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Chandragiri Loan and Sale Co-operative Society, Pakala Vs. Nalli Chenga Reddi and ors. - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies
CourtAndhra Pradesh High Court
Decided On
Case NumberAppeal No. 1070 of 1953
Judge
Reported inAIR1959AP288
ActsMadras Co-operative Societies Rules, 1932 - Rule 22(18) and 22(18)(1); Madras Co-operative Societies Act, 1932 - Sections 57A
AppellantChandragiri Loan and Sale Co-operative Society, Pakala
RespondentNalli Chenga Reddi and ors.
Appellant AdvocateA. Kuppuswami, Adv.
Respondent AdvocateP. Somasundaram and ;P. Suryanarayana, Advs.
DispositionAppeal allowed
Excerpt:
.....charges against cost of stamp paper - stamp paper deposited after expiry of last day prescribed by deputy registrar along with petition for condonation of delay - delay not condoned - auction sale cancelled and fresh auction ordered - resale generated only rs. 4,000 - respondent wanted refund of rs. 12,000 - only rs. 4,000 ordered to be refunded - additional deputy registrar finding procedural error with deputy registrar's order stated set off of loss of rs. 8,000 cannot be done without execution petition - held, under rule 22 (18) (a) no need for execution petition - under section 57a first purchaser liable for deficiency caused at auction resale. - - the 2nd defendant has obtained loans on several occasions from the 1st defendant for carrying on his family trade and had failed to..........issues numbered as issues 3,4,5, and 6 respectively only are material for our purpose.''(3) is the sale held on 12-6-1948 by the 1st defendant's society not valid and is tainted by gross and material irregularity for the various reasons stated in paragraphs 8 and 10 of the plaint? (4) is re-sale dated 17-5-1949 also invalid and not binding on the plaintiff for the reasons stated in paragraphs 9 and 10 of the plaint? (5) is the order dated 6-9-1950 passed by the registrar of co-operative societies regarding the set-off of rs. 8,000/- valid and binding on the 1st defendant? (6) is the plaintiff entitled to recover rs. 8,000/-for any of the reasons stated in para 13 of the plaint either from the 1st defendant or defendants 2 to 4?' on issues 3 and 4, the trial court found that neither the.....
Judgment:

Bhimasankaram, J.

1. The 1st defendant, the Chandragiri Loan and Sale Co-operative Society, is the appellant in this appeal. The suit was instituted by the 1st respondent and there were three more defendants, 2nd defendant being the father and the others his minor sons both represented by their maternal grand-father as guardian. The 2nd defendant has obtained loans on several occasions from the 1st defendant for carrying on his family trade and had failed to repay them in time; the 1st defendant thereupon filed claims against him before the Deputy Registrar of Co-operative Societies under the Madras Co-operative Societies Act and obtained a number of decrees against him.

We are only concerned with its claim No. 180/-45-46 for a sum of Rs, 3,794-6-4 which resulted in Ex. A-1 an award Dated 28-10-1946 passed by the Co-operative Sub Registrar. On 4-6-1946, the Society filed E. P. No. 180/45-46 seeking execution of its decree against the properties of its judgment-debtor. The properties now described in the A' schedule to the present plaint were then attached and brought to sale. The sale actually took place on 12-6-1948 and the plaintiff was the highest bidder.

Some time before the sale took place, the guardian of the present defendants 3 and 4 filed an objection petition urging that certain items included in the sale proclamation should be excluded on the ground that they had fallen to the share of his wards at a partition in the family evidenced by a registered partition dated 2-2-1946. That objection was overruled and the sale was held as originally notified. The properties were knocked down for Rs. 12,000/- and the plaintiff made an initial deposit, as required by the rules, of Rs. 2,000/- on the date of sale.

He had under the rules to deposit the balance together with a sum of Rs. 360/- for the cost of stamp paper on or before 28-6-1948. In the meanwhile the guardian of the defendants 3 and 4 filed a suit O. S. No. 38 of 1948 on the file of the Subordinate Judge's Court, Chittoor impeaching the order of the Deputy Registrar overruling his objection, To this suit, the society as well as the present plaintiff were made parties. The plaintiff deposited with the Deputy Registrar in time the balance of the purchase-money but did not deposit the sum of Rs. 360/- and filed a petition before that officer requesting him to stay further proceedings till the disposal of O. S. No. 38 of 1948.

