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G. Subramania Mudaliar and ors. Vs. the Ideal Finance Corporation, Partnership Firm - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai High Court
Decided On
Case NumberC.R.P. No. 728 of 1977
Judge
Reported inAIR1977Mad358
ActsCode of Civil Procedure (CPC), 1908 - Order 21, Rule 72; ;Civil Practice Rules - Rule 199
AppellantG. Subramania Mudaliar and ors.
RespondentThe Ideal Finance Corporation, Partnership Firm
Cases ReferredGanchi Laxmichand v. Tulsidas
Excerpt:
.....good service is subsequently found to be bad in law. show that apart from the requirement that the decree-holder should make out a case for leave to bid and set of, the executing court itself must be satisfied on the facts that such leave would be necessary for obtaining the most advantageous price in the execution sale. for it is now well recognised that the rules of natural justice can be invoked and applied unless the statute that governs the proceedings evinces a clear intention to exclude the application of those principles. it is further settled on authority that the paramount consideration that must move the court under this provision is that any order it passes must be to the end that the best price is realised for the property in execution. after all, while the decree-holder..........is: whether a judgment-debtor has a right to be heard in objection to an application filed by a decree-holder for leave to bid and set off in a sale of the judgment debtor's property in execution of the decree. the executing court in this case passed an order in the decree-holder's favour granting him leave to bid and set off. the order was made ex parte. the judgment-debtors have brought this appeal against that order.2. a preliminary objection was raised before me by mr. p. venkataswami, learned counsel for the respondent. he said that the judgment-debtor's appeal is not maintainable. according to him, no appeal lies under o. 43, c.p.c. against an order granting leave to bid and set off.3. i think the objection is well taken. order 43, c.p.c., does not provide for an appeal against.....
Judgment:
ORDER

1. This case raises an important question of Civil Procedure. The question is: Whether a judgment-debtor has a right to be heard in objection to an application filed by a decree-holder for leave to bid and set off in a sale of the judgment debtor's property in execution of the decree. The executing court in this case passed an order in the decree-holder's favour granting him leave to bid and set off. The order was made ex parte. The judgment-debtors have brought this appeal against that order.

2. A preliminary objection was raised before me by Mr. P. Venkataswami, learned counsel for the respondent. He said that the judgment-debtor's appeal is not maintainable. According to him, no appeal lies under O. 43, C.P.C. against an order granting leave to bid and set off.

3. I think the objection is well taken. Order 43, C.P.C., does not provide for an appeal against an order either granting or refusing to grant to the decree holder leave to bid and set of in an execution sale, although it provides an appeal against an order of the executing court setting aside or refusing to set aside the sale in favour of the decree-holder. Mark the restricted wording of O. 43, R. 1(j). The position, indeed, is not open to argument, for it is covered by authority. One is a decision of the Privy Council reported in Ko Tha Hnyin v. Ma Hnin, (1911) 38 Ind App 126(PC). The other is a decision of this Court in Ulaganatha v. Alagappa, ( : AIR1929Mad903 ).

4. Conceding this position, Mr. M.V. Chandran, learned counsel for the appellants requested that the present appeal may be treated as a proceeding in revision and dealt with as much on merits. Learned Counsel for the respondent did not seriously object to this course. In any case, he realized that this was a matter within this court's discretion. I accordingly treat the present proceeding as one invoking the Court's revisional jurisdiction under S. 115 of the Code.

5. The first contention of Mr. Chandran before me is that the executing court was not justified in setting his client ex parte and proceeding in their absence to order the decree-holder's application under O. 21, R. 72, C.P.C. The order, no doubt, proceeds on the assumption that the judgment-debtors were properly served with notice of the application. The record shows that the notices addressed to the judgment-debtors were served by affixture. But, Mr. Chandran submitted that service by affixture was not called for in this case, even on the basis of the process-server's own endorsements.

