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Velayudha Konar Vs. Kora Miah Sahib and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai High Court
Decided On
Case NumberLetter Patent Appeal No. 8 of 1969
Judge
Reported inAIR1974Mad355
ActsCode of Civil Procedure (CPC) - Sections 151 - Order 21, Rule 91; Limitation Act, 1908 - Schedule - Article 166; Provincial Insolvency Act - Sections 37
AppellantVelayudha Konar
RespondentKora Miah Sahib and ors.
Cases ReferredVenkatareddi v. Kunjappa Gounden
Excerpt:
execution sale--validity--sale without notice to person affected to a nllity and void--official receiver representing insolvent judgment-debtor, not a party to sale--official receiver can ignore such a sale--void sale--decree-holder can again bring property to sale after cancelling record of part satisfaction. ;a sale held without making the affected person a party to the proceeding is one made without jurisdiction. in the present case, the official receiver had stepped into the shoes of the judgment debtor before the court sale was held. he having been not made a party the court sale is of no effect at all as against him. it is void as far as he is concerned and therefore he can ignore it and there is no need for him to file and application to set aside the sale. ;but such a court sale.....1. this appeal under the letters patent is against the judgment of venkataraman j. allowing c. m. s. a. no. 153 of 1966. the appellant before us is a mortgagee-decreeholder. after final decree in the mortgage suit, the judgment-debtor had been adjudged insolvent. in the execution proceedings though the decree-holder through the official receiver in whom the equity of redemption had by then vested due to the adjudication, the official receiver had both been made a party to the said proceeding. in the court sale held in execution of the decree, the decreeholder himself purchased the property but ignoring the above court sale, the official receiver sold the property to a third party. the appellant before us who was the decreeholder auction purchaser was unable to take possession of the.....
Judgment:
1. This appeal under the Letters Patent is against the judgment of Venkataraman J. allowing C. M. S. A. No. 153 of 1966. The appellant before us is a mortgagee-decreeholder. After final decree in the mortgage suit, the judgment-debtor had been adjudged insolvent. In the execution proceedings though the decree-holder through the Official Receiver in whom the equity of redemption had by then vested due to the adjudication, the Official Receiver had both been made a party to the said proceeding. In the court sale held in execution of the decree, the decreeholder himself purchased the property but ignoring the above court sale, the Official Receiver sold the property to a third party. The appellant before us who was the decreeholder auction purchaser was unable to take possession of the property. There were two suits, one filed by the present appellant to set aside a summary order regarding obstruction caused while he attempted to take delivery of a particular item of property, and the other was by the person who was in possession of the other items of property through the Official Receiver to injunct the decreeholder auction purchaser from interfering with her possession. In these two suits it had been held that the auction sale in pursuance of the mortgage decree was void inasmuch as the Official Receiver in whom the equity of redemption had vested (as the judgment-debtor had been adjudged insolvent subsequent to the final decree) has not been made a party.

2. After the decision in the above two suits, the appellant filed E. A. 1289 of 1963 in the executing court purporting to be under Section 151, C. P. C for setting aside the court sale and the part satisfaction of the decree which had been recorded earlier. This is obviously with a view to take fresh execution proceedings to bring the property to sale in the presence of the Official Receiver or his successor-in-interest. viz. the first respondent before us, who will hereinafter be referred to as the respondent.

3. The respondent is a person claiming title to the property through the Official Receiver. He contended that even though the court sale is not binding on the Official Receiver and that the Official Receiver had conveyed good title to his (respondent's) predecessor-in-title, the court sale in favour of the appellant was not a nullity, that the appellant's remedy if any was to have filed an application under Order 21, Rule 91, C.P.C., that such an application being barred by time he is without any remedy. This contention of the respondent was however not accepted by the executing court and the first appellate court. The respondent filed C. M. S. A. No. 153 of 1966 in this court and Venkataraman J. has allowed the appeal holding that the court sale, though would not bind the Official Receiver, is not a nullity and is valid and binding as between the parties to the proceeding. It is contended on behalf of the appellant that the view taken by the learned Judge is not correct.

