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R. Raghavachari Vs. M.A. Pakkiri Mahomed Rowther and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai
Decided On
Reported in34Ind.Cas.760; (1916)30MLJ497
AppellantR. Raghavachari
RespondentM.A. Pakkiri Mahomed Rowther and ors.
Cases ReferredArthanari Chettiar v. Nagoji Rao
Excerpt:
.....a finding as to the question whether the appellant was a bona fide purchaser in good faith at the auction sale, the district judge seems to have thought that 'good faith' implied also ignorance of the pendency of an appeal against the decree which are being executed and hence in his finding he stated that the property was purchased by the purchaser for fair value, that he purchased it for his own benefit and also that he did not know of the pendency of the appeal. i cannot treat the above as embodying a decision by the learned judges that ignorance of the pendency of an appeal is necessarily a constituent element of the good faith of the court auction-purchaser. i think that the words 'good faith' merely indicate such things as absence of participation in the frauds and irregularities,..........entitled as against the court auction-purchaser (appellant) to get back petitioner's share of the lands purchased by the appellant, he can in partial restitution, be given his 10 1/2/60th of the sale proceeds of that property rs. 625, which the decree-holder has received. as the appellate court has got all the powers of the court of first instance, we shall direct the south indian export company to pay that amount with interest at 6% per annum to the 1st respondent.sadasiva aiyar, j.6. i entirely agree. i wish to add only a few words in regard to the contention of mr. anantakrishna aiyar that a purchaser in a court auction sale cannot be a bona fide purchaser if he was aware that an appeal is pending against the decree under execution.7. order 41, rule 5 clause (1) of the civil.....
Judgment:

Moore, J.

1. This is an appeal by 2nd respondent in the Lower Court against an order of the Subordinate Judge of Negapatam passed in execution. The circumstances which have given rise to the appeal are these : - The South Indian Export Company, Limited, obtained a mortgage decree in O.S. No, 38 of 1903 on the file of the Court of the Subordinate Judge of Kumbakonam. The 1st respondent preferred an appeal and under the decree of the High Court dated 8th April 1910, his share in the properties was exonerated. While the appeal was pending certain properties were brought to sale in execution on the 8th October 1909 and the present appellant purchased in his own name for Rs. 525, some nanja lands in Peyur which are referred to in the evidence as the Theevali lands. The appeal relates to these properties which were, it appears, subject to a prior mortgage of about Rs. 5,000, in favour of a third party, the South Indian Export Company holding a subsequent mortgage over those and other properties on which they had obtained a decree for nearly Rs. 7,000. At the time of the sale the appellant was the agent of the Company. He left the 'Company's service in November 1911. The 1st respondent applied to the Subordinate Judge for restitution and delivery of his 10 1/4/60th share of the properties which had been taken possession of by the South Indian Export Company and the appellant as purchasers at the auction sale. The decree-holder, it may be mentioned had received permission to bid at the sale. The appellant opposed the application for restitution on the ground that he had purchased the properties in Court auction not in his capacity as the agent of the Company but on his own behalf the sale certificate having been issued in his name. The Company in the Lower Court raised no objections to the 1st respondent being given his share of the lands. The Subordinate Judge found that the appellant was merely as benamidar for the Company and that 1st respondent was accordingly entitled to get his share of the lands and directed that symbolical possession should be given to him, and that a separate application should be made for the ascertainment of mesne profits.

2. The learned Vakil for the appellant contends that the Subordinate Judge erred in holding that the purchase was made for the Company and that in law the purchase could not be subsequently adopted as their own by the Company. Certain letters which had passed between the South Indian Export Company and their agent, the appellant, were tiled. The oral evidence consists of the deposition of the appellant who was called as a witness curiously enough for the claimant (1st respondent). No evidence was offered on behalf of the South Indian Export Company. Why Mr. Simpson who was at the time Manager of the Company was not examined is not clear. We are certainly not prepared to accede to Mr. Devadoss's request that the case should be sent back to enable the Company to adduce evidence. It will be convenient to deal with the correspondence between the Company and their agent prior to the auction sale. On 18th April 1909, the appellant wrote to the Company informing them of the date fixed for the sale and asking for permission to purchase the properties in Court sale if necessary, and mentioned that bidders were not likely to buy at the auction for fear of the Mahomadams. In his reply, Exhibit E, Mr. Simpson wrote that the Company objected very much to buying properties like this in public auction and pointed out that, the appellant had not explained why it was necessary for the Company to bid. He also asked him for a detailed statement of the values of the properties which the Company should bid for and what outside offers he had received. In his letter, Exhibit Dl, the appellant replied that the lands were worth about Rs. 8,000 and that as there were two mortgages amounting to Rs. 12,000 on the property nobody was likely to buy them in Court auction and it was not worth while for the Company to take them in their own name. The concluding portion of the letter is as follows:

But I am making arrangements subject to your sanction, that is, let any one take this in Court auction for a amount and conduct the suit on the first mortgage. If he succeeds in the case let him pay us Rs. 4,000 or Rs. 5,000 for our decree debt. Until then we have our decree in force. In case of failure, it doss not matter much for us as the first mortgage amount and costs will come to more than the value of the property. In his reply, Ex. El, Mr. Simpson wrote that he agreed to what the appellant had suggested, and that 'with regard to the nanja lands' the appellant might 'arrange with a third party to purchase them and conduct the suit of the first mortgagee.