6. I have perused the records connected with the return of service. I agree with the submission that no case at all has been made out for serving the judgment debtors by affixture. Under the Code, affixture cannot be resorted to before exhausting all attempts at direct service on the persons named in the notice or summons. It is found from the records that the judgment-debtors were not in their respective residences at the time the process-server called. But the process-server's report does not say that the judgment-debtors did not have any agents to receive the notices on their behalf. Nor does it appear that any attempt was made to serve the notices on any adult male member of the family in their residences. The process-server straightway proceeded to affix the notices, stating that the judgment-debtors were out of town. This, surely, is not good service under O. 5, R. 17 of the C.P.C. I, therefore, uphold Mr. Chandran's contention that the order of the executing court declaring the judgment-debtors ex part is without jurisdiction.

7. The logical follow-up to my above finding would be to set aside the further order of the executing court granting the decree-holder leave to bid and set off. And Mr. Chandran, for the judgment-debtor asked me to do so without further ado. But Mr. Venkataswami urged that even on the footing that they were wrongly set ex parte, the judgment debtors were not entitled to object to the order in favour of the decree holder giving him leave to bid and set-off. Learned counsel submitted that it was not one of law's requirements that before the Court granting a decree-holder leave to bid and set off, the judgment-debtors should first be notified and convened. If that was the position and if an order could be passed by the Court without issuing any notice at all to the judgment-debtors, in what way, Mr. Venkataswami asked, could the position be worse in a case, such as the present, where the order is made ex parte on an erroneous view of the sufficiency of the notice?

8. In my view, there is no parallel between the two situations. The court having decided to issue notice must see to it that the notice is properly served. The court cannot very well pretend it had not issued any notice at all to the judgment-debtors, merely because the service of notices on the parties, which is thought, at the time, to be good service is subsequently found to be bad in law.

9. Mr. Venkataswami then submitted that it was purely within the discretion of the executing court to grant or withhold permission to bid and set-off. He further urged that the court's direction was wholly administrative in character. He submitted that the discretion was invoked, and became exercisable under the Code, at the instance of the decree-holder and nobody else. In these events, according to learned counsel, the judgment debtor has no locus standi to object to an order granting leave to bid and set off.

10. Mr. Chandran, on the other hand, pointed out that the permission to bid and set off has reference to the sale in execution of the decree-holder's property, and this being so, it would be a regrettable position if the law were held to be indifferent to his rights and interests. He submitted that the judgment-debtor was entitled to a reasonable opportunity to put forth his objection before the executing court makes up its mind to grant the decree-holder's request for leave to bid and set-off. He further submitted that whether the executing court's discretion is regarded as administrative or judicial should not be adversely affected without his being heard on the subject.

11. The procedure enabling a decree-holder to apply to the executing court for leave to bid and set off is governed by O. 21, R. 72, C.P.C. The provision is couched in a negative form to the effect that no holder of a decree in execution of which property is sold shall, without the express permission of the Court, bid for, or purchase, the property. The implication, obviously, is that the court has the discretion to grant permission t the decree-holder in this regard. The details of procedure for applying for leave to bid and set off are to be found in R. 199 of the Civil Rules of Practice. This rule says that an application for leave to bid at the sale shall be supported by an affidavit setting forth any facts showing that an advantageous sale cannot otherwise be had. The application must include an undertaking by or on behalf of the decree-holder that in the event of his being declared the purchaser of the property, he would enter up satisfaction of the decree under which the sale is made, for the amount of the purchase money. Cases in the books on the subject of O. 21, R. 72, C.P.C. show that apart from the requirement that the decree-holder should make out a case for leave to bid and set of, the executing court itself must be satisfied on the facts that such leave would be necessary for obtaining the most advantageous price in the execution sale. (Vide Raghavachariar v. Murugesa Mudali : AIR1923Mad635 and Varadarajulu Pillai v. Gendapodi Nanniar, : AIR1950Mad392 . In both these cases it was observed that the main consideration which must move the court in favour of granting the request of the in favour of granting the request of the decree-holder would be that the decree-holder's participation in the sale would be to the advantage of every one concerned and it would help obtain the highest price for the property under execution. In view of the real rationale behind the rule, it was difficult for me to accept the theoretical basis for the position that an executing court only engages in an administrative exercise when it allows the decree-holder to bid and set off. However, there is high authority to support the view that an order granting the decree-holder leave to bid is purely administrative in character. Indeed, it is upon this ground that courts have held that there is no appeal against such an order. (Vide the decision of the Privy Council in Ko Tha Hnyin v. Ma Hnin, (1911) 38 Ind App 126 (PC) and of this court in Ulaganatha v. Alagappa, ( : AIR1929Mad903 ).

