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Annavajhula Venkatachellamayya Garu Vs. Ramagirjee Neelakanta Girjee - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported in43Ind.Cas.685; (1918)34MLJ156
AppellantAnnavajhula Venkatachellamayya Garu
RespondentRamagirjee Neelakanta Girjee
Cases ReferredBhavani Kunwar v. Mathurd Prasad Singh I.L.R.
Excerpt:
.....was only a mortgage--a fact which the subsequent purchaser had to prove at his risk, was not a re-sale contemplated by rule 71. reference has been made to baijn in the first case the learned judges observe that a change in the nature of the property by diluvian and the like causes beyond the control of anybody might not relieve the defaulting purchaser from liability. 99 as to the effect of correctly stating in the proclamation of re-sale what was incorrectly set out in the first proclamation are obiter and with all respect i fail to see why the correction of errors at least of such as would in the ordinary course enhance the value of the property at the second sale should be a valid ground of objection. in that case a purchaser at a court sale declined to complete the purchase on the..........irregularity in the proceedings that led up to the sale or that any circumstances existed on the date of sale which would justify the purchaser in refusing to complete the purchase. he knew perfectly well what he was purchasing and the risks he ran. there is no warranty of title in sales by court in execution of decrees and as order 21, rule 91 only applies to cases where there is no saleable interest. so long as the judgment-debtor has any interest however small in the property the purchaser cannot except in cases where he would have right to set aside the sale on the ground of material irregularity under order 21, rule 90 avoid his purchase.7. order 21, rule 86 provides for a re-sale in case the purchaser makes default in paying the balance of the purchase money within the time.....
Judgment:

John Wallis, C.J.

1. Under Order 21, Rules 84 - 86 of the Code of Civil Procedure on the default of a purchaser at a court auction either in making the deposit or paying the balance of purchase money within the specified period the property is to be resold; and under Order 21, Rule 71 any deficiency in price which may occur at the re-sale together with the expenses attending the re-sale, as certified to the Court, are recoverable at the instance of the decree-holder or the judgment-debtor under the provisions relating to the execution of a decree for the payment of money. 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; and the rule provides a summary method of recovering these damages in execution by the Court at the instance of either of the parties interested, the decree-holder or the judgment-debtor. This is a statutory provision intended to minimise the hardship resulting from the purchaser's default, and I see no reason why the Court should refuse to give effect to it unless the defaulting purchaser would be substantially prejudiced. This was the case in Baijnath Sahai v. Moheep Narain Singh I.L.R. (1889) Cal. 535 where he had been induced to bid for the property as unincuimbered by the fact that the incumbrances were not mentioned in the proclamation of sale and the re-sale was on a proclamation in which the incumbrances were mentioned. ln such a case the difference between the two prices could not be regarded as a fair measure of damages, as the purchaser who afterwards defaulted must obviously have made a higher bid than he would have done if he had known of the incumbrances. If the learned Judges in Baijnath Sahai v. Moheep Narain Singh I.L.R. (1889) Cal. 535 and Kali Kishore Deb Sirkar v. Guru Prosad Sukil I.L.R. (1897) Cal. 99, intended to lay down a more stringent rule I am with great respect unable to agree with them.

