties
were to be sold. There is no merit in this contention. A perusal of the auction notices marked as Exs.P-14 to P-16 shows that the description
found in the three deeds of mortgage is repeated verbatim in the auction notices. It is also seen that Schedule ''B'' is described to be a part of
Schedule ''A''. Even in Schedule ''A'', it is clearly mentioned that the extent of 3 grounds and 726 sq.ft. formed part of the larger property of an
extent of 8 grounds and 260 sq.ft. as per patta granted to the father of the first plaintiff. It was clearly stated that what was owned by the first
plaintiff, the mortgagor, which was mortgaged to the mortgagee was only an extent of 3 grounds and 726 sq.ft. Reference is also made to the plan
attached to the relevant documents. It is also stated that the title deeds of the property could be inspected at the office of the auctioneers during
office hours. Hence, there could be no contusion whatever to intending purchasers. In the description of the property in Tamil, reference is made to
the schedules set out in English. Any person who intended to take part in the auction would necessarily read the entire auction notice containing the
Schedules in English as well as in Tamil and also inspect the title deeds before taking part in the auction. There is nothing in Exs.P-14 to P-16
which can confuse any intending purchaser. It is not the case of the plaintiffs that anybody was actually confused in that manner. No evidence has
been adduced by the plaintiffs.
It was contended before us that the auction notices gave an impression that a larger property of an extent of 8 grounds and 260 sq.ft. was the
subject matter of the auction; but what was sold was only 3 grounds and 726 sq.ft. of land with a building. There is no substance in the contention,
as we have already pointed out earlier, the description in Schedules ''A'' and ''B'' is very clear. Significantly, D.W.3, the fifth defendant, has not
been cross-examined on the alleged misdescription or confusing description of the property.
It was next contended that the particulars of the number of rooms in the building and the measurements of the rooms and the facilities available
in the buildings were not set out in the auction notices, which led to the dearth of bidders. In our opinion, it was not necessary to mention all such
details in the auction notice. When the auction notices repeated the description given in the mortgage deeds, that was sufficient for the purpose of
advertising the sale. Any person interested in participating in the auction would necessarily go to the property and have an idea of the same. In fact,
the auction was itself held only in front of the suit building. No person has been examined to show that he could not participate in the auction
because of non-mention of the details and particulars of the building in question. Even assuming that there was want of sufficient publicity, that
would not be a sufficient ground for setting aside any sale; nor would it lead to any inference of fraud.
It was next contended that the very fact that there were only three bidders would itself show that there was a fraud on the part of the
mortgagees. We are unable to accept this contention. There is ample evidence adduced by the defendants to show that the plaintiffs made
arrangements to prevent the holding of the auction with the help of their servants and rowdies. There is no reason to disbelieve the evidence of
D.Ws.1 to 3 in that connection. They have categorically stated that on 17-2-1982 the plaintiffs'' men prevented any intending bidder from entering
the property and no auction could be held. On 18-2-1982 the defendants had obtained police protection and, therefore, they were able to hold the
auction. If there was dearth of bidders, the plaintiffs have to blame themselves. That will not prove any fraud of the mortgagees. It is seen from the
bid-sheet marked as Ex.D-31, that there was a keen contest among the three bidders who participated in the auction. Nothing was elicited in the
cross-examination of D.Ws.1 to 3 so as to warrant discrediting their evidence in this regard.
It should not be forgotten that there is overwhelming evidence to prove that the auction sale was given as much publicity as required. Apart
from distributing hand-bills and causing proclamations by tom tom in the property as early as on 2-2-1982 (vide Exs.D-21 and D-22),
advertisements have been published in The Hindu and Dhina Thanthi in several issues. See Exs.D-23 to D-28. A comment is made that the copies
of the newspapers have not been produced before Court. The defendants were not called upon to produce the same. If there had been any
infirmity in the advertisements of the sale, the plaintiffs could well have taken steps to stop the same by approaching the Court before the sale was
held. They had notice that the mortgagees had given instructions to the auctioneers as early as in June 1981. Because the mortgagors paid the
interest, the mortgagees withdrew their instructions and again when there was default, the auctioneers were instructed to hold the auction. The
auctioneers took the precautions for sending notices to the plaintiffs to which we have made reference earlier. From September 1981 till February
1982, the plaintiffs had only been promising to pay the amounts, but did not take steps to keep up the promises. We are satisfied on the evidence
that there was proper publicity for the sale and there was no irregularity whatever in the conduct of the sale.