12. On the basis of the doctrine that an executing court only functions administratively when granting leave to the decree-holder to bid and set off, Mr. Venkataswami argued that there would then be no need at all for the court to issue notice to the judgment-debtor. From this, according to learned counsel, it followed that absence of notice cannot vitiate an order granting leave to bid and set off to the decree-holder. He referred me to a ruling to that effect in a decision of the Andhra High Court reported in P. Atchamma v. T. Bayanna, : AIR1969AP196 . There the learned Judges held that since an order giving or refusing to give leave to bid at an execution sale is only a ministerial or administrative order, it is not essential to give prior notice to the judgment-debtor, and want of notice would not invalidate the court auction, or the sale in favour of the decree-holder as the highest bidder.

13. The facts before the Andhra High Court show that the ex parte order granted by the executing court in the decree-holder's favour was in a second application filed by him in that regard, and in an earlier application filed by him for the same relief the judgment-debtor had been duly served with notice. It was in this factual background that the learned Judges held that the absence of notice to the judgment-debtors before granting leave to bid and set off to the decree-holder would not vitiate the sale in which the decree-holder was allowed to bid. It may or may not be possible to accept this conclusion as correct on the facts before the learned Judges. But, with respect, I find it difficult to accept the general proposition that no notice at all is necessary in law to the judgment-debtor in any application filed by the decree-holder for leave to bid and set off. It is true there is no express requirement in O. 21, R. 72, C.P.C. for issue of notice to the judgment-debtor. It must also now be accepted as settled law that an order passed under that provision is purely an administrative order. But even so, I am unable to accept the justness of the position that notice to the judgment-debtor can be dispensed with, without qualms. No one can deny that an order passed by the executing court allowing the decree-holder to bid and set of in the sale is a matter of great moment, which vitally affects the property of the judgment-debtor. This aspect, by itself without more, should convince us all that it would be not only just but also necessary that the judgment debtor should be notified of the decree-holder's application before any order is made against him. I derive my conviction from a basic principle of our jurisprudence, which requires prior notice to a person wherever decisions are taken tending to affect vitally his property or other rights. This principle has been held to govern the action not only of courts of law, but also of other tribunals and authorities, even in the absence of express provision in the enacted law concerning notice to the affected party. In recent years, the superior Courts in our land have been applying this fundamental principle of natural justice to a wide variety of proceedings in cases classified by academic writers under the head 'Administrative law'. And the learned Judges have had no hesitation in setting aside orders passed in the exercise of quasi-judicial power, wherever there was want of notice to the party affected. Recent trends in court-decisions show that this principle of natural justice must be applied even to purely administrative decision-making. if that should affect an individual's rights. Two recent decisions of our Supreme Court are in point. The first is that of A.K. Kraipak v. Union of India reported in : [1970]1SCR457 . It was observed in that case that the concept of natural justice is constantly expanding. This trend was illustrated by copious reference to authorities. Indian and foreign, and it was ultimately laid down that the principles of natural justice would apply even to purely administrative orders. The order in question before the Supreme Court in that case was an administrative order laying down the order of seniority as between members of a departmental cadre in the Forest Service. The order was challenged on the ground that the committee which settled the seniority included a number whose name also was among the list of candidates. The Supreme Court quashed this order as being opposed to the rule of natural justice which requires that no man can be judge in his own cause.