2. There was no circumstance of this kind in the present case. The efforts, in which the Legislature joined, to save the ancient Zamindari of Kalahasti from being sold in execution having finally failed, a taluk, of the North A root District, was attached and brought to sale at the instance of a judgment-creditor. The taluk had been conveyed to a Mahant for six lakhs of rupees with an agreement for reconveyance if the money was repaid before a stipulated date, the 31st August 1914. The sale in execution to the respondent took place on the 25th August 1914 only a few days before the stipulated time for repayment to the Mahant, and the respondent was no doubt aware of this when he bid, as he would not have bid more than five lakhs for the judgment-debtor's interest without satisfying himself of the terms of the agreement for reconveyance mentioned in the sale proclamation, and in any case he must be taken to have had notice of it. The case for the appellant is that he was a man of straw employed by the Mahant to get the property knocked down to him as the highest bidder and make the necessary deposit with the money supplied by the Mahant in order to keep out genuine purchasers and to ensure that the specified date should be allowed to go by without repayment and the right to a reconveyance be lost; but all this has not been gone into and it is unnecessary to rely on it. On the 25th of August, the date of the sale, the respondent made the necessary deposit of Rs. 1,72,500 which entitled him to a delay of 15 days to complete the purchase, vide Order 21, Rule 85. On the completion of the 15 days he defaulted, and it became necessary to re-sell. By that time the 31st August 1914 had gone by, and the purchaser would no longer have a clear right to a reconveyance from the Mahant on payment of six lakhs, and could only rely on the positions that the transaction was really a mortgage or that the tender had been made before the specified date and refused. Now it is quite clear that what was put up to sale and purchased by the respondent on the 25th August included the right to get back this taluk from the Mahant on payment of six lakhs before the 31st August, and if he chose to purchase the judgment-debtors' interest and let the day go by, I am clearly of opinion that he is the person to bear the resulting loss. The other view as regards this part of the case appears to be that the judgment-debtor's right to a reconveyance on payment of a fixed sum before a stipulated day, which might be a most valuable right and in this case is said to have been worth much more than the five lakhs which the respondent agreed to pay for it, cannot be made the subject of an effective sale in execution, if the sale takes place less than fifteen days before the stipulated date, as under Order 21, Rule 85, the purchaser has fifteen days to pay the balance and the sale is not final until confirmed after not less than thirty days. These provisions in my opinion were made alio intuitu and were not intended to have that effect. He could, if necessary, have procured the concurrence of the judgment-debtor in making the tender to the Mahant without prejudice to the question of the confirmation of the sale, and in that case would have been entitled to a charge on the property so released. In any view he got what he bargained for, and I can see no reason why he should not incur the ordinary consequences of failing to complete his bargain.

3. It is quite clear, and has not been disputed before us, that at the re-sale consequent on the respondent's default, the judgment-debtor's right, title and interest in the same properties was brought to sale. It was, however, no longer possible to put up a right to reconveyance on payment before the 31st August 1914 as that date had gone by; but the nature of the judgment-debtor's interest was represented as favourably as possible in the proclamation as it alleged that the transaction with the Mahant was a mortgage and also that the agreement for the reconveyance still subsisted because, it alleged, the Mahant had fraudulently gone away from his residence to avoid receiving the tender of six lakhs which the judgment-debtor made before the stipulated date. In this case the sale and the re-sale were both duly held and were of the judgment-debtor's interest as it existed at the date of the sale and re-sale respectively, and the depreciation which occurred in the meantime was one for which the respondent was exclusively responsible, In these circumstances I see no reason why the deficiency should not be recovered from him under the Code. It was scarcely disputed before us that he would have no answer to a suit for damages, and I see no reason for refusing to give effect to the plain language of the Code. I concur in the order proposed by Kumaraswami Sastri, J.

Ayling, J.

4. I concur.

Kumaraswami Sastri, J.

5. This Appeal arises out of an application by the decree-holder to recover from the auction purchaser the loss arising from a resale held in consequence of his default. Certain villages forming part of the Kalahasti Zamindari were brought to sale in execution of a decree against the Zamindar. The villages had been conveyed by the Zamindar to one Raja Bahadur Narsingar Gyangirji of Hyderabad for six lakhs of Rupees by a deed dated 4th August 1908. The Zamindar got an agreement toreconvey bearing the same date if the sum of six lakhs was repaid by the 31st August 1914. The sale proclamation specified the two documents as also other documents not material for the purpose of this Appeal. The Zamindar's interest in the property conveyed was described as ' the right of obtaining a reconveyance under the reconveyance agreement dated 4th August 1908 executed and given to the defendant by Raja Narasingar Gyangirji Garu residing at Hyderabad and all the other rights and interest possessed by the defendant in these villages. ' The sale took place on the 25tb August 1914 and the respondent who was the highest bidder was declared the purchaser for six lakhs and ninety thousand rupees. He paid Rupees 1,72,500 the deposit required by Order 21, Rule 84 of the Code of Civil Procedure. Rule 85 gave him 15 days for the payment of the balance but he failed to pay the sum and complete the purchase.