4. The main question that arises for consideration is what is the position of the court auction purchaser in the execution sale when the Official Receiver who had not been made a party to the said sale treats it as void as against him and sells the property to a third party, and whether the remedy of the auction purchaser is to file, an application under Order 21, Rule 91, C.P.C. to set aside the court sale. If that is the remedy of the court auction purchaser, then E. A. 1289 of 1963 filed by the appellant is hopelessly time-barred, for the period of limitation under Art, 166 of the Limitation Act, 1908, is only 30 days from the date of sale, In the present case, the court auction sale was on 15-9-1961. The execution application to set aside the sale was filed in 1963. But the contention on behalf of the appellant is that Order 21, Rule 91, C.P.C. has no application to the facts of the case, that the application filed by the appellant is certainly not one under that provision and that as the Official Receiver had treated the court sale as void and sold the property himself to a third party, only that fact has to be recorded by the executing court and the appellant should be allowed to execute the decree again.

5. Before considering this question, we may dispose of another contention raised, namely, that the respondent is bound by the decree in the suit in which it was held that the court sale was void and that therefore it is not now open to the respondent to contend that the court sale is not void and that the same is binding on the parties to the proceeding. To appreciate this contention, some more facts have to be noticed.

6. The properties in question were subjected to six mortgages. The appellant before us was the second mortgagee. The mortgage suit that he filed is O. S. No. 209 of 1955 on the file of the court of the District Munsif, Tirunelveli in which he impleaded all the puisne mortgagees, as parties. A preliminary decree was passed on 26th March 1956 and final decree was passed on 22nd October 1956. It is only after the final decree in the mortgage suit, the petition for adjudication of the mortgagor as insolvent came to be filed. That was on 26th June 1957. The mortgagor was adjudged insolvent on 14th December 1957. The Official Receiver in whom the hypotheca vested leased out the same except on item, namely a house, to one Kuppammal. That Kuppammal happened to be the fourth mortgagee of the hypotheca and she had also been impleaded as a party in O. S. 209 of 1955. Subsequent to the abovesaid lease in favour of Kuppammal, the Official Receiver auctioned the equity of redemption. That was on 3rd April 1961and the highest bidder whose bid was accepted by the Official Receiver was the abovesaid Kuppammal herself. The consideration was only Rs. 11 subject to all the six mortgages. Even though the auction was on 3rd April 1961, no sale deed in her favour had been executed by the Official Receiver. There had been controversy between her and her husband by name Sivasankaran Pillai as to in whose name the sale deed should be executed. According to Sivasankaran Pillai, his wife Kuppammal was only his benamidar when she successfully bid at the auction held by the Official Receiver on 3-4-1961, and that, therefore, the Official Receiver should execute the sale in his favour. He filed O. S. 144 of 1962 on the file of the court of the District Munsif, Tirunelveli, in which it was held that Kuppammal, his wife was only his benamidar. Therefore on 18-10-1962, the Official Receiver executed the sale deed only in favour of Sivasankaran Pillai. It is from the said Sivasankaran Pillai, the respondent has purchased the property.

7. In the meanwhile, that is subsequent to the auction held by the Official Receiver but before the Official Receiver executed the sale deed in favour of Sivasankaran Pillai, Kuppammal filed O. S. 27 of 1962 on the file of the court of the Dist. Munsif, Tirunelveli, for an injunction against the present appellant, contending that she is in possession of the hypotheca as a lessee under the Official Receiver and that the court sale in favour of the appellant being void on the ground that the Official Receiver had not been made a party to those proceedings, the appellant had no right to interfere with her possession. This suit was decreed on 28-2-1963, the court holding that the execution also in favour of the appellant was void.

8. O. S. 134 of 1962 is a claim suit filed by the appellant in respect of one of the items of the hypotheca (a house property) in which the judgment-debtor's (mortgagor's) brother claimed a right of residence. In that suit also it was held that the court sale in favour of the appellant was void. However, for the present question namely whether the respondent is bound by the decision of the court to the effect that the court sale is void, the decision O. S. 134 of 1962 is not invoked. Only the decision in the other suit, namely O. S. 27 of 1962 is said to bar the respondent from now agitating that the sale is not void and that the same is binding on the parties to the petition. However, the contention on behalf of the appellant in this respect is not correct.