A comment was also made by learned counsel for the plaintiffs that confusion was created by advertising three auctions on 17-2-1982, 18-2-
1982 and 22-2-1982 respectively. There is no merit in this contention. Each auction notice relates to one mortgage. The notice relating to the first
mortgage is Ex.P-14 mentioning only the name of the first mortgagee. Ex.P-15 relates only to the second mortgage and refers only to the name of
the second mortgagee. Ex.P-16 relates only to the third mortgage and mentions the name of the third mortgagee. There is no confusion whatever in
the notices and if one takes care to read the notices with a view to know the contents thereof, one would easily understand that the three sales
were to be held in pursuance of three different mortgages though they'' relate to the same property.
The only other objection raised by the plaintiffs and accepted by the learned judge is that there was no provision for introducing a nominee by
the person who was the highest bidder at the auction. We have already noticed that the fifth defendant took part in the auction and was the highest
bidder. But, he nominated the 6th defendant for taking the sale deed and requested the mortgagee to execute the sale deed in favour of the 6th
defendant. The contention is that neither the mortgage deeds nor the auction sale conditions permitted such nomination and it was only the highest
bidder at the auction who could be the purchaser of the property. Learned counsel for the plaintiffs added before us that the very fact that a person
other than the highest bidder was nominated to be the purchaser would prove mala fides and the absence of bona fides on the part of the fifth
defendant, which would vitiate the sale. It was also his contention that the fifth defendant bad no money to pay the balance of consideration after
making the initial payment of 1/4th of the bid amount and, therefore, he introduced the 6th defendant as the purchaser. It was argued that the only
course available to the mortgagees was to hold a fresh auction and not to execute a sale deed in favour of the 6th defendant. There is no merit
whatever in any of the above contentions.
Before adverting to the law on the subject, we would refer to the relevant facts as substantiated by the evidence. The bid-sheet, Ex.D-31,
dated 18-2-1982,.shows the bids made by the three bidders viz., R. Krishnamurthy, P.N. Arumugham and Bhagwandas (5th defendant). The
highest bid was for Rs. 6,80,000, against which the name of Bhagwandas was written. The words ''or nominee'' are found written by the side of
the name ''Bhagwandas''. Below that the bid amount is written in words. Below that Bhagwandas has signed and has written his name in block
letters with his address. Then the guardian of the second defendant made an endorsement below that, ""I accept the highest bid of Rs. 6,80,000/-
and signed the same. Below that five persons have signed as witnesses. Ex.D-32, the original of which is marked as Ex.P-20, is a letter dated 19-
2-1982, the very next day after the auction, written by the fourth defendant, auctioneer, to plaintiffs 1 and 2. It is mentioned therein that there were
large number of persons assembled at the auction spot and three persons paid the deposit of Rs. 2,000/- as per conditions of sale. It was also
stated that after keen biding, the highest was for Rs. 6,80,000/- made by Sri Bhagwandas or nominee and that the same had been accepted by the
mortgagee. The letter also informed the plaintiffs that the highest bidder has made the requisite deposit of Rs. 1,70,000/-. Copy of the letter was
marked to the second defendant''s erstwhile guardian. Thus, on the very next day after the auction, the auctioneer had informed the plaintiffs that
the highest bid was made by the fifth defendant or nominee. The address of the fifth defendant was also mentioned in that letter. There is no
substance or merit in the contention that the idea of introducing a nominee was an after thought and there was an interpolation in Ex.D-31 made
much later than the auction. Whether it was made at the time of the auction or later than the auction, there can be no doubt whatever that the idea
of nominee was introduced even before 19-2-1982 of which information was given to the plaintiffs by the auctioneers. In spite of such information,
the plaintiffs did not choose to make any averment regarding the same in their plaint. Nor did they choose to say anything about the same when
they impleaded the 6th defendant as a party to the suit or when they amended the plaint in 1985. Without any pleading in that regard, the learned
judge proceeded to consider the question as if it was purely one of law and held that there was no contract for appointing a nominee by the fifth