6. There was so far as I can see no excuse for his not paying the balance. It is not shown that there was any irregularity in the proceedings that led up to the sale or that any circumstances existed on the date of sale which would justify the purchaser in refusing to complete the purchase. He knew perfectly well what he was purchasing and the risks he ran. There is no warranty of title in sales by Court in execution of decrees and as Order 21, Rule 91 only applies to cases where there is no saleable interest. So long as the judgment-debtor has any interest however small in the property the purchaser cannot except in cases where he would have right to set aside the sale on the ground of material irregularity under Order 21, Rule 90 avoid his purchase.

7. Order 21, Rule 86 provides for a re-sale in case the purchaser makes default in paying the balance of the purchase money within the time limited by Rule 85. The defaulting purchaser is under Rule 71 liable to pay the deficiency in price if any and the same on being certified by the officer holding the sale is recoverable from the defaulting purchaser under the provisions relating to the execution of a decree for the payment of money.

8. Owing to the respondent's default the property was put up for re-sale. Both Mr. Justice Oldfield and Mr. Justice Bakewell agree in holding that the same villages were put up for sale the second time and this is not disputed before us. When the property was purchased by the respondent at the first sale there were only six days within which six lakhs had to be paid in pursuance of the agreement to reconvey dated 4th August 1908. This period elapsed within the 15 days allowed to the respondent to pay the balance of purchase money and it is clear that no re-sale was possible within the period when the six lakhs was payable. At the date of the fresh proclamation rendered necessary by Rule 87 before re-sale the position of the Zamindar, the judgment-debtor in relation to the villages advertised for sale became altered. Whereas prior to the 31st August 1914 he was entitled to a reconveyance on tender or payment of six lakhs, he could alter that date in the absence of proof of tender in time only get a reconveyance if he was able to show that the transaction evidenced by the sale deed and agreement to reconvey of the same date was in law a mortgage and not a mere sale with an agreement to repurchase. It was alleged by the Zamindar that he did make a tender within the 31st August which was improperly refused, but as this allegation has not been enquired into by the District Judge, I shall proceed on the footing that no such tender was made.

9. The proclamation for re-sale had to mention the state of facts as they stood on the date when it was settled by the Court. There is nothing in the Code requiring that the proclamations of sale and re-sale should in all respects be identical and having regard to the duty of the Court to give intending purchasers correct information, it is difficult to see how mention of a material alteration in the circumstances between the first and second proclamations could be avoided. The second proclamation therefore contained a statement to the effect that tender of six lakhs was made and was improperly refused, that the transaction evidenced by the deed of sale and agreement to repurchase dated 4th August 1908 was a mortgage, that Gyangirji has only the right to recover six lakhs of rupees and that the property was sold subject to the right.

10. It is difficult to see how these statements could be prejudicial to the first purchaser. Their tendency was if anything to induce persons to purchase for a higher price, as a bald statement after the 31st August 1914 that the property was agreed to be recon-veyed if six lakhs were paid before the 31st August 1914 would be useless. The only person to complain would be the second purchaser if the allegation as to the tender and the effect of the sale and agreement to reconvey were not correct but he has raised no objection and the sale to him has been confirmed.