9. As already seen, O. S. 27 of 1962 had been filed by Kuppammal only in her capacity as a lessee of the hypotheca from the Official Receiver. No doubt even before she filed that suit, the Official Receiver had held the auction and Kuppammal was the successful bidder. But it is incorrect to say that on the date of the said auction, namely 3-4-1961, the property had been sold to Kuppammal. There can be no doubt that the sale by the Official Receiver was only under the registered document dated 18-10-1962, which was in favour of Sivasankaran Pillai, the husband of Kuppammal. Under such circumstances, the respondent cannot be said to a person claiming title through Kuppammal. Admittedly the respondent was not a party to O. S. 27 of 1962. In fact that suit came to be decided only subsequent to the hypotheca being sold by the Official Receiver to Sivasankaran Pillai. As already seen, the sale in favour of Sivasankaran Pillai is dated 18-10-1962 and O. S. 27 of 1962 came to be decreed only on 28-2-1963. However, Sivasankaran Pillai, the purchaser of the property had not been made a party to the said suit Kuppammal having filed the suit only in her capacity as a lessee under the Official Receiver the decision rendered in that suit cannot be said to bind the respondent who purchased the property from Sivasankaran Pillai to whom the Official Receiver executed the sale, even prior to the decree in O. S. 27 of 1962.

10. Coming to the main question, no authority is cited before us covering a situation as in the present case. In this case the court sale to which the Official Receiver was not made a party has been ignored by the Official Receiver as he is entitled to, and he has sold the property to Sivasankaran Pillai, the predecessor-in-title of the respondent. It is elementary principle that a sale held without making the affected person a party to the proceeding is one made without jurisdiction. If in a given case no notice of the execution sale goes to the judgment-debtor and without such notice his property is sold in court auction, undoubtedly such a sale is one made without jurisdiction, for, no court has jurisdiction to sell the property of a person without he being informed about it. It has been held right down from Khairajmal v. Daim. ILR (1902) 32 Cal 296(PC), that the court has no jurisdiction to sell the property of persons who were not parties tot he proceedings or were properly represented. At page 312 it has been pointed out that as against such persons (persons who were not made parties) the decrees and sales purporting to be made would be a nullity and might be disregarded without any proceeding to set them aside. In a recent case reported in Nataraja v. Chandmul Amarchand, (1971) 1 Mad LJ 474, a Bench of this Court to which one of us was a party has also held that a sale without notice to the judgment-debtor is without jurisdiction and hence a nullity.

11. In the present case, the Official Receiver had stepped into the shoes of the judgment-debtor before the court sale was held. Therefore, he ought to have been made a party to the execution proceedings. It may be noted that the Official Receiver came into the picture only after the final decree in the mortgage suit was passed, Therefore, the Official Receiver is undoubtedly bound by the final decree. However, the execution proceedings in which the property was sold had been taken subsequent to the adjudication of the mortgagor (judgment-debtor) and hence the Official Receiver ought to have been made a party to the said proceeding. He having been not so made a party, the court sale is of no effect at all as against him. It is void as far as he is concerned and therefore he can ignore it and there is no need for him to file an application to set aside the sale. If the said sale is only voidable at the instance of Official Receiver, naturally he is to have the sale set aside by any method known to law. But the question of having the court sale set aside would arise only in the case of parties to the proceedings. The Official Receiver not being a party to the execution proceeding he can just ignore the sale and that is so because the sale is without jurisdiction as far as he is concerned.

