(1) This appeal, under the letters Patent, is directed against the order of Venkatadri J. in C. M. A. Nos. 109 and 276 of 1960. One Varadaraja Pillai and his brother Periaswami Pillai mortgaged four items of properties, and the properties included as item 2 a cinema theatre in Namakkal, and item 3 a house in Salem. A preliminary decree was passed and then a final decree. On 16-3-1945, the decree-holders brought the mortgaged properties to sale, and the sale was advertised to be held by the court on 28-8-1952. After adjournments from day to day the sale was concluded on 4-9-1952, when the cinema theatre at Namakkal was sold for Rs. 20,000 and the house at Salem was sold for Rs. 8200. Varadaraja Pillai, one of the mortgagors, filed a petition in the executing court, i.e., Sub Court, Salem, for setting aside the aforesaid sale on the ground that the two items of properties sold were grossly under-valued, and consequently substantial injury had been caused, by the execution sale, to the judgement debtors. There was one more allegation that the order of the lots as notified in the sale proclamation, was altered by the executing court and it was urged that this also was an irregularity vitiating the sale.
We are, however, not upholding this ground, as there is no evidence to show that the change in the order of the lots prejudicial affected the judgment debtor. That is an essential pre-requisite to enable a sale following a different order of lots, to be set aside in appeal--vide Meenakshi Sundaram Pillai v. Chokkalingam Pathari, 56 mad LJ 624: (AIR 1929 Mad 506). There were some other allegations including want of due publicity, as factors contributing to the irregularity of the sale, but only the first two points mentioned above have been pressed for consideration before us.
(2) The executing court dismissed the petition. But Venkatadri J. in appeal, held that there was gross under-valuation of the properties that the price realised was far below the market price and that thereby a substantial injury was caused to the judgment debtors. The sale was set aside. From this decision, this appeal under the Letters Patent, is filed by respondents 9 and 10 in the application, who were the auction purchasers.
(3) We will put down briefly the proved facts in the case, before applying the law on the subject to them. the execution petition was filed in 1947, and the decree-holders had estimated the upset price for item 2, the cinema theatre in Namakkal, at Rs. 7500 and for item 3, the house at Salem, at Rs 7500. at the auction sale held on 28-8-1952, bids were offered and the price for item 2 was raised to Rs. 16000 and that of item 3 was raised to Rs. 8200, by the 9th and 10th respondents respectively. But the learned Subordinate Judge was not prepared to knock down the sale, as in his opinion the bids appeared to be low. He ordered the sale proceedings to continue from day to day, and there is a note in the bid list in the concerned execution petition that no bidders were present on the succeeding days until 4-9-1952. On 4-9-1952, a few more bids were offered, and the court finally knocked down item 2 in favour of the 9th respondent for Rs. 20,000 and item 3 in favour of the 10th respondent for Rs.8,200.
(4) To prove their contention about the gross under-valuation of the properties, the judgment debtors examined a number of witnesses and also produced some documents. The auction purchasers merely filed the proclamation of sale in regard to the two properties but did not adduce evidence contra, regarding the specific allegations made by the petitioners for the purpose of setting aside the sale.
(5) We will take up first the evidence in regard to item 2. P. W. 1, Natesa Pillar had a cinema theatre of his own 11/2 furlongs away from item 2, whose accommodation was less than that o item 2, and on 5-12-1951 he sold it for Rs 1,70,000. His theatre was sold by him four years after it was built, and he sold along with the theatre building, the furniture, fittings and equipment on which items he had spent a lakh of rupees. It is common ground that so far as item 2 is concerned, it was sold without furniture, fittings and equipment. If Rs. 1,00,000 which the witness gave as the estimate for the furniture, fittings and equipment is excluded, Meera Theatre, sold by him in 1951, would have fetched Rs. 70000. If we add 3 1/2 acres of site which is also appurtenant to item 2, and also was sold along with it, it is obvious that in 1951, the proper price for item 2 would have considerably exceeded Rs. 70,000. Item 2 is said to be about 30 or 32 years old, whereas the Meera theatre of the wetness is only 4 years old. There is nothing alleged as to the unserviceability of the building in item 2, or the comparative advantages of the building proper, so far as item 2 and the Meera theatre of P. W. 1 are concerned. There was no cross-examination of P. W. 1 on these points.