At the same time, he requested a month's time for payment of the sum of Rs. 360/-. Upon that application of the plaintiff, the Deputy Registrar, passed an order stating that he had no power to stay the proceedings but that the plaintiff might have the full period of 30 days allowed by Rule XXII (7) (h) of the Rules framed under the Madras Co-operative Societies Act, for the payment of the money due for the stamp duty. The plaintiff however did not make the deposit before 11-7-1948 which was the last day but actually deposited it on 13-7-1948 and filed a petition praying that the delay in making the deposit may be excused.

He stated that there had been a mistake in calculating the time for making the deposit. Thereupon, notice of that application was given to the judgment-debtor who however did not care to appear. Nevertheless, the petition was dismissed by the Deputy Registrar who ordered the cancellation of the sale in favour of the plaintiff and at the plaintiff's risk. At the re-sale which was held on 17-5-1949 one Dayya Reddy was the highest bidder and his bid was only for Rs. 4,000/-.

The 1st defendant-Society then applied to the Deputy Registrar praying that out of the sum of Rs. 12,000/- standing to the credit of the plaintiff with him, the sum of Rs. 4,000/- realised at the re-sale, be deducted and the balance of Rs. 8,000/-be paid over to it for adjustment towards the money owing to it by the 2nd defendant. The plaintiff at about the same time applied for a refund of the whole of the amount of Rs. 12,000/- as also the sum of Rs. 360/- subsequently deposited by him for stamp expenses.

The Deputy Registrar passed an order on 18-12-1949, marked as Ex. A-23 in the case, in which he said that the re-sale having been held on account of the default of the plaintiff and at his risk the plaintiff was liable to make good the loss suffered by the Society by the re-sale and directed that the sum of Rs. 8,000/- being the difference between the bid amounts on the occasion of the first and the second sales be paid over to the Society and that the plaintiff should be refunded only a sum of Rs. 3,725-14-0 arrived at after deducting from the balance of Rs. 4,000/- poundage etc.

He also directed the refund of the full sum of Rs. 360/- deposited by the plaintiff towards the cost of the stamp paper. Dissatisfied with this order, the plaintiff invoked the revisional jurisdiction of the Registrar of Co-operative Societies although he styled his petition an appeal. The additional joint Registrar's order in revision (Ex, A-24) was passed on 6-9-1950. In his order he held that the re-sale was rightly held on account of the default of the plaintiff at the risk of the plaintiff and that it was also otherwise in order and not open to the objections as to its validity raised by the plaintiff.

He also held that the plaintiff being a defaulting auction-purchaser was liable for the deficiency o the price resulting on the re-sale 'either to the decree-holder Or the defaulter' as provided by Rule XXII (18)(1) of the Madras Co-operative Societies Rules, 1932. But in his view, the Deputy Registrar was wrong in issuing the directions as to adjustment in the absence of a regular execution petition to be taken under Rule XXII (1) by the decree-holder for the recovery of the deficiency. He therefore set aside the order of the Deputy Registrar evidenced by Ex. A-23 'in so far as the set-off of the deficiency from the deposit of the defaulting auction-purchaser is concerned.'

This the plaintiff seems to have considered as one entitling him to a refund of the sum of Rs. 8,000/- in deposit with the Deputy Registrar. Acting on that view, he seems to have applied to the Deputy Registrar for refund and later through an advocate to the Registrar himself. On 23-1-1951, he was informed by the Registrar that the Deputy Registrar, Chittoor had already been instructed 'to give effect to the Additional Joint Registrar's Orders' and that 'the Deputy Registrar, Chittoor is taking necessary action in the matter.' What transpired afterwards does not appear, hut presumably nothing to the satisfaction of the plaintiff.

2. The plaintiff instituted the present action on 7-11-1951 in which he sought recovery of the sum of Rs. 8,000/- from the defendants 1 to 5 jointly and severally. It is not easy to find out from the plaint what exactly according to the plaintiff, is cause of action is. Jn paragraph 6 of the plaint, he states that he was not aware that there was a registered partition deed between the 2nd defendant and his sons and that he made the bid for Rs. 12,000/- at the first sale in the bona fide belief that all the items mentioned in the proclamation belonged to the 2nd defendant alone.