12. But that does not mean that such a court sale is a nullity in the sense that even the judgment-debtor can ignore the same. Courts have consistently held that when a person is adjudged an insolvent and his property vests in the Official Receiver it is not as if the insolvent suffers a civil death. If he had executed a mortgage of his properties prior to adjudication, in spite of the equity of redemption vesting in the Official Receiver, on adjudication, still the insolvent would be a person interested in the redemption of the mortgage and he would be a necessary party under Order 34, Rule 1, C.P.C. in a suit on the mortgage. In spite of adjudication, the insolvent is not incompetent to enter into a contract and there is no statutory provision prohibiting the insolvent from transferring his property. Therefore, if the insolvent transfers his property, such a transfer is not wholly void, in the sense that the insolvent himself can ignore that, but the same would not bind the Official Receiver. In Peraya v. Kondayya, ILR (1948) Mad 872 at p.877 = (AIR 1948 Mad 430), a Bench of this court observed that merely because under Section 28 of the Insolvency Act, the property vests in the Official Receiver, a transaction entered into by the insolvent was not void for all purposes. Therefore, in the present case, it would be incorrect to say that the court sale is void for all purposes. At the same time, the Official Receiver is entitled to ignore the same for, it would never bind him. That is on the basis that a sale held without making him a party to the execution proceedings is void as far as he is concerned. As already mentioned, it is not necessary for the Official Receiver who is not a party to the execution proceedings to file an application to set aside the sale and therefore it may not be correct to say that the sale is only voidable at his instance. In some decided cases, no doubt, it is stated that under such situations, the sale is voidable at the instance of the Official Receiver. That is only to emphasise the fact that a sale is not void for all purposes or that it is a nullity, in the sense that it has no legal existence at all. As already seen the insolvent, in spite of adjudication, is a person competent to enter into transactions regarding the property. Being a party to the execution proceedings he cannot be heard to say that the proceedings are void even as against him, only on the ground that the Official Receiver had not been made a party.

13. Mr. T. R. Ramachandran, the learned counsel for the respondent, at one stage contended on the basis of certain observations contained in the Full Bench case reported in Subbiah v. Ramasami, (FB), that the court sale in this case is only voidable at the instance of the Official Receiver and it is not void even as against him. But he had to concede that the Official Receiver need not take any steps to have the sale set aside, he not being a party to the proceeding, and that he can just ignore it. If he can so ignore it, it is only on the basis that the sale is void. In the Full Bench case referred above, the question whether a court sale of the insolvent's property without making the Official Receiver or only voidable at his instance did not really arise. The Full Bench understood the reference made by the Division Bench as restricted only to the single question concerning the proper interpretation of Section 37 of the Provincial Insolvency Act. The Divisional Bench which made the reference thought that there was conflict in decisions regarding the interpretation of Section 37 of the Provincial Insolvency Act, and the Full Bench held that the effect of annulling the adjudication is to wipe out the effect of insolvency altogether and to vest the property in the insolvent debtor, subject however to the exceptions provided in Section 37. This completely answered the reference as understood by the Full Bench itself. However, the Full Bench went into the alternative contention which was raised on behalf of the respondent in that case.

14. The alternative contention as referred to in the leading judgment rendered by Satyanarayana Rao J. at page 85 is whatever may be the view to be taken regarding the interpretation of Section 37 and the effect of annulment, the objection that the decree and the sale in pursuance thereof are null and void can be taken only by the Official Receiver and not by the insolvent himself who was a party to the proceedings. The learned Judge said that if either of the contentions urged on behalf of the respondents were to be accepted their title could undoubtedly be upheld. That was a case where a mortgage decree was passed after vesting of the equity of redemption in the Official Receiver, but without making him a party to the mortgage suit. Subsequently in the court auction in pursuance of the mortgage decree the decree-holder himself purchased the property. Of course in the execution proceedings also the Official Receiver was not a party. Later the insolvency itself was annulled without making nay vesting order. The respondents in the case claimed through the auction sale. One of the contentions on their behalf was that under Section 37 of the Insolvency Act, once the insolvency was annulled without making any vesting order, the adjudication itself is wiped out and it is as if there had been no insolvency at all, and that the effect of the annulment is to vest the title to the property retrospectively in the insolvent. The reference as understood by the Full Bench related only to the above question.

