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Friday, May 26, 2017

HOW TO CONDUCT A SALE AND WHEN THE SALE CAN BE SET ASIDE - BRIEFLY COVERED - USEFUL TO JUNIORS -Order 21 Rule 90 (2) of the Code.= “90. (2) No sale shall be set aside on the ground of irregularity or fraud in publishing or conducting it unless, upon the facts proved, the court is satisfied that the applicant has sustained substantial injury by reason of such irregularity or fraud.”- We also find on facts that firstly, the proper publicity was given for auction sale in papers so also by beat of drums pursuant to which as many as seven bidders including the appellant herein participated in the auction sale. Had there been no publicity, it would not have been possible for seven persons to participate in the auction proceedings. - Secondly, the details of the valuation of the property were duly mentioned, namely, decree holder's valuation at Rs.2,75,000/- likewise, Amin’s valuation at Rs.4 lacs whereas the property was sold in auction for Rs.7,50,000/-. In this view of the matter, it could not be said that the bidders did not know the valuation or/and that it was not mentioned in the auction papers.- Thirdly, judgment debtor did not adduce any evidence nor brought any bidder to purchase the property for a higher price than the purchase bid (Rs.7,50,000/-) except to say in the application that value of the property was between Rs.12 lakhs to Rs.14 lakhs. In our view, this objection has no substance for want of any evidence. - Fourthly, there was adequate publicity given with the aid of beat of drums in the locality. It was proved with the record of the executing Court as was rightly held by the executing Court and lastly, in our view, a clear 15 days’ notice was given for auction sale fixed for 17.11.1999 when counted from 05.10.1999. In other words, 15 days have to be counted from 05.10.1999 because it is on this date the order was issued as contemplated under Order 21 Rule 64 for proclamation of sale fixing the date of sale as 17.11.1999.- The executing Court, therefore, substantially and in letter and spirit followed the procedure prescribed under Order 21 Rules 64 and 66 of the Code while conducting the sale of the property in question- The law on the question involved herein is clear. It is not the material irregularity that alone is sufficient for setting aside of the sale. The judgment debtor has to go further and establish to the satisfaction of the Court that the material irregularity or fraud, as the case may be, has resulted in causing substantial injury to the judgment- debtor in conducting the sale. It is only then the sale so conducted could be set aside under Order 21 Rule 90(2) of the Code. Such is not the case here.- there are no material irregularities noticed in the case and that there was compliance of the provisions of Order 21 Rules 64 to 68 then, in our view, the law laid down in these decisions are of no help to the respondent-judgment debtor.

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL No.5988 OF 2007


Chilamkurti Bala Subrahmanyam     ….Appellant(s)

                                   VERSUS

Samanthapudi Vijaya Lakshmi
& Anr.                                 …Respondent(s)