14. In a later decision, reported in D.F.O. South Kheri v. Ram Sanehi, : AIR1973SC205 the Supreme Court has to apply to an administrative order, another test of natural justice, namely, that a man must be heard before being visited with an adverse decision. In that cases what was affected by the administrative order in question was the property of an individual. Holding that absence of notice to him was fatal to the validity of the order, the Supreme Court observed:--(at p. 206)

'Granting that the order was administrative and not quasi-judicial, the order had still to be made in a manner consonant with the rules of natural justice when it affected the respondent's rights t property.'

15. Mr. Venkataswamy, however, argued that the rules of natural justice laid down in cases in administrative law cannot be borrowed, or adopted for application, for matters arising under our established Civil Procedure. He drew my attention to the circumstance that the Supreme Court itself had expressed the view the rules of natural justice should not be applied willy-nilly to all proceedings, but only to those that are not governed by any law validly made prescribing the property procedure. He particularly cited the following passage in the judgment of Hegde, J., in A. K Kraipak v. Union of India, : [1970]1SCR457 :--

'What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case, the framework of the law under which the enquiry is held and the constitution of the Tribunal or body of persons appointed for that purpose'.

16. I accept, with respect, the caution administered in the above passage, and proceed to examine all the relevant considerations that bear on the question in the present case. Adverting to the language of O. 21, R. 72, C.P.C., it may be conceded that it does not contain any express provision for notice. But on that score it cannot be held that the legislative intention was to enable the court to make an order without any notice whatever to the judgment-debtor. For it is now well recognised that the rules of natural justice can be invoked and applied unless the statute that governs the proceedings evinces a clear intention to exclude the application of those principles. As I earlier mentioned, O. 21, R. 72 is enacted in a negative fashion to the effect that the decree-holder shall not bid or purchase the property without express permission of the Court. The clear intendment of the rule, as pointed out by the Privy Council, is that the Court is thereby given a discretion either to permit or not to permit the decree-holder to bid at the auction. Even the Division Bench of the Andhra High Court, on which Mr. Venkataswamy placed reliance, described the jurisdiction of the executing Court as invoking the exercise of discretion. If so much is granted, I cannot see how, at the same time, the subject could be regarded as a matter strictly between the court and the decree-holder to the entire exclusion of the judgment-debtor. In my view, a discretion, especially one which is conferred on a court of law, can properly be exercised only in the presence of all the parties who may be affected by its exercise one way or the other. Besides, as I have earlier pointed out, R. 199 of the Civil Rules of Practice imposes certain terms and conditions subject to which alone the decree-holder could be granted permission to bid and sort off. It is further settled on authority that the paramount consideration that must move the court under this provision is that any order it passes must be to the end that the best price is realised for the property in execution. This last consideration, it is easy to see, is oriented not so much from the point of view of the decree-holder, but from that of the judgment-debtor. After all, while the decree-holder must have his decree satisfied and the executing court must assist him in realising the amount decree, there are such things too as the rights of the judgment-debtor which are not to be left in the lurch. The policy of the Code, as disclosed by the various provisions found in the execution chapter, is not to render the judgment-debtor a helpless prey of the decree-holder's execution proceedings, but to afford him every safeguard against unfairness and injustice. I am, therefore, of the view that the mere omission to make express provision in O. 21, R. 72 for notice to the judgment-debtor cannot be held to rule put the application of the principles of natural justice. On the contrary, the very absence of any provision regarding notice makes for reading into the Rule and engrafting on to it, the relevant principles of natural justice. I am not inclined to agree with Mr. Venkataswamy's thesis that t he rules of natural justice have relevance only in the realm of public administrative law and they do not apply to the law of civil procedure governing the course of private litigation. In my view, the principles of natural justice are so fundamental that they should punctuate every kind of legal proceeding wherein decisions are made affecting the rights of persons. They apply as much to cases where courts are called upon to do justice between man and man as to cases that call for justice between man and State. Indeed, the case for applying those rules, to common law courts is a fortiori. I must, therefore, conclude that the order of the executing court in this case granting the decree-holder leave to bid and set off is bad in law and must be set aside, for the reason that it was without observing the principles of natural justice and without ensuring that the judgment-debtor had due notice of the application. I like to imagine that the decision in the case before the Andhra High Court in Atchamma v. Bayanna, : AIR1969AP196 would have been different if the learned Judges had had occasion to consider the position from the point of view of natural justice. As it happened, however, this aspect was not presented before them, presumably because those were days when the rules of natural justice were tacitly assumed by most of us, not to apply to administrative decision-making. The Kraipak ruling of the Supreme Court : [1970]1SCR457 , which, with respect, was to break new ground in this department of jurisprudence, was to come only some time later.