He then narrates the facts which lad up to - the re-sale and states that though the proclamation at the re-sale mentioned all the properties that were notified in the first said, the bidders knew that they could get only the properties described in the plaint 'B' schedule and not the others and that therefore the highest hid in the re-sale was made only for 'the 'B schedule properties' and that consequently it did not exceed Rs. 4,000/- which is their proper value. Then ha proceeds to state in paragraph 10 as follows;--

'The large deficiency in price Rs. 8000/- was caused directly by fa) the enormous delay of more than 11 months in conducting the re-sale (the first sale was on 12-6-1948 and the re-sale on 17-5-1949); (b) the wide publicity given to the fact that the minor sons of the defaulter Krishna Reddy had filed O. S. No. 38 of 1948 for a declaration of their ,title (o the properties allotted to them in the partition; --(c) the indifference, apathy and collusion of the society in their conduct of the defence in O.S. No. 38 of 1948 and the removal of the 3rd defendant (the present plaintiff) from the record; and (d) the certainty of litigation against powerful and influential parties which the impending decree in O. S. No. 38 of 1948 made inevitable. In these circumstances, there was really no re-sale on 17-5-1949. The properties sold on that day were not the same as those sold on 12-6-1948. The 'A' schedule properties were sold on 12-6-1948. On 17-5-1948, the 'B' schedule properties were sold, together with a litigation in regard to 'C' schedule' properties.'

In order to understand this paragraph, it may be stated that when the sale in favour of the plaintiff was set aside and the re-sale ordered, the plaintiffs in O.S. No. 38 of 1948 gave up the present plaintiff who was a defendant in the Suit as already stated & the suit proceeded only against the Society & the present 1st defendant, On the date of the trial however the learned advocate for the Society was absent and the suit was decided ex parte. The result of that suit was that the summary order was set aside and the rights of the present defendants 2 and 3 to the property described in the present 'C' schedule were declared.

3. Then the plaint proceeds to impugn the Order of the Deputy Registrar as illegal and inequitable. After stating that the order was set aside by the Additional Joint Registrar, it States in paragraph 12 that in spite of the plaintiff having made demands for the! refund of Rs. 8,000/- 'and in spite of numerous letters and petitions, the Deputy Registrar has turned a deaf ear to the plaintiff's requests' and that he has not given effect to the order of the Additional Joint Registrar. Then in paragraph 13 of the plaint, it is alleged that the deficiency in the resale was not due to any default on the part of the plaintiff but is 'wholly due to the default of the decree-holder, the 1st defendant herein,'

Then it is further stated in the plaint that the plaintiff had sustained a loss of Rs. 8,000/- by 'the illegal and inequitable set off ordered by the Deputy Registrar on 18-12-1949 and that the defendants have improperly and illegally benefited pro tanto. The 1st defendant is stated to be liable both in law and in equity to the plaintiff to repay the plaintiff the sum of Rs. 8,0007- because of the defects in the proclamation made by it for the sale on 12-6-1948 and also because it acted in collusion with the 2nd defendant and his sons in allowing an ex parte decree to he passed in O. S. No. 38 of 1948 as also because of the long delay in bringing about the re-sale.

As regards the defendants 2 to 4 they are also stated to be liable both in law and in equity because the sum of Rs. 8,0007- has gone in reduction of their debt lawfully due to the 1st defendant under the awards, and as pre-partition debts and having been incurred by the manager of the joint family for justifiable necessity, they are binding not only on the 2nd defendant but also on the defendants 3 and 4. Paragraph 16 which contains the relief sought for by the plaintiff is as follows:--.

'The plaintiff humbly prays that the Honourable Court may be pleased to grant a decree to the plaintiff-

(i) declaring that the Order of the Deputy Registrar dated 18-12-1949 which was also set aside by the Joint Registrar on 6-9-1950 is null and void as against the plaintiff; and

(ii) directing defendants 1 to 4 jointly and severally to 'ay to the plaintiff the sum of Rs. 8,000/- together with interest thereon at 6 per cent per annum from the date of suit till realisation and

(iii) directing the defendants 1 to 4 to pay plaintiff the costs of the suit.'

4. In its written statement, the 1st defendant denied the material allegations, particularly, the allegation that there was any irregularity in the proclamation of the sale. It stated that the re-sale also was properly held in accordance with the rules and that the Deputy Registrar was entitled to issue a certificate for the deficiency occurring as a result of the re-sale, that the order of the Deputy Registrar was right and the order of the Additional Joint Registrar setting; aside was wrong. It repudiated its liability for the refund. It also stated that the basis upon which the plaintiff framed his suit for the recovery of Rs. 80007- against it was 'neither legal nor just and equitable.'

5. We are not now concerned with the defence put forward by the other defendants.

6. The lower court passed a decree against the 1st defendant only. Several issues were framed at the trial of which the following issues numbered as issues 3,4,5, and 6 respectively only are material for our purpose.