3. It is, we think, clear from the correspondence that the Company expressly forbade their agent to purchase the Tneevali lands for the Company and that there can be no doubt from the evidence that the purchase was made by the appellant on his own behalf. It is significant that in the site account it is stated that Raghavacharry, the appellant, purchased lot No. 1 for himself and that he his signed in his own name, whereas in the case of the other lands which he purchased on behalf of the Company he added the words 'plaintiff's agent' below his signature. If the purchase had been made on behalf of the decree-holder who had obtained permission to bid, no deposit would be necessary. The appellant explains that, as he could not find any third person to purchase the lands he purchased them himself, and that there were no other bidders. He says that he had enough money with him to pay the deposit of 25 per cent, and that he borrowed the balance from his brother-in-law, but we agree with the Subordinate, Judge that this statement is untrue; and that it is more probable that the appellant paid Rs. 525 out of the Company's funds in his hands. In Ex. A the account furnished by the appellant to the Company Rs. 525 is not however shown as having been expended on 8-10-09. The last item in the account is 'amount to be recovered from Court Rs. 526.'

As to what transpired subsequently the evidence is not so clear. The appellant states that after the sale he went to Madras and orally reported that he had purchased the lands himself and had an interview with his master (presumably Mr. Simpson) who said that the lands might be transferred to a third person who would fight it out with the first mortgagee. The appellant further states that there was an application to set aside the sale, and that the Manager of the Company said that the Company had a mortgage of the lands and would arrange with others for the purchase of the lands from him, and that, as he was the servant of the Company he agreed to this. It is pointed out that no mention is made of this agreement or arrangement in the appellant's counter-petition in the Lower Court, that the date of the agreement is not stated, that the appellant wrote the letters Ex. F series to the Company asking them to arrange for the payment of the kist on the lands, that in Ex. B he debited the Company on 12-1-10 with Rs. 525 the sale price of the lands which had been deposited in Court, and that he admits in his evidence that he got back the price which he paid from the Company and that the Company hid the right to sell the lands. All this is, however, we think perfectly consistent with the appellant's statement which we accept, that between the date of the sale' and January 1910 he agreed that the Company should arrange for the purchase of the lands from him, the appellant receiving as his commission the surplus, if any, should the lands be sold for more than the decree amount of Rs. 9,000. It is clear that not only did the Company not authorize the appellant as their agent to purchase the lands at the auction but expressly forbade him to do so. Mr. Devadoss argues that even if there was no express authorisation the Company are entitled to the benefit of the purchase and that a principal can ratify an unauthorised act of an agent. Reliance is placed on Section 216 of the Contract Act. That section, however, deals with the principal's right to the benefit gained by an agent dealing on his own account in the business of the agency as, for instance, the case of an agent 'employed to sell, selling and securing the secured profit for himself which he must account for, Andrews v. Ramsay and Co. (1903) 2 K.B. 635, Section 196 of the Contract Act is in these terms : 'Where acts are done by one person on behalf of another, but without his knowledge or authority, he may elect to ratify or to disown such acts. If he ratify them, the same effects will follow as if they had been performed by his authority.' Keighley Maxsted and Co. v. Durant (1901) A.C. 240, which was cited by the appellant's vakil is against the respondent. In that case it was held by the House of Lords, reversing the decision of a Majority of the Court of Appeal, that a contract made by a person intending to contract on behalf of a third party but without his authority cannot be ratified by the third party so as to render him able to sue or liable to be sued on the contract. Where the person who made the contract did not profess at the time of making it to be acting on behalf of the principal there must be on the part of the person acting without authority the express intention to contract on behalf of the other and in the absence of it there can be no ratification. No ratification is possible where' the agent does not purport to act, though without authority, on behalf of his principal, Kandasami Asari v. Somaskanta Ela Nidhi : (1910)20MLJ371 . Here the appellant purchased the property on his own behalf and did not profess to act on behalf of his principal. Following the ruling in Keighley Maxsted & Co. v. Durant (1901) A.C. 240, and Kandasami Asari v. Somaskanta Ela Nidhi : (1910)20MLJ371 , we hold that the Company cannot ratify the unauthorised act of the appellant so as to enable it to have the benefit of the purchase. We are unable to agree with the Subordinate Judge that the appellant was a mere benamidar for the Company. There is no evidence to support his finding on this point. Whatever the appellant's secret or undisclosed intention may have been, when he purchased the property, he purchased it on his own behalf. The appellant was a stranger and the purchase was not made on behalf of the decree-holder. Where a sale has really taken place in execution of the decree in force at the time, it cannot afterwards be set aside as against a bona fide purchaser not a party to the decree, on the ground that on further proceedings a decree has been, subsequently to the sale, reversed by an Appellate Court. Zain-ulabdin Khan v. Muhammad Ashjhar Alikhan I.L.R. (1897) A. 166. Their Lordships point out the distinction between bona fide purchasers who are no parties to a decree at a sale under execution and the decree-holders themselves. If the appellant was a bona fide purchaser, restitution cannot be demanded from him, and the modification of the decree in appeal cannot affect its validity so far as the auction purchaser who was not a party to the decree is concerned. The circumstance that the sale took place during the pendency of the appeal of which the appellant was presumably aware is not we think material. Mr. Anantakrishna Aiyar for the 1st respondent argues that the appellant was a speculative purchaser. However this may be, the appellant was nonetheless, a bona fide purchaser. The first respondent's claim for restitution must be disallowed.