defendant. Factually we find that the contract brought into existence under Ex.D-31, after the fifth defendant was found to be the highest bidder,
was that the sale could be in favour of the fifth defendant or his nominee, whoever he may be. In this case, the nominee happens to be the son of
the fifth defendant. Nothing has been suggested in the course of evidence that the fifty defendant has no money to complete the sale and that is why
he made the 6th defendant the purchaser by nominating him. Nor has anything been suggested in the course of evidence to warrant an inference of
fraud by the introduction of the 6th defendant as the purchaser under the sale deed. While nothing turns on the nomination of the 6th defendant as
the purchaser by the fifth defendant, who was the highest bidder at the auction, in so far as the reliefs prayed for by the plaintiffs are concerned, we
have to point out that the question of nomination and acceptance thereof is entirely a matter between the mortgagees and the auctioneers on the
one hand and the purchaser on the other. It is for the mortgagees, if at all, to raise a contention that the highest bidder was not entitled to nominate
any other person as the purchaser. In fact, the learned judge has observed in the impugned judgment in more than one place that it was not open to
the highest bidder to compel the mortgagee to execute a sale deed in favour of his nominee. There is no question of compulsion in this case. The
mortgagee has agreed even at the time of auction that thee sale could be in favour of the highest bidder or his nominee.
The position in law in also very clear. The view taken by the learned judge is absolutely unsustainable. The learned Judge has made reference
to the decision of this Court in In Re: Polisetti Govinda Rao of Ellore, and that of the Allahabad High Court in Umar Noor Mohammad v. Dayal
Saran Darbari AIR 1967 Alla 253 and distinguished the judgment of this Court by stating that in the present case there is neither pleading nor
evidence that the purchaser had assigned his rights to the nominee and it is not a case of assignment. It is very unfortunate that the learned single
judge has misread the judgments referred to by him.
The statutory provisions relating to contracts and the enforceability thereof by persons other than the contracting parties are found in Sections
37, 40 and 41 of the Contract Act and Section 15(b) of the Specific Relief Act (47 of 1963). A perusal of those Sections would show that
contracts could be performed by the promisor or his representatives by employing competent persons to perform the same unless it appears from
the nature of the case that it was the intention of the parties that the promise contained in it should be performed by the promisor himself. Section
2(d) of the Contract Act shows that consideration for a contract could be provided by a third party thereto. In Sakalaguna Nayadu v. Chinna
Munuswami Nayakar ILR 51 Mad 533 = (1928) 28 L.W. 51, P.C.), the Privy Council held that a contract for reconveyance is enforceable by
the assignee of the vendor against the sons of the purchaser. In In Re: Polisetti Govinda Rao of Ellore, , referred to by the learned judge in the
impugned judgment, it was held that contract to sell goods can be assigned by the seller so as to enable the assignee to sue for damages for breach
of contract on tender of performance by him. In N. Pattay Gounder Vs. P.L. Bapuswami, it was held that prima facie the right and liabilities under
a contract like an agreement for repurchase are assignable unless it has been prohibited in the deed itself. It must be noticed that the judgment of
this Court was reversed by the Supreme Court in P.L. Bapuswami Vs. N. Pattay Gounder, on another point. There was no necessity for the
Supreme Court to deal with the proposition referred to above. In Khardah Company Ltd. Vs. Raymon and Co. (India) Private Ltd., it was held
that rights under a contract are assignable unless the contract is personal in nature or the rights are incapable of assignment, either under law or
under an agreement between the parties. In Umar Noor Mohammad Vs. Dayal Saran Darbari, it was held that except in some special
circumstances, a contract to sell a property is not dependent upon any personal qualifications of the individual who agrees to purchase and it is a
matter of no consequence to the vendor that the person who is going to be the vendee is not the same person with whom he had entered into a
contract for sale, it was also held that such a contract is enforceable not only by the person to whom the property was agreed to be sold but also
by his representatives in interest and assignees, unless of course, the contract itself prohibits assignment either expressly or by clear implication.