''(3) Is the sale held on 12-6-1948 by the 1st defendant's Society not valid and is tainted by gross and material irregularity for the various reasons Stated in paragraphs 8 and 10 of the plaint?

(4) Is re-sale dated 17-5-1949 also invalid and not binding on the plaintiff for the reasons stated in paragraphs 9 and 10 of the plaint?

(5) Is the order dated 6-9-1950 passed by the Registrar of Co-operative Societies regarding the set-off of Rs. 8,000/- valid and binding on the 1st defendant?

(6) Is the plaintiff entitled to recover Rs. 8,000/-for any of the reasons stated in para 13 of the plaint either from the 1st defendant or defendants 2 to 4?'

On issues 3 and 4, the trial court found that neither the sale held on 12-6-1948 nor the re-sale held on 17-5-1949 was invalid on any account. It found however under issue No. 5 that the order passed by the Registrar of Co-operative Societies on 6-9-1950 is binding on the 1st defendant and under issue 6 it held that the plaintiff is entitled to recover the sum of Rs. 8,000/- only from the 1st defendant and not from the defendants 2 to 4.

7. Mr. Kuppuswamy for the appellant contends that the decree of the lower court is unsustainable and we find ourselves in complete agreement with him. It seems to us that there are at least two good reasons why the plaintiffs suit should have been dismissed.

8. In the first place, we are not satisfied that the plaintiff has any cause of action against the 1st defendant-society. It is not alleged in the plaint that the 1st defendant came into possession of this sum of Rs. 8,000/- directed to be adjusted towards the debt due to it from the 2nd defendant. In fact, it is clear from the proceedings filed by the plaintiff himself that he was demanding the refund of Rs. 8000/- from the Deputy Registrar.

Paragraph 12 of the plaint above-quoted show; that the plaintiff was addressing numerous letters and petitions for the refund of Rs. 8000/- to the Deputy Registrar and in paragraph 13 it is clearly stated that the sum was deposited with the Deputy Registrar. In the absence of proof that the sum came into the possession of the 1st defendant even assuming that the order of the Deputy Registrar was invalid, the plaintiff, it is plain, cannot have any cause of action against the society.

9. In the second place, it is perfectly clear that both the Deputy Registrar as well as the Additional Joint Registrar were of the opinion that not only was the re-sale properly held hut that the plaintiff was liable for the deficiency. It is not necessary to quote from Ex. A-23 the order of the Deputy Registrar because that is admittedly against the plaintiff, but the following extract from the order of the Additional Joint Registrar, Ex. A-24, will show that he also was at one with his subordinate in regard to that matter:--

'I do not see any reason why the Deputy Registrar should postpone the resale and I find that the resale is in order ......... The Registrar of the District in his proceedings ....... ordered that the balance of Rs. 8,000/- i.e., the difference between the bid amounts of the original sale and re-sale be set off from the deposit amount made by the defaulting auction purchaser based on the report of the sale officer dated 17-9-1949 and at the request of the decree-holder dated 17-5-1949.

Sub-rule 18(1) of Rule XXII lays down that any deficiency of price which may happen on a resale held under Clause (j) of Sub-rule (7) by reason of the purchaser's default, shall at the instance of either the decree-holder or the defaulter, be recoverable from the defaulter purchaser under the provisions of this rule. Rut no regular execution petition was filed by the decree-holder for the recovery of the deficiency. The action of the Registrar of the District in straightaway ordering the set-off of tha deficiency from the deposit made by the defaulting auction purchaser without taking out the prescribed execution processes under Sub-rule (1) of Rule XXII is therefore irregular.

I hereby, order that the order of the Registrar of the District of the Chittoor E.P. No. 180/45-46 dated 18-12-1940 be set aside in so far as the set off of the deficiency from the deposit of the defaulting auction purchaser is concerned.'

10. A close examination of the above excerpt discloses that the only fault that the Additional Joint Registrar found with the order of the Deputy Registrar was that the set-off in favour of the Society was directed without a proper execution petition. He therefore held that the order was 'irregular', that is to say, in his view the direction given was vitiated by a procedural error. He did not disagree with the view of the Deputy Registrar that the deficiency was recoverable from the plaintiff the petitioner before him. He expressly rejected the contention of the plaintiff that the re-sale was illegally held. Ex. A-24 therefore did not entitle the plaintiff to get back the sum of Rs. 8,000/-. It only contemplated the regularisation of proceedings by the filing of an execution petition on the basis of the resale.