                               J U D G M E N T
Abhay Manohar Sapre, J.
1)    This appeal is filed  by  the  auction  purchaser  against  the  final
judgment and order dated 23.12.2005 passed by the High Court of  Judicature,
Andhra Pradesh  at Hyderabad in Civil Misc. Appeal No. 1721 of 2000  whereby
the High Court allowed the appeal filed by judgment  debtor-respondent  No.1
herein and set aside the order dated 20.04.2000 passed by the  Senior  Civil
Judge, Kovvur in E.A. No. 1020 of 1999 in E.P. No. 46 of 1998  in  O.S.  No.
192 of 1987 dismissing the application filed by the  judgment  debtor  under
Order 21 Rule 90 read  with  151  of  the  Code  of  Civil  Procedure,  1908
(hereinafter referred to as “the Code”).
2)     Facts  of  the  case  need  mention,  in  brief,  to  appreciate  the
controversy involved in this appeal.
3)    Respondent No.2-State Bank of India  is  the  plaintiff/decree  holder
whereas respondent No.1 is the defendant/judgment debtor in O.S.  No.192  of
1987.  Respondent No.2 obtained a money  decree  for  Rs.5,15,390/-  against
respondent No.1 on 16.03.1998 in O.S. No.192 of 1987 for  the loan given  to
her by respondent No.2 and which remained unpaid by respondent  No.1.  Since
respondent  No.1  failed  to  satisfy  the  decree,  respondent  No.2  filed
execution application and brought the schedule property owned by  respondent
No.1-judgment debtor to auction sale  through  the  process  server  of  the
Court of Senior Civil Judge, Kovvur, in execution proceedings  in  E.P.  No.
46 of 1998 in O.S. No.192 of 1987 for realization of decretal dues.
4)     The  suit  schedule  property  was,  accordingly,  attached  by   the
executing Court  under  a  warrant.   Notice  was,  accordingly,  issued  to
respondent  No.1-judgment  debtor  in  respect   of   the   said   executing
proceedings on 14.07.1999 to  which  she  filed  counter  affidavit  raising
certain objections.   On  31.09.1999,  the  executing  Court  overruled  the
objections raised by respondent No.1 in  her  counter  affidavit  and  fixed
22.09.1999 as the date of settlement of terms.  On 22.09.1999, the terms  of
proclamation of sale were settled fixing the  date  for  sale  of  the  said
property on 17.11.1999.
5)    Pursuant to the above referred proceedings, proclamation of  the  sale
was issued on 05.10.1999 by the executing Court under Order 21  Rule  64  of
the Code mentioning therein the conditions of  sale.   Proclamation  of  the
sale was entrusted to the Process Server of publication on 27.10.1999.   The
Process Server gave endorsement on 02.11.1999  that  the  sale  proclamation
was affixed to the house/suit schedule property and also by beat of tom  tom
near the property and also affixed the same  on  the  notice  board  of  the
Court. On 04.11.1999, sale warrant was issued to  the  Bailiff  to  give  15
days’ notice by affixing the same in court house,  making  due  proclamation
of the suit schedule property. The proclamation of the  sale  was  published
in the newspaper on 05.11.1999 stating  that  the  sale  would  be  held  on
17.11.1999.
6)    On 17.11.1999, the property  was  brought  to  auction  sale  where  7
bidders participated.  The  appellant  herein  was  the  highest  bidder  of
Rs.7,15,000/-.  Out of the said bid amount, Rs.1,78,750/- was  paid  to  the
Bailiff.  The Bailiff filed a return on 18.11.1999 about  the  sale  stating
that he published about sale by tom tom and the appellant  was  the  highest
bidder and the initial amount was deposited with respondent No.2-Bank  after
deducting poundage.
7)     Dissatisfied  with  the  auction,  the  judgment  debtor   filed   an
application under Order 21 Rule 90 seeking setting aside of the sale,  inter
alia, on the ground that the proclamation was done within 15 days and  hence
it is illegal,   tom  tom  wala  neither  made  proclamation  and  nor  took
neighbours’ signatures, proclamation was not published  in  Nagar  Panchayat
office, publication was defective in nature because it did not  mention  the
valuation of the property etc.  It was also objected that the  Bank  brought
only three bidders whereas if more bidders had  participated,  the  property
put to sale would have fetched easily between 12 to 14 lakhs.
8)    By order dated 20.04.2000, the Senior Civil  Judge,  Kovvur  found  no
merit in any of the objections raised by  respondent  No.1  and  accordingly
dismissed the application.
9)    Challenging the said order, the judgment debtor-respondent No.1  filed
an appeal before the High Court.
10)   The High Court, by impugned judgment  dated  23.12.2005,  allowed  the
appeal and set aside the order of the executing Court, inter  alia,  holding
that if the judgment debtor deposits a sum of Rs.7,15,000/- being the  price
fetched at the public auction within a period of three weeks from  the  date
of receipt of a copy of the judgment, the  sale  held  would  not  be  given
effect to. It was held that if the executing Court  feels  that  the  amount
deposited by the judgment debtor is sufficient  to  discharge  the  decretal
amount, it would not be necessary to put the property  to  auction  and  the
amount so deposited earlier by the auction purchaser shall  be  refunded  to
him.  It was held that  if  the  amount  ordered  to  be  deposited  by  the
judgment debtor is more than the amount due to  the  decree  holder,  excess
amount,  after  adjusting  the  amount  due  to  the  decree  holder/auction
purchaser, be refunded to the judgment debtor.  It was held  that  no  clear
15 days’ notice of sale as per Rules  was  given  and  hence  sale  held  is
irregular.  It was lastly held that in default of payment  of  Rs.7,15,000/-
within the stipulated period, the appeal shall stand dismissed.
11)   Aggrieved by the said judgment, the auction purchaser has  filed  this
appeal by way of special leave before this Court.
12)   Heard  Mr.  Basava  Prabhu  Patil,  learned  senior  counsel  for  the
appellant-auction  purchaser  and  Mr.  Gagan  Gupta,  learned  counsel  for
respondent No.1-judgment debtor and Mr. Sanjay Kapur,  learned  counsel  for
the Bank-decree holder.
13)   Having heard the learned counsel for the parties  and  on  perusal  of
the record of the case, we are inclined to allow the  appeal  finding  merit
therein.
14)   The law which governs the controversy involved in this appeal is  laid
down by this Court  in the case of Saheb Khan vs. Mohd. Yousufuddin &  Ors.,
2006(4) SCC406 (Three Judge Bench). While examining the scope  of  Order  21
Rule 90 of the Code, Justice Ruma Pal speaking for the Bench held  as  under
:
“12. We are unable to sustain the reasoning of  the  High  Court.  Order  21
Rule 90 of the Code of Civil Procedure allows, inter alia, any person  whose
interests are affected by the sale to apply to the  court  to  set  aside  a
sale of immovable property sold in execution of a decree on  the  ground  of
“a material irregularity or fraud in publishing  or  conducting”  the  sale.
Sub-rule (2) of Order 21 Rule 90 however places a further condition  on  the
setting aside of a court sale in the following language:

“90. (2) No sale shall be set aside on the ground of irregularity  or  fraud
in publishing or conducting it unless, upon the facts proved, the  court  is
satisfied that the applicant has sustained substantial injury by  reason  of
such irregularity or fraud.”

13. Therefore before the  sale  can  be  set  aside  merely  establishing  a
material irregularity or fraud will not do. The applicant  must  go  further
and  establish  to  the  satisfaction  of  the  court  that   the   material
irregularity or fraud has resulted in substantial injury to  the  applicant.
Conversely even if the applicant has suffered substantial injury  by  reason
of the sale, this would not be sufficient  to  set  the  sale  aside  unless
substantial injury has been occasioned by a material irregularity  or  fraud
in publishing or conducting the sale. (See Dhirendra Nath  Gorai  v.  Sudhir
Chandra Ghosh;(1964) 6 SCR 1001, Jaswantlal Natvarlal Thakkar v.  Sushilaben
Manilal Dangarwala, 1991 Supp(2) SCC 691 and Kadiyala  Rama  Rao  v.  Gutala
Kahna Rao,(2000) 3 SCC 87)

14. A charge of fraud or material irregularity under Order 21 Rule  90  must
be specifically made with sufficient  particulars.  Bald  allegations  would
not do. The facts must be established which could reasonably sustain such  a
charge. In the case before us, no such particulars have been  given  by  the
respondent of the alleged collusion between the other  respondents  and  the
auction-purchaser. There is also no material irregularity in  publishing  or
conducting the sale. There was sufficient  compliance  with  Order  21  Rule
67(1) read with Order 21 Rule 54(2). No doubt,  the  trial  court  has  said
that the sale should be given wide publicity but that does  not  necessarily
mean by publication in the newspapers. The provisions of Order  21  Rule  67
clearly provide if the sale is to be  advertised  in  the  local  newspaper,
there must be specific direction  of  the  court  to  that  effect.  In  the
absence of such direction, the proclamation of sale has  to  be  made  under
Order 21 Rule 67(1) “as nearly as may be, in the manner prescribed  by  Rule
54  sub-rule  (2)”.  Rule  54  sub-rule  (2)  provides  for  the  method  of
publication of notice and reads as follows:

“54. (2) The order shall be proclaimed at some place on or adjacent to  such
property by beat of drum or other customary mode, and a copy  of  the  order
shall be affixed on a conspicuous part of  the  property  and  then  upon  a
conspicuous part of the courthouse, and also, where  the  property  is  land
paying revenue to the Government, in the office  of  the  Collector  of  the
district in which the land is  situate  and,  where  the  property  is  land
situate in a village, also in the office of  the  Gram  Panchayat,  if  any,
having jurisdiction over that village.”

