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N.R.M. Govindarajulu Naidu Vs. the Secretary of State for India in Council Represented by the Collector - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported inAIR1933Mad649; (1933)65MLJ317
AppellantN.R.M. Govindarajulu Naidu
RespondentThe Secretary of State for India in Council Represented by the Collector
Cases ReferredKanthamma v. Reddi Pantulu
Excerpt:
.....amount of revenue assessed on the land or upon its different sections, the proportion of the public revenue during the remainder of the current fasli, would all equally apply to what was being sold on the second occasion as well as to what was being sold on the first occasion. this case was relied on by the trial court and is certainly in favour of the appellant, though it was sought to distinguish it by saying that such a sale is not under a legal process like a court sale or a revenue sale and that in the case of a sale under a legal process there can be no remedies except the actual ones given by the procedure. i do not think therefore that the government in order to deprive the appellant of his remedy can say that he is confined to what can be found in the processual law in act ii..........land revenue under act ii of 1864, the property is not sold free of encumbrance as it is in a land revenue sale. it is also admitted that if the sale were a private one between two private parties, the buyer could compel the seller to discharge the encumbrance on the property which exists on the date of the sale if the property is sold free from encumbrance. it is also admitted that if it were a court sale, unless there was some misrepresentation by the selling officers or some default of the person who verified and signed under order 21, rule 66(3) the statement which should accompany an application for an order for sale, the purchaser would have to bear the loss of the non-mention of an existing mortgage. there is only one case in which he could have a remedy and that is if the.....
Judgment:

Pakenham Walsh, J.

1. An abkari contractor committed default in payment of the monthly rental due to the Government. The Government sustained loss on re-sale of the shop and they therefore put up the house of the defaulter for sale. The defendant bid for Rs. 1,805 at the auction and the property was knocked down to him. He did not however deposit the necessary amount within the time mentioned in the conditions of sale or afterwards. The Government therefore re-sold the house. At the re-sale held on the 18th August, 1924, the sale price was only Rs. 20. The Government therefore brought this suit to recover from the defendant the loss caused by the re-sale, namely, Rs. 1,805 - Rs. 20 or Rs. 1,785 with interest at 6 per cent, per annum from the date of the re-sale. The defendant admitted having bid for Rs. 1,805 but pleaded that the sale was vitiated by non-disclosure of material facts amounting to fraud; that while the property was heavily encumbered the selling officer told him that there was no encumbrance. He made certain other allegations also as regards irregularity in the publication and the conduct of the sale. The findings of the trial Court were that both the Government Officers and the defendant were ignorant of the existence of the mortgage in favour of one Santhanam Aiyangar and since in the re-sale when the mortgage became known only Rs. 20 was bid for, it was reasonable to hold that the defendant would not have bid Rs. 1,805 if he had been aware of the mortgage. As regards the legal effect, the learned District Munsif held that both parties having under a mistake of fact consented to the agreement, Section 20 of the Contract Act applies, and he therefore dismissed the suit. On appeal the learned District Judge agreed that both parties were ignorant of the existence of the prior mortgage on the suit property but held that the principle of caveat emptor applied and that therefore the Government was entitled to a decree as prayed for. Against this the defendant has preferred this second appeal.

2. Certain admitted legal positions may be stated. Although a sale for default under the Abkari Act is held in the manner of one for recovery of arrears of land revenue under Act II of 1864, the property is not sold free of encumbrance as it is in a land revenue sale. It is also admitted that if the sale were a private one between two private parties, the buyer could compel the seller to discharge the encumbrance on the property which exists on the date of the sale if the property is sold free from encumbrance. It is also admitted that if it were a Court sale, unless there was some misrepresentation by the selling officers or some default of the person who verified and signed under Order 21, Rule 66(3) the statement which should accompany an application for an order for sale, the purchaser would have to bear the loss of the non-mention of an existing mortgage. There is only one case in which he could have a remedy and that is if the judgment-debtor had no interest at all in the property.