15. However, the Full Bench has allowed the respondents before it to raise the alternative contention that whatever may be the view to be taken regarding the interpretation of Section 37 and the effect of annulment, the objection that the decree and the sale in pursuance thereof are null and void can be taken only by the Official Receiver and not by the insolvent himself who was a party to the proceeding. It is in that context, Satyanarayana Rao J. at page 85, has stated before entering into discussion, that if either of the contentions urged on behalf of the respondents were to be accepted their title could undoubtedly be upheld. As already seen, the Full Bench answered the reference in favour of the respondents regarding the interpretation of Section 37 holding that the effect of annulling the adjudication is to wipe out the effect the insolvency altogether, and therefore, in spite of the equity of redemption stood vested in the Official Receiver on the date of the mortgage decree and the sale in pursuance of it, the respondent who claimed through the court sale should succeed. Under such circumstances, what is stated by the Full Bench regarding the alternative contention raised on behalf of the respondent is in the nature of obiter.

16. Even the alternative contention did not relate to the question whether the court sale was void or voidable as against the Official Receiver. As stated by Satyanarayana Rao J. at page 85, the alternative contention was whether the objection that the decree and the sale in pursuance thereof are null and void can be taken only by the Official Receiver and not by the insolvent himself who was a party to the proceeding. On this, the Full Bench held that it is not open to the insolvent who was a party to the proceeding to contend that the decree and the execution which followed to which he was a party are null and void and that such a contention can be raised only the Official Receiver. As we said, the leading judgment in this case is by Satynarayana Rao J. Subba Rao J., (as he then was), has written a separate but incurring judgment in which the question covered by the reference (as understood by the Full Bench) regarding the interpretation of Section 37 of the Insolvency Act and the effect of annulment has not been dealt with, but only the alternative contention raised on behalf of the respondents has been gone into. The learned Judge concurred with the view of Satyanarayana Rao J., even with regard tot he alternative contention and concluded at page 115 that the appellant who is a representative of the insolvent-judgment-debtor is precluded from questioning the validity of the sale on the ground that the Official Receiver was not a party to the decree or to the execution proceedings. There can be no dispute about this proposition namely that it is not open to the insolvent judgment-debtor to contend that either the decree or the court sale in pursuance of the same is null and void on the ground that the Official Receiver had not been made a party to the proceeding. But the learned Judge obviously for the purpose of emphasising that the proceeding without making the Official Receiver a party are not a nullity in the sense that they had no existence at all (as the validity of the same cannot be questioned by the insolvent judgment-debtor who is a party to the same) has observed that the said proceedings are not void but only voidable at the instance of the Official Receiver.

17. In an early case, Puninthavelu Mudaliar v. Bhashyam Aiyangar, ILR (1902) 25 Mad 406 at pp. 422 and 423, it has been held that the decree, as a mortgage decree directing the sale of the chattels, including the debt in question, is void and inoperative as against the Official Assignee, in as much as the whole right, title and interest of the defendant therein devolved by operation of law upon the Official Assignee during the pendency of the suit and before the decree was passed. As already seen in Peraya v. Kondayya, ILR (1948) Mad 872, it has been stated that a transaction entered into by the insolvent was not void for all purposes. That does not mean that the transaction is not void as against the Official Receiver in whom the property has vested. The observation that the transaction is not void for all purposes' has been made only to emphasise that it is not open to the insolvent to contend that the transaction is void on the score that the Official Receiver was not a party. In Nagubai v. Shama Rao, , it has been observed that a sale in execution of a decree passed in a deceptively constituted mortgage suit does not affect the right of redemption of persons interested in the equity of redemption who have not been impleaded as parties to the action as they should have been under Order 34, Rule 1, C.P.C. but is valid and effective as against the parties to the action. It is also made clear there that the above rule is applicable even when the person in whom the equity of redemption is vested is the Official Receiver and he has not been made a party to the proceeding resulting in the sale. If the sale does not affect the equity of redemption which had been vested in the Official Receiver as held by the Supreme Court, it means that the sale is void as against him, and not merely voidable.