11. In this connection, we may observe, though it may not have any bearing upon the! merits of this appeal that the view of the Additional Joint Registrar, in our opinion, is wrong. In the first place, we do not find that there is a provision for any execution application in a matter of this sort. In fact, it seems to us clear there is no question of any execution in such a matter. The decree-holder must have filed an execution petition pursuant to which the attachment and sale were brought about and when a re-sale is held consequent upon the default of the first purchaser, Rule XXII (18) (1) is attracted, which provides as follows:--

'Any deficiency of price which may happen on a resale held under Clause (j) of Sub-rule (4) or clause (e) or Clause (j) of Sub-rule (7) by reason of the purchaser's default, and all expenses attending such re-sals shall be certified by the Sale Officer to the Registrar of the district and shall, at the instance of either the decree-holder or the defaulter, be recoverable from the defaulting purchaser under the provisions of this rule. The costs, if any, incidental to such recovery shall also be borne by the defaulting purchaser.'

There is no provision for the mode of recovery, because in such a case the money of the defaulting purchaser is available with the Registrar. We can see no difficulty in the Deputy Registrar adjusting it either in favour of the decree-holder or 'the defaulter,' meaning the judgment-debtor. Rule XXII(1) to which the Additional Joint Registrar refers in Ex. A-24 provided for execution of 'decree, decision, award or contribution order.' But no definite order is contemplated so far as we can see in regard to the recovery of the deficiency of price.

Rule XXII only refers to amounts recoverable under Section 57-A of the Act and these sums are

'(a) any amount due under a decree or order of a civil court, a decision or an award of the Registrar or arbitrator, or an order of the Registrar, obtained by a registered society including a financing bank or liquidator; or (b) any sum awarded by way of costs under Section 41 to a registered society including a financing bank or to the Government, or

(e) any sum ordered under Section 47 to be recovered as a contribution to the assets of a society or as costs of liquidation or (d) any sum ordered under Section 49 to be repaid to a society or recovered as a contribution to its assets.'

Section 57-A, it is true deals with sums recoverable by a society. But Sub-rule 18 (1) of Rule XXII does not confer a right upon the society to recover the sum. There can be no order passed directly in its favour or in favour of the 'defaulter' i.e., the judgment-debtor. What is contemplated by that provision is that the defaulting purchaser should be made liable for the deficiency. Our attention has not been drawn however to any provision in the rules as to how the deficiency so recoverable is to be appropriated though the recoverability depends upon the decree-holder or the defaulter asking that it should be recovered.

We see however, no objection to any valid appropriation of the sum being made towards any liability, treating it as part of the purchase-money obtained by the sale. The true position in law is that the deficiency is to be treated as part of the purchase-money recovered by the sale of the properties of the judgment-debtor, in which case, of course, it could be adjusted against the sum due from him to the society. There need be no execution petition for such appropriation just as there need be need where such purchase-money is obtained at a first sale.

12. In this connection we may observe that .in the course of the examination of the provisions under Rule XXII, we find that there is no substantive provision for the re-sale of immovable property though a re-sale is provided for in the case of moveable property by Clause (j) of Sub-rule (4) of that rule in these terms :

'Resale in case of default -- Where the purchaser may fail in the payment of purchase-money, the property shall be re-sold.'

There is no corresponding express provision in regard to the re-sale of immovable property. We Wish to draw the attention of the concerned authorities to this omission. We may also state that while Clause (k) of Sub-rule (7) of this rule provides for the entering up of satisfaction of the decree where the decree-holder purchases, there is no express provision as regards the disposal of the money obtained from a third party purchaser.

13. We are clearly of the opinion that the Additional Joint Registrar was wrong in thinking that there was need for an execution petition by the society. As we have already stated, the deficiency to be recovered is to be treated as part of the purchase money realised at a sale of the properties of tbe judgment-debtor and to be dealt with accordingly. The Deputy Registrar could direct that that sum should be treated as money realised at the sale of the 2nd defendant's properties, and to be appropriated towards or 'set off against, the sum due from the 2nd defendant to the 1st defendant. We can see no flaw in the order of the Deputy Registrar.

14. In any case, we are perfectly clear that even the Additional Joint Registrar did not take the view that the plaintiff would be entitled to a refund whatever the right of the society may be. Clause (1) of Sub-rule (18) of Rule XXII provides for the recoverability of the deficiency at the instances of either the decree-holer or the Judgment-debtor. In this case, the decree-holder moved the Deputy Registrar by Ex. B-12 dated 17-5-1949 for such recovery and the Deputy Registrar was quite in order, in OUT


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