4. We accordingly allow the appeal and set aside the order of the Subordinate Judge directing that symbolical possession should be given to the first respondent. Plaintiff (2nd respondent) must pay the appellant's costs in both Courts. The respondents will bear their own costs.

5. Mr. Ananthakrishna Aiyar contends that the 1st respondent is at any rate entitled to his share of the sale proceeds which were paid to the decree-holder. We think he is entitled to such an order. Section 144 of the Civil Procedure Code makes it imperative on the Court of First Instance to 'cause restitution as far as may be' and for the purpose of restitution it is empowered to make any necessary order. Though the petitioner (1st Respondent) has now been found not entitled as against the Court auction-purchaser (appellant) to get back petitioner's share of the lands purchased by the appellant, he can in partial restitution, be given his 10 1/2/60th of the sale proceeds of that property Rs. 625, which the decree-holder has received. As the Appellate Court has got all the powers of the Court of First Instance, we shall direct the South Indian Export Company to pay that amount with interest at 6% per annum to the 1st Respondent.

Sadasiva Aiyar, J.

6. I entirely agree. I wish to add only a few words in regard to the contention of Mr. Anantakrishna Aiyar that a purchaser in a Court auction sale cannot be a bona fide purchaser if he was aware that an appeal is pending against the decree under execution.

7. Order 41, Rule 5 Clause (1) of the Civil Procedure Code states 'An appeal shall not operate * * * nor shall execution of a decree be stayed by reason only of an appeal having been preferred from the decree.' Clause 3 of the same Order and Rule says 'no order for stay of execution shall be made' 'unless the court' making it is satisfied' in respect of certain matters. In the present case, the Appellate Court refused stay of execution of the decree and then the sale was held. If everybody who knows of an appeal and who comes to bid at the execution sale ceases to be a bidder in good faith, and when his bid is accepted, he cannot claim the1 position of a bona fide purchaser, it will practically nullify the provisions of Order 41, Rule 5. Not only can execution seldom take place under those conditions (as the judgment-debtor might be expected to warn off all bidders by giving them notice of the appeal) but the judgment-debtor himself will in many cases, sustain substantial loss and injury by the scaring away of honest bidders and by a few litigious persons alone remaining as bidders.

8. Reliance was placed by Mr. Anantakrishna Aiyar on the case of, Arthanari Chettiar v. Nagoji Rao (1912) M.W.N. 513, for his above contention. There, Sir Arnold White, C.J. and Sankaran Nair, J. sent down the case to the District Judge to submit a finding as to the question whether the appellant was a bona fide purchaser in good faith at the auction sale, The District Judge seems to have thought that 'good faith' implied also ignorance of the pendency of an appeal against the decree which are being executed and hence in his finding he stated that the property was purchased by the purchaser for fair value, that he purchased it for his own benefit and also that he did not know of the pendency of the appeal. On the return of that finding, the learned Judges accepted it and allowed the appeal dismissing the application of the defendant for restitution. I cannot treat the above as embodying a decision by the learned Judges that ignorance of the pendency of an appeal is necessarily a constituent element of the good faith of the Court auction-purchaser. I think that the words 'good faith' merely indicate such things as absence of participation in the frauds and irregularities, if any, committed by the decree-holder, absence of the relation of agent or benamidar to the decree-holder, absence of any conduct such as scaring away other bidders by false statements and so on.


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