18. We have said enough to show that the sale is really void as against the Official Receiver, he having not been made a party to the execution proceeding. Assuming that in such a situation the sale is not void but only voidable at the instance of the Official Receiver it makes no difference in this case. Whether we use the word `void' or `voidable'-the distinction between the two not always being maintained-there is no dispute that the Official Receiver in this case need not seek to set aside the sale, Mr. Ramachandran, the learned counsel for the respondent, though would not concede that the sale is void as against the Official Receiver, maintained that the Official Receiver can ignore the same and there is no question of his having the sale set aside. In the present case, the Official Receiver has elected to exercise his right (as put by the Supreme Court in the above case at page 603 column 2) and has sold the property to the respondent's predecessor-in-title, ignoring the court sale. The court sale may not be void ab initio but once the Official Receiver elects to exercise his right he avoids the same, and, therefore, even if the sale is only voidable at the instance of the Official Receiver, it becomes of no effect at all (void) from the date he so exercises his right. What is the position of the appellant who is the court auction purchaser in such a situation is the question.

19. Relying upon the observations of the Supreme Court in the case referred to above, as well as by the Full Bench of this court in the case mentioned earlier, to the effect that the transaction is valid and effective as against the parties to the same, Mr. Ramachandran, learned counsel for the respondent, contends that it is not open to the appellant who was a party to the court auction sale now to say that the sale is not valid. We are unable to accept the contention. It should be noted that in the case before the Full Bench as well as the Supreme Court, the Official Receiver has not elected to exercise is right. In fact in the case before the Full Bench, the adjudication having been subsequently annulled, on the interpretation of Section 37 of the Insolvency Act, the annulling of the adjudication was to wipe out the effect of insolvency altogether and to vest the property in the insolvent debtor. In the case before the Supreme Court, the finding was that there was really no vesting of the property in the Official Receiver.

20. That was a case in which a maintenance suit on behalf of one Devamma who was then a minor was filed in the year 1919. There was a decree in that maintenance suit in the year 1921 charging the properties of one Kesavanand for the maintenance awarded. In the meanwhile, that is, after the institution of the suit for maintenance but before it was decreed, Kesavanand sold the property (which was ultimately charged for the maintenance under the decree) to a third party under whom the appellant before the Supreme Court claimed title. In pursuance of the maintenance charge decree, the same property was sold in court auction in 1928 and the respondent before the Supreme Court claimed title to the property under the said court auction. In 1926, that is, after the maintenance charge decree was passed but before the execution sale was held, Kesavanand had been adjudged insolvent. The Supreme Court held that in view of the fact that Kesavanand had executed a private sale of the property even in the year 1920 (during the pendency of the maintenance suit though that sale is affected by the doctrine of lis pendens there was no property to get vested in the Official Receiver when Kesavanand was adjudged insolvent in the year 1926. Therefore the Supreme Court concluded that the appellant who claimed title to the property under the private sale effected by Kesavanand in the year 1920 had necessarily to fail because that sale is hit by the doctrine of lis pendens, and that the respondents who claimed under the execution sale held in pursuance of the maintenance charge decree got good title. The question whether the execution sale was bad on the score that the Official Receiver had not been made a party had been considered only hypothetically. As already mentioned the finding of the Supreme Court is that the property did not vest in the Official Receiver, the same having been sold away (though hit by the doctrine of lis pendens) by Kesavanand even prior to the adjudication. The Supreme Court further observed that even assuming that in spite of the private sale in the year 1920, Kesavanand still had some interest in the property left and that it vested in the Official Receiver, the latter not having elected to exercise his right to question the court sale, it is not open to attack by the transferee pendente lite.