11. The chief contention raised by the learned Advocate General for the respondent is that in order to attract the provisions of Order 21, Rule 71 what is sold at the re-sale should be in all respects the identical property that was sold the first time, identical not only with reference to the description and area of the property sold but also with respect to the interest of the judgment-debtor therein, and that consequently the sale at which his client purchased being the right of the judgment-debtor to get a reconveyance on tender of six lakhs without reference to the nature of the transaction evidenced by the sale-deed and agreement to reconvey (which was a clear and good title), the re-sale of the properties in which the judgment-debtor's interest wag only the right to obtain a reconveyance on proof that the transaction was only a mortgage--a fact which the subsequent purchaser had to prove at his risk, was not a re-sale contemplated by Rule 71. Reference has been made to Baijnath Sahai v. Moheep Narain Singh I.L.R. (1889) Cal 535, Kali Kishore Deb Sarkar v. Guru Prosad Sukul I.L.R. (1897) Cal. 99, and Gangadas Dayabhai v. Bai Suraj I.L.R. (1911) 36 Bom. 329.

12. In Baijnath Sahai v. Moheep Narain Singh I.L.R. (1889) Cal 535, the first proclamation of sale contained no statement as to the encumbrances on the property put up for sale while the proclamation for re-sale set out the encumbrances. It was therefore clear that the purchaser at re-sale would have paid considerably less than the first purchaser who purchased the property on the assumption that it was unencumbered, and the deficiency of price was attributable not to the first purchaser's default but to the misdescription in the first proclamation. In Kali Kishore Deb Sarkar v. Guru Prosad Suhul I.L.R. (1897) Cal. 99, the defaulting purchaser had applied to set aside the sale under Section 313 of the Civil Procedure Code and the finding was that there was a material misdescription in the sale proclamation. In the first case the learned Judges observe that a change in the nature of the property by diluvian and the like causes beyond the control of anybody might not relieve the defaulting purchaser from liability. Their observations as to the effect that Section 293 of the Act of 1882 applied only to cases when the same property was sold under the same description at both sales must be read in the light of the later observations as to the change in the property by causes beyond the control of the parties.

13. I do not think that it was intended to lay down as an inflexible rule that if a few trees on the land fell down or a portion was washed away between the dates of sale and re-sale there could be no re-sale so as to make the defaulting purchaser liable for the deficiency. The observations in Kali Kishore Deb Sarkar v. Guru Prosad Suhul I.L.R. (1897) Cal. 99 as to the effect of correctly stating in the proclamation of re-sale what was incorrectly set out in the first proclamation are obiter and with all respect I fail to see why the correction of errors at least of such as would in the ordinary course enhance the value of the property at the second sale should be a valid ground of objection.

14.The general rule no doubt is that it is the property which was sold on the first occasion that must be put up for sale but this is subject to the property remaining identical. If owing to natural causes or causes attributable to the defaulter, there should be any change either in the property or the wording of the sale proclamation, there is nothing in the Code to release the defaulting purchaser from his liability under Order 71.

15. Gangadas Dayabhai v. Bai Suraj I.L.R. (1911) 36 Bom. 329 was a case where it was admitted that the first proclamation did not state either fairly or accurately the property to be sold. The property was described as that of A in the first sale and as that of B in the second.

16. Sooruj Buksh Singh v. Sree Kishen Doss (1811) 6 W.R. p. 126 (Miscellaneous rulings cited by the vakil for the appellant is more in point. In that case a purchaser at a Court sale declined to complete the purchase on the ground that the property bad been sold the next day in execution of another decree by a party who had a previous mortgage on the estate. The property was subsequently re-sold and he was asked to pay the difference. The Sudder Ameen held that the first purchaser was not liable under Section 254 of Act VIII of 1859 which is substantially the same as Order 21, Rule 71 of the Act of 1908 but his decision was reversed by the High Court on the ground that he had purchased something though perhaps less than what he had expected and that if he chose to bid he was bound to complete his purchase. From the facts as set out in the judgment it appears that the decree obtained by the mortgagor was in force at the date of sale which, unless discharged before the sale fixed for the day after the first sale, would entail the consequences that the property would pass under a title paramount to that of the first purchaser and that the re-sale was after the sale in execution of the mortgage decree when no title remained in the judgment-debtor.