17. Learned counsel for the judgment-debtor sought to attribute another infirmity to the order of the executing court in this case. He said that the decree-holder's application which the executing court granted without question, had not put in even the minimal averments that are requisite for making out a case for grant of leave to bid and set off. He proceeded to take me through the allegations contained in the affidavit in support of the decree-holder's application. I was, however, not willing to be drawn into a discussion of this aspect of the merits of the decree-holder's application under O. 21, R. 72, C.P.C., considering that the effect of my finding on the absence of notice would be to set the merits at large once again before the executing court.

18. Mr. Venkataswamy, for the decree-holder made one last submission on the basis of the subsequent conduct of the judgment-debtors. He said that while E. A. 151 of 1975 for leave to bid and set off was ordered on 25-11-1975, the judgment-debtors had subsequently paid Rs. 500/- and Rs. 1,000/- on 1-12-1975 and 8-12-1975 respectively and also filed E. A. Nos. 157 of 1975 and 163 of 1975 praying for entering part-satisfaction and for adjourning the sale of the properties. Learned counsel points out that this participation by the judgment-debtors in the subsequent proceedings without question disentitled them from raising the question of validity of the earlier order granting the decree-holder leave to bid and set-off. He put the same idea differently by arguing that the judgment-debtor's present objection would be barred by constructive res judicata. He pointed out that E. P. No. 13 of 1975 was filed as early as 1974, and although the judgment-debtors were made aware of it, they did not raise any objection to the sale of the properties at the time. This being so, they ought not to be allowed to raise any objection to the grant of leave to bid and set-off. Learned counsel cited, in this connection, a judgment of the Gujarat High Court reported in Ganchi Laxmichand v. Tulsidas, : AIR1963Guj1 where it was held that the rule relating to constructive res judicata would apply even to execution proceedings.

19. I do not think it necessary to go into the question of estoppel by conduct or constructive res judicata raised by the decree-holder, considering that I propose to set aside the executing court's order dated 25-11-1975 and direct it to go into the question afresh under O. 21, R. 72, in the presence of the judgment-debtor. That re-inquiry would provide the proper occasion for both the parties to raise all contentions of fact and law which may have a bearing on the question.

20. In the result, the C. M. A. filed by the judgment-debtors and dealt with by me as a C. R. P., is allowed. The order of the learned subordinate Judge dated 25-11-1975 in E. A. No. 151 of 1975 is set aside and he is directed to take back the same on file and dispose it of afresh in accordance with law, after giving the judgment-debtors a reasonable opportunity to the file their objections. In the circumstances of the case, I make no order as to costs.

21. Learned counsel for the decree-holder pleads that having regard to the age of the execution proceedings, the lower court may be directed to dispose of E. A. No. 151 of 1975 without delay. There is justification for this request. I direct the executing court to hear and determine the Execution Application a expeditiously as possible.

22. Order accordingly.


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