21. Therefore, the observations that the transaction is valid as between the parties to the action made in the above cases cannot be torn out of context, and it is not right to contend in this case that the court auction sale is binding on the appellant who was no doubt a party to the sale. Once the Official Receiver has elected the exercise his right, the court sale ceases to have any effect. Taking a case, where there is no insolvency, a court sale without notice to the judgment-debtor would certainly be void as against him. But in such a case, if the judgment-debtor never demurs and acquiesces in the court sale it would not be open to third party to say that the court auction purchaser did not get good title on the score that the judgment-debtor had not been given notice of the execution proceedings. However, once the judgment-debtor exercises his option and treats the court sale void, the there is no question of the auction purchaser alone being bound by the party to the same. The same principle should apply to the present case also where the Official Receiver is the person who really represented the judgment-debtor on the relevant date. He having not been made a party to the execution proceedings, the sale is void as against him and he can ignore the same. Once he exercises such an option, can it be said that the auction purchaser being a party to the sale is bound by it? We are of the opinion that in a case where the Official Receiver in whom the property had vested exercises his option, then the fact that the auction purchaser was a party to the execution proceedings is of no consequence at all. In such a situation, the court auction sale is just in the same position as one without notice tot he judgment-debtor (in case where there is insolvency). It is like a third party having been impleaded in the execution proceedings leaving out the judgment-debtor. There can be no doubt that once the Official Receiver in whom the equity of redemption vests exercises his option, the insolvent mortgagor becomes a non entity, though however, in a different situation namely when the Official Receiver does not exercise his option, the transaction between the mortgagor (judgment-debtor) and the decree-holder would be perfectly valid. As the Supreme Court put it in the case mentioned above at page 603, the purchaser from the insolvent judgment-debtor gets a good and impeccable title subject only to any right which the Official Receiver may have to exercise. But as we said, once the Official Receiver elects to exercise his right, the insolvent judgment-debtor becomes a non entity and he is in the position of a third party who has no interest in the property at all.

22. Mr. Ramachandran learned counsel referred to the decision reported in Muthukumarasami Pillai v. Muthusami Thevar, ILR 50 Mad 639 = (AIR 1927 Mad 394) and contended that the court sale in the present case tantamounts to sale of a property to which the judgment-debtor had no title and that the remedy of the auction purchaser is only to file an application under Order 21, Rule 91, C.P.C. to have the sale set aside. In this connection, the learned counsel relied upon the observations of Subba Rao J. (as he then was) in the Full Bench case referred above at page 115, where the learned Judge said that if the property vested in the Official Receiver and sold as if that was the property of the insolvent, the sale would be valid and the judgment-debtor cannot question the validity of the same; and such a sale would be analogous to a sale of the property of a third party as if it was the property of the judgment-debtor. In the course of the judgment, the learned judge has also referred to ILR 50 Mad 639 = (AIR 1927 Mad 394). The analogy the sale of the property of a third property as if it was property of the judgment-debtor and one where the property is vested in the Official Receiver but held without making the Official Receiver a party (and the Official Receiver elects to exercise his right) is only limited. In both the cases, the purchaser does not get title. But while in the case of a property not belonging to the judgment-debtor being sold the sale is not void or one made without jurisdiction in as much as the judgment-debtor is a party to the sale. In the other case, namely, where the property vests in the Official Receiver but he is not made a party to the proceeding (and ultimately he elects to exercise his right), that position would be as if, in spite of the judgment-debtor being added as a party to the proceeding, a third party who has no interest in the property being so added. It is needless to stress that in a case where the property vests in the Official Receiver (and the Official Receiver elects to exercise his right) the Official Receiver and he alone would be a person representing the interest of the judgment-debtor and the judgment-debtor himself would be a non entity, or would be in the position of a third party who has no interest in the property.

23. In the present case there is no question of an application under Order 21, Rule 91, C.P.C. for the simple reason, that this is not a case of a property belonging to the judgment-debtor having been sold. This is a case of a sale of the hypotheca and the Official Receiver being bound by the mortgage decree. Even if the adjudication was prior to the mortgage decree and the Official Receiver has not been made a party to the mortgage suit, still the Official Receiver would be in the position of the mortgagor and any sale by the Official Receiver can only be subject to the mortgage. That is the effect of Section 28(6) of the Provincial Insolvency Act. In this case the adjudication was after the final decree in the mortgage suit and the Official Receiver is bound not only by the mortgage but also by the decree. Admittedly the sale by him was only subject to the said mortgage decree. When the mortgage decree is put in execution and the hypotheca is sold, it is meaningless to say that it is similar to property not belonging to the judgment-debtor having been sold. The learned counsel, when he conceded that in this case the only remedy of the auction purchaser is to file an application under Order 21, Rule 91, C.P.C. overlooked the fact that the Official Receiver is the real judgment-debtor and the defect in the procedure is only in not making him a party; and it is not a case of the judgment-debtor having been made party but a property not belonging to him having been sold.