17. Time runs and with it follows change. The provisions of Order 21 of the Code of Civil Procedure as to re-sale in case the balance of purchase money is not paid necessitate a delay of at least one and a half months from the date of the first sale. The reasonable construction to place on Rule 71 is that the re-sale should be within a reasonable time after the first sale and property re-sold should be substantially the same and that any difference will not matter if the difference in the condition of the property or the title thereto is one which would occur in the ordinary course of things having regard either to the nature of the property or the transactions in respect thereof having legal force at the date of sale or was brought about by the first purchaser's default.

18. It has been argued that the provisions of Rule 71 are summary in their nature and so should receive a very strict interpretation. Rule 71 only enacts the rule that the measure of damages in cases when a purchaser commits default is the difference between the price at which he agreed to purchase and the price realized at a re-sale. I do not think the rule prevents the defaulting purchaser from raising such objections as are competent to him under Order 21 of the Civil Procedure Code to raise. It is a principle of natural justice that a person should be given an opportunity of showing cause before an order adverse to him is passed and though Rule 71 does not expressly provide for the issue of a notice to the defaulting purchaser it is the duty of the Court to give him notice and to hear and decide on his objections before it orders execution to issue against him. In all the cases decided under the old and the new Code the defaulting purchaser did appear and raise objections which were adjudicated upon by the Court and he was held by the Calcutta and Madras High Courts to have a right of appeal. I need only refer to Sworuj Buksh Singh v. Sree Kishen Doss, (1866) 6 W.R.M 126 Baijnath Sahai v. Moheep Narain Singh I.L.R. (1889) Cal. 534 Kali Kishore Deb Sarkar v. Guru Prosad Sukul I.L.R. (1897) Cal. 99, Amir Buksha Sahib v. Venkatachala Mudali 5 M.L.J. 206.

19. I do not, therefore, see any good reason for placing an unduly restricted interpretation on Order 21, Rule 71. Having regard to the fact that there is no warranty of title in the case of sales by Court (the maxim Caveat Emptor applying) and that the purchaser cannot avoid the sale so long as the judgment-debtor has some interest however small in the property the objections which the defaulting purchaser can urge are practically confined to those which can be urged in an application to set aside a sale under Order 21 and proceedings under Rule 71 are neither more nor less summary than proceedings under Order 21 to set aside a sale.

20. It was also argued that it was the duty of the judgment-debtor or the decree-holder to keep the title alive between the period of sale and confirmation and that as no tender was made of 6 lakhs the defaulting purchaser is not liable. As the sale was only of the right, title, and interest of the judgment-debtor subject to the conditions in the agreement to reconvey on repayment of 6 lakhs, it is clear that the person to pay the 6 lakhs was the purchaser, the price he pays being estimated with reference to the existing liability on the property. There was under the terms of the proclamation no duty on the decree-holder or judgment-debtor to pay 6 lakhs.

21. With reference to the-argument that the defaulting purchaser had no legal right io tender 6 lakhs as he acquired no title on the 31st of August, the last date for the tender, I think the auction purchaser has an interest on the property which would make any tender by him valid. The position of a person between the date of sale and the date of confirmation is not that of a person who has only an agreement to sell in his favour. Section 65 of the present Code funlike Section 316 of the old Code vests title in him from the date when the property is sold and not from the time, the sale becomes absolute. It is no doubt true that the sale is liable to beset aside either by payment under Order 21, Rule 89 or for irregularity or want of title under Order 21, Rules 90 and 91, but it does not follow that a person who under Order 21, Rule 84 has been ' declared to be the purchaser' by the officer conducting the. sale has no interest in the property sufficient to prevent a forfeiture or preserve the title from destruction. The observations of their lordships of the Privy Council in Bhavani Kunwar v. Mathurd Prasad Singh I.L.R. (1912) Cal. 89, as to the rights and duties of an auction purchaser as from the date of sale are in point.

22. I am of opinion that no valid grounds exist in the present case for not making the defaulting purchaser liable for the loss arising from the re-sale. I would allow the Letters Patent Appeal and set aside the order of the District Judge with costs in this and the lower Court. The District Judge will dispose of the application of the appellant with regard to the deposit paid by the respondent according to law.


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