3. The appellant takes two grounds. Firstly, that as the sale required confirmation by the Collector the contract was not completed and therefore the principle of caveat emptor does not apply. Muthu Pillai v. The Secretary of State for India : AIR1923Mad582 is quoted in this connection. But the learned Government Pleader has sent for the records of that case, and it turns out not to have been a sale under the Revenue Recovery Act but a sale by the Government of certain poramboke land belonging to the Government. That sale was dependent on the confirmation of the Collector and it is clear that he had full liberty to confirm or refuse to confirm it as he chose. A sale under Act II of 1864 is entirely different. The power of the Collector to refuse to confirm the sale is confined to sales which he can set aside. The grounds of setting aside a sale are those set out in Section 37-A and Section 38 of the Act. The effect of holding that a contract of sale held under Act II of 1864 is not completed until the Collector has confirmed it would be practically to nullify the provisions relating to default by the purchaser to make the deposit or to complete the purchase, because he could take advantage of his own default and plead that there was no completed contract as the sale had not been confirmed by the Collector. The right of re-sale under Section 36(4) arises on default whereas the question of confirmation arises only later. Watson v. Davies (1931) 1 Ch. 455 quoted for the appellant in this matter is a case of a private sale and is therefore not in point. So far as this ground of appeal goes, I think it cannot be sustained.

4. The second ground urged is that the property sold at the re-sale is not the same as the property purchased by the defendant at the first sale, and therefore the loss at the second sale is not the measure of the damages arising by the default of the defendant to complete his purchase at the first sale. For the appellant are quoted, Baijnath. Sahai v. Moheep Narain Singh ` Kali Kishore Deb Sarkar v. Guru Prosad Sukul I.L.R.(1897) 25 Cal. 99 and Venkatachellamayya v. Nilakanta Girjee I.L.R.(1917) 41 Mad. 474 : 34 M.L.J. 156. The reply to this point on behalf of the Government is on the following lines. The method of recovery in case of default with respect to an abkari contract being under Act II of 1864, the sale is regulated by the provisions of that Act and Section 36 of that Act describes the manner in which the sale is to be held, which is as follows: 'In the sale of immovable property under this Act the following rules shall be observed: - First. - The sale shall be by public auction to the highest bidder. The time and place of sale shall be fixed by the Collector of the District in which the property is situated, or other officer empowered by the Collector in that behalf. The time may be either previous to or after the expiration of the Fasli year. Second. - Previous to the sale the Collector, or other officer empowered by the Collector in that behalf, shall issue a notice thereof in English and in the language of the District, specifying the name of the defaulter; the position and extent of land and of his buildings thereon; the amount of revenue assessed on the land or upon its different sections; the proportion of the public revenue during the remainder of the current Fasli; and the time, place and conditions of sale. This notice shall be fixed up one month at least before the sale in the Collector's office and in the Taluk cutchery, in the nearest police station-house, and on some conspicuous part of the land.' There is, it is argued, no obligation here to publish the mortgages on the property or to make any statement that it is not being sold free of mortgages and the property re-sold in this case did not differ in description on any point from the description required under Section 36(2). In reply to this, two points can, I think, be legitimately urged. Although the procedure for sale is that under the Revenue Recovery Act it is obvious that the circumstances of the sale are different and there is one very important difference, namely, that the sale for arrears of revenue under the Revenue Recovery Act is free of encumbrances whereas for an Abkari default it is not. Although the Government may not be legally bound to notify in the sale of immovable property for default under the Abkari Act that it is subject to encumbrances, the fact that the forms of sale proclamation are identical with those of the sale for revenue arrears is certainly apt to mislead the public into thinking that the sales are free of encumbrances. Though I do not say that this would make any difference in the legal aspect of the sale, it is perfectly obvious that Section 36(2) is drawn up with reference simply to a sale of land for arrears of Government cist, and it would be quite easy to think of cases where house property is sold for arrears under other Acts in which though the description as given in Section 36(2) would apply to the property sold at both sales, the property would really be different. For instance, suppose in the case of a house, the doors, windows, etc., were not included in the second sale or suppose even that the house had been burnt down between the time of the first and the second sale; nevertheless the words of description in this section, that is, the name of the defaulter, the position and extent of land and of his buildings thereon, the amount of revenue assessed on the land or upon its different sections, the proportion of the public revenue during the remainder of the current fasli, would all equally apply to what was being sold on the second occasion as well as to what was being sold on the first occasion. Therefore it appears to me that it cannot be argued that if the Government has followed the wording laid down in Section 36(2), and if under that wording the description of the property remains the same for the second sale, it necessarily follows that the property sold at the re-sale cannot be different from that sold at the first sale. A property sold not subject to a mortgage is certainly a different property from one sold subject to a mortgage and the decisions in Baijnath Sahai v. Moheep Narain Singh I.L.R.(1889) 16 Cal. 535 Kali Kishore Deb Sarkar v. Guru Prosad Sukul I.L.R.(1897) 25 Cal. 99 and Venkatachellamayya v. Nilakanta Girjee I.L.R.(1917) 41 Mad. 474 : 34 M.L.J. 156 proceed on this hypothesis. Whether a difference in the property will make a deficit on the second sale damages recoverable from the purchaser in the first sale or not is a different matter; but the difference in the proper44ty itself is acknowledged in all these three cases. In Baijnath Sahai v. Moheep Narain Singh I.L.R.(1889) 16 Cal. 535 it was held that even if the change in the property was owing to causes beyond the control of any person, the decree-holder must proceed against the defaulting purchaser by way of suit and not by way of an application under Section 293. In Kali Kishore Deb Sarkar v. Guru Prosad Sukul I.L.R.(1897) 25 Cal. 99 it was held that 'before the defaulting purchaser can be made liable under Section 293, it must appear that the property which is the subject of the two sales is the same in every respect.' Venkatachellamayya v. Nilakanta Girjee I.L.R.(1917) 41 Mad. 474 : 34 M.L.J. 156 distinguishes Kali Kishore Deb Sarkar v. Guru Prosad Sukul I.L.R.(1897) 25 Cal. 99 but only on the question as to the liability of the purchaser at the first sale. In that case the purchaser had himself diminished the value of the property by his own act and so could not claim that it should be re-sold under the same description. In Nursing Dass Kothari v. Chuttoo Lull Misser I.L.R.(1923) 50 Cal. 615 the sale was by a receiver appointed by Court but both parties were in ignorance of a notice of the Board of Trustees for the Improvement of Calcutta that the site might be acquired as a proposed public street, and the plaintiff refused to complete the purchase. He was held to be not liable for the decrease of price in the re-sale. This case was relied on by the trial Court and is certainly in favour of the appellant, though it was sought to distinguish it by saying that such a sale is not under a legal process like a Court sale or a revenue sale and that in the case of a sale under a legal process there can be no remedies except the actual ones given by the procedure. It appears to me that a sale by a receiver appointed by the Court is just as much a public sale as a sale in default of abkari dues. The phrase 'as if they were arrears of land-revenue' in the Abkari Act has got to be read reasonably. If strictly construed, it would mean that the property is sold free of encumbrances, which is admittedly not the case. I do not think therefore that the Government in order to deprive the appellant of his remedy can say that he is confined to what can be found in the processual law in Act II of 1864, while they have at the same time to admit that according to the terms of Act II of 1864 he should have got the house free of encumbrance altogether, which benefit he does not enjoy. It was even argued for the respondent that there was no contract at all between the appellant and the Government, and for this purpose certain remarks in Tirumalaisami Naidu v. Subramanian Chettiar I.L.R.(1916) 40 Mad. 1009 were relied on. That was a decision regarding a sale in execution and the remedies, if any, of the purchaser as against the decree-holder. Those remarks, in my opinion, have no application to this case. In Venkatachellamayya v. Nilakanta Girji I.L.R.(1917) 41 Mad. 474 : (1917) 34 M.L.J. 156 Wallis, C.J., says:

By his failure to complete his purchase the purchaser commits a breach of contract and is answerable in damages to the Court or the persons on whose behalf it sells, viz., the decree-holder and the judgment-debtor. These damages estimated by the ordinary rule consist of the deficiency, if any, in the price obtained at the re-sale as compared with the price at the first sale together with the expenses of the re-sale.

5. So also in Kanthamma v. Reddi Pantulu (1923) 46 M.L.J. 134 the following observations occur:

Where in Court auction a property is sold, the auction-purchaser is one party to the contract, but the other party to the contract is not in our view the judgment-debtor or the decree-holder but the Court itself.

6. So that even in the case of a Court auction it would appear that there is something in the nature of a contract between the Court and the auction-purchaser. In my opinion the property sold at the re-sale was not the same as the property purchased by the appellant at the first sale and the difference in price is not the amount which the Government is entitled to recover. The correct amount which can be recovered from the appellant is the difference between what he bid at the first sale and the price fetched at the re-sale with any encumbrance amounts due at the time of the re-sale added to the latter figure. The appellant did offer in Ex. I to pay the purchase price which he bid subject to the Government clearing the mortgage. As it cannot be ascertained from the materials on hand what the correct amount of the mortgage or mortgages was on the date of the re-sale, the first appeal will have to go down for final disposal after ascertaining this amount. The Government will then be entitled to the difference so found together with interest at six per cent, per annum from the date of the re-sale and subsequent interest at six per cent, per annum up to the date of payment. The Government will pay and receive proportionate costs of this appeal. Costs in the Court below will also be given proportionately to the result.


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