24. The Official Receiver being bound by the mortgage decree, the court auction sale without impleading him as a party suffers only from a procedural defect thereby making the sale a void one, the Official Receiver having elected to exercise his right. The court sale being void as between the Official Receiver and the decreeholder auction purchaser (the mortgagor judgment-debtor becoming a non entity) the decreeholder would certainly have a right to bring the property to sale again. Supposing in this case, the Official Receiver had moved the executing court for a declaration that the sale is void as against him on the ground that he had not been made a party and such an application is allowed as it ought to be, then can it said that there having been a court sale to which the mortgagor was a party, the decreeholder is not entitled to bring the property to sale again?

25. Further in the present case, if instead of bringing the property to sale through court, the mortgagee decreeholder had taken a private sale of the property in discharge of the mortgage decree from the mortgagor judgment-debtor, such a transaction would be perfectly valid subject to the right which the Official Receiver does elect to exercise his right then the above transaction would be of no avail. Then can it be contended that the mortgagee decreeholder cannot execute the decree and bring the property to sale through court impleading the Official Receiver? Would the fact that the mortgagee decree-holder had chosen to take a private sale from the judgment-debtor which transaction is of no avail because the Official Receiver exercised his option, debar him from executing the decree and bring the property to sale after making the Official Receiver a party? Surely it would not. The question is whether, instead of there having been a private sale between the decreeholder and the judgment-debtor, there was a court sale, would make any difference. We think there could be no difference.

26. The respondent claims title through the Official Receiver. The Official Receiver treats the court sale as void. Then the court sale is void as between the decreeholder and he Official Receiver. It is meaningless to say that it is void as against the Official Receiver but valid as far as the decreeholder is concerned. We have already pointed out that the question of sale being valid between the judgment-debtor and the decreeholder as being parties to the transaction would arise only when the Official Receiver does not elect to exercise his right. Therefore, it is not open to the respondent who claims through the Official Receiver to contend that the court sale is valid. It was already noticed that in a case where the Official Receiver does not elect to exercise his right, the judgment-debtor himself cannot question the court sale on the ground that the Official Receiver has not been made a party. Conversely, when the Official Receiver elects to exercise his right and thereby the court sale is treated as void, then the person who claims through the Official Receiver cannot be heard to say that the court sale is valid.

27. In Chandramma v. Gunaseethan, AIR 1931 Mad 542, which follows Venkatareddi v. Kunjappa Gounden, AIR 1924 Mad 650, the mortgagee filed a suit against wrong person. Later a second suit was filed impleading the real owner of the equity of redemption. The question arose whether the second suit would lie. At page 548, column 2, Ananthakrishna Iyer J., one of the members of the Division Bench which decided the case (AIR 1931 Mad 542), observed-

" The circumstance that the mortgagee filed a suit against a wring person doe not affect the rights of the real owners of the equity of redemption. If it does not affect them at all, one fails to see how they could be heard to say that by virtue of the prior suit which admittedly does not affect them a (second) suit against them is not maintainable. So far as they are concerned, the second is the only suit against them, and the first suit and the proceedings connected with the same must be taken to be non est in the eye of law".

In the present case, when the Official Receiver had not been impleaded as a party to the execution proceedings, but only the judgment-debtor had been impleaded, it must be deemed that the proceedings were against a wrong person, in as much as the Official Receiver had elected to exercise his right. That means, the proceedings taken earlier impleading the `wrong' person are non est.

28. We hold that the court sale is void, that there is no necessity for the same to be set aside under Order 21, Rule 91, C.P.C., that the sale has already been treated as void and all that the executing court should do is to record that fact, namely, that the sale is void. That means, the part satisfaction recorded should also be treated as cancelled. Accordingly, the Letters Patent Appeal is allowed and the judgment and decree in C. M. S. A. No. 153 of 1966 are set aside and the order of the executing court, confirmed by the first appellate court is restored. There will be no order as to costs.

29. We would further like to make it clear that the observations of Venkataraman J. in disposing of the civil miscellaneous second appeal, that any fresh execution petition might be time-barred, need not have been made, because that question was not before the learned Judge.

30. Appeal Allowed.


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