15)   After examining the facts of this case in the light of  the  law  laid
down in the case of Saheb Khan (supra), we are  of  the  considered  opinion
that the reasoning and the conclusion arrived  at  by  the  executing  Court
deserves to be restored as against that of the High Court  in  the  impugned
order. In other words, no case was made  out  by  the  judgment  debtor  for
setting aside of the sale of the property  in  question  on  the  ground  of
committing  any  material  irregularity  or  fraud  in  publishing   or   in
conducting the sale so as to enable  the Court to invoke  its  powers  under
Order 21 Rule 90 (2) of the Code.
16)   It is noticed that respondent No. 1, in her  application  for  setting
aside the sale, had mainly raised four objections. Firstly, clear  15  days’
notice was not given for sale  of  the  properties  as  required  under  the
Rules. Secondly, the valuation of the property was  not  properly  mentioned
in the concerned documents so as to enable the parties to  know  its  proper
valuation prevailing on the date of sale. Thirdly, the market value  of  the
property on the date of auction was more than the price actually fetched  in
the auction, and fourthly, no proper publication including beating  of  drum
was  made  before  the  date  of  auction  due  to  which  there  was   less
participation of the bidders in the auction sale.
17)   The executing Court dealt with all the four objections with  reference
to the record of the proceedings and found  as  a  fact  that  none  of  the
objections had any merit.  The High Court, however, found fault in the  same
though not in all but essentially in the matter relating to giving of  clear
15 days’ notice and the manner in which it was issued and finding  merit  in
the objection, set aside the sale on imposing certain conditions  enumerated
above.
18)   In our considered opinion, as mentioned  above,  the  executing  Court
was justified in overruling the objections and we concur with the  reasoning
and the conclusion of the executing Court.
19)   We also find on facts that firstly, the  proper  publicity  was  given
for auction sale in papers so also by beat of drums  pursuant  to  which  as
many as seven bidders including the appellant  herein  participated  in  the
auction sale. Had there been no publicity, it would not have  been  possible
for seven persons to participate in the auction proceedings.
20)   Secondly, the details of the  valuation  of  the  property  were  duly
mentioned, namely, decree  holder's  valuation  at  Rs.2,75,000/-  likewise,
Amin’s valuation at Rs.4 lacs whereas the property was sold in  auction  for
Rs.7,50,000/-. In this view of the matter, it could not  be  said  that  the
bidders did not know the valuation or/and that it was not mentioned  in  the
auction papers.
21)   Thirdly, judgment debtor did not adduce any evidence nor  brought  any
bidder to purchase the property for a higher price  than  the  purchase  bid
(Rs.7,50,000/-) except to say in the application that value of the  property
was between Rs.12 lakhs to Rs.14 lakhs. In our view, this objection  has  no
substance for want of any evidence.
22)    Fourthly, there was adequate publicity given with the aid of beat  of
drums in the locality.  It was proved  with  the  record  of  the  executing
Court as was rightly held by the executing Court and lastly, in our view,  a
clear 15 days’ notice was given for auction sale fixed for  17.11.1999  when
counted from 05.10.1999.  In other words, 15 days have to  be  counted  from
05.10.1999 because it is on this date the order was issued  as  contemplated
under Order 21 Rule 64 for proclamation of sale fixing the date of  sale  as
17.11.1999.
23)   The executing  Court,  therefore,  substantially  and  in  letter  and
spirit followed the procedure prescribed under Order 21 Rules 64 and  66  of
the Code while conducting the sale of the property in question.
24)   The law on the question involved  herein  is  clear.  It  is  not  the
material irregularity that alone is sufficient  for  setting  aside  of  the
sale.  The  judgment  debtor  has  to  go  further  and  establish  to   the
satisfaction of the Court that the material irregularity or  fraud,  as  the
case may be, has resulted in causing substantial  injury  to  the  judgment-
debtor in conducting the sale. It is only then the sale so  conducted  could
be set aside under Order 21 Rule 90(2) of the Code. Such  is  not  the  case
here.
25)   In the light of aforesaid discussion,  we are of the  considered  view
that none of the objections raised by respondent No.1 had any merit and  nor
any of the objections constituted any kind of material irregularities so  as
to enable the Court to set aside the sale under Order 21 Rule 90(2)  of  the
Code. So far as the plea of fraud was  concerned,  admittedly,  it  was  not
raised and, therefore, it did not fall for consideration.
26)   Learned  Counsel  for  the  respondent  has  placed  reliance  on  the
decisions in Gajadhar Prasad & Ors. Vs. Babu Bhakta Ratan & Ors.,  (1973)  2
SCC 629, Ambati Narasayya vs. M. Subba Rao & Anr.,  1989  Supl(2)  SCC  693,
Desh Bandhu Gupta vs. N.L. Anand & Rajinder Singh,  (1994)  1  SCC  131  and
Saheb Khan vs. Mohd. Yousufuddin & Ors.,(2006)  4  SCC  476.  We  have  gone
through these cases and find that all are distinguishable on facts. When  we
have held on facts that there are no material irregularities noticed in  the
case and that there was compliance of the provisions of Order  21  Rules  64
to 68 then, in our view, the law laid down in  these  decisions  are  of  no
help to the respondent-judgment debtor.
27)   In view of foregoing discussion, we  are  unable  to  agree  with  the
reasoning and  the  conclusion  arrived  at  by  the  High  Court  which  is
factually and legally unsustainable.  Its view is  not  in  conformity  with
the law laid down in the case of Saheb Khan (supra).
28)   As a result, the appeal succeeds and is allowed.   Impugned  order  is
set aside and that of the executing Court restored.



………...................................J.
                                  [R.K. AGRAWAL]


…...……..................................J.
                                [ABHAY MANOHAR SAPRE]
      New Delhi;
May 02, 2017
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