Reliance was placed on the judgment of this Court in Munuswami Nayadu v. Sagalaguna Nayudu ILR 49 Mad 87 and the judgment of the Privy
Council confirming the same in Sakalaguna Nayudu v. Chinna Munuswami Nayakar ILR 51 Mad 533 = 28 L.W. 51 referred to by us earlier.
Making a reference to Section 40 of the Contract Act, the Court said that except in very special circumstances a person agreeing to purchase a
property is not bound to purchase it himself and he may arrange to purchase the property by some other person as his nominee on the strength of
the agreement entered into by him.
Thus, the law on the subject is very clear that a person who agreed to purchase a property could nominate another person to complete the
contract, unless there is an express or implied prohibition in the contract itself against the same. In the present case, there is nothing whatever to
warrant an inference or conclusion that the contract between the second defendant and the fifth defendant was personal to the fifth defendant and
the latter was not entitled to nominate another person to purchase the property. We have held on the facts that even at the time of conclusion of
contract, there was an agreement that the purchase could be either by the fifth defendant or his nominee.
Thus, we hold that the findings arrived at by the learned single judge are unsustainable on facts and in law.
In the result, we set aside the judgment and decree passed by the learned judge in C.S.No.129 of 1982 and dismiss the said suit.
Consequently, the plaintiff in C.S. No. 492 of 1982 is entitled to recover possession of the property from the defendants therein. The plaintiff is
entitled to recover mesne profits from the defendants. In the plaint the prayer is for payment of Rs. 10,500/- towards mesne profits from 24-7-
1982, the date of sale deed till the date of plaint viz., 24-9-1982. As regards the future, the prayer is for mesne profits at the rate of Rs. 7,000/-
per month from the date of plaint to the date of delivery of possession. During the pendency of the suit, the fist defendant in C.S. No. 492 of 1982
was appointed receiver to manage the property and submit accounts. Later, he was removed and an advocate receiver was appointed. The said
receiver is in charge of the properties from 1985 till this date. It was agreed before us that during the period of the management by the Advocate-
receiver, the statements of accounts filed by him showing the income from the property and the expenditure relating thereto would be accepted for
the purpose of deciding the mesne profits payable to the plaintiff. It was also agreed that with regard to the earlier period i.e., prior to the
appointment of the advocate-receiver, mesne profits could be determined under Order 20, Rule 12, C.P.C. Hence, we set aside the judgment and
decree for the learned single judge dismissing C.S. No. 492 of 1982 and pass a decree in favour of the plaintiff therein directing the defendants to
deliver possession of the suit property to the plaintiff forthwith. The question of mesne profits will be decided under Order 20, Rule 12, C.P.C.
While doing so, the statements of accounts filed by the Advocate-Receiver appointed by the Court during the period of his management will be
taken as conclusive as regards the income from the property during that period. For the other periods, the Court will decide the mesne profits by
holding an enquiry under Order 20, Rule 12, C.P.C. In fine, the appeals are allowed. The judgment and decrees passed by the learned single
judge are set aside. There will be no order as to costs in both the appeals.
Srinivasan, J. & S.S. Subramani, J. :- At the conclusion of the judgment, learned counsel for the appellants represent that the Advocate Receiver,
who is in charge of the properties, may be directed to deliver possession of the properties to the appellants. Accordingly, we direct the Advocate-
Receiver to deliver possession of the properties to the appellants immediately. The Receiver will be discharged on the passing of the accounts by
the concerned official of this Court.