Therefore P. W. 1's evidence is important to show that item 2 should have been worth more than Rs. 70,000 in 1951, and consequently in 1952 also. P. W. 2 has given more precise evidence that the theatre proper would be worth Rs. 60,000, and the adjacent site would be worth Rs. 18000 and the whole property would be worth Rs. 78,000. There was nothing elicited to discrete it the evidence of this witness. P. W. 3 is one of the mortgagors and the brother of Varadaraja Pillai, who applied for setting aside the sale. He deposed that he had leased the theatre in 1948 on a monthly rent of Rs. 447 for 15 years as per Ex. A.
3. Subsequently, he obtained a decree on the lease and the Commissioner, who was appointed by the court to manage the property, leased the theatre for Rs. 16000 per annum and the Commissioner's report is Ex. A. 4 dated 2-1-1958. No doubt, this lease by the Commissioner included the furniture, fittings and the machinery binding the adjacent site, which is cultivable land. But we have evidence of P. W. 1 about the normal value of the fittings and machinery, which could be estimated at a lakh of rupees. The capitalised value of Rs. 16000 for 20 years purchase would give Rs. 3,20,000 as the value of the theatre, fittings and the machinery in 1957. Even if one has to make due allowance for the appreciation of values between 1952 and 1957, it can be said that the market price of the theatre without fittings, machinery but with the appurtenant site would have been at least Rs. 80000 if not more in 1952.
(6) Coming to the house in Salem town, a Commissioner was appointed to value it while the application was pending in the lower court. He made a careful report with the help of a surveyor, and estimated the value of the house at Rs. 18000. He took into account the annual rental value of the building according to the municipal registers, which was Rs. 1200. Objection was taken to the Commissioner's report before us on the ground that the Commissioner was not examined as a witness in the executing court. But it is pointed out by the respondents that the Commissioner's report was marked in the executing court by consent and that there was no objection to its being received in evidence. The Commissioner's report is based on the annual rental value recorded in the municipal registers. It is a matter of common knowledge that these annual rental values are based on enquiries, and if there I a tenant, the valuation is based upon the rent paid by the tenant, but if the owner is in occupation the Municipal authorities give and estimate, which the owner is entitled to challenge by filing an appeal to the appropriate authorities if it is in any way excessive. The owner in such cases generally gets a fair decision in his favour, about the annual rental value and property tax. In such circumstances, the estimate of the value of the house at Rs. 18000 by the Commissioner must be considered to be a proper estimate of its market value.
(7) From the above data, it would appear that the upset value given by the decree holder for item 2 at Rs. 7500 and for item 3 at Rs. 7500 was grossly disproportionate to the market value. At the time when the sale was held, under the rule in O. 21 R. 66(e) C. P. C. (as per the amendment made in Madras in 1936) the court has to give the value of the properties stated (1) by the decree holder and (2) by the judgment debtor. It does not appear from the records in this case that this rule was followed. The upset price in the proclamation was the one given by the decree-holder.
(8) In Rangaswami Iyengar v Marudanayagam Pillai, AIR 1938 Mad 720 it was observed that the upset prices fixed in the sale proclamation and the prices realised in pursuance of the same, were exactly one fourth of the prices which were given by the decree-holder himself, and any likely bidder who looked at the sale proclamation would consider that having regard to the smallness of the value fixed for the several items of property, they are really of very inferior quality and not worth going in for at high prices. In such circumstances, the court felt justified in setting aside the sale on the ground of material irregularity which caused prejudice to the judgment debtor. In Ramasesha Iyer v. Ramanujachariar, AIR 1935 Mad 459 it was observed that if the properties had been grossly under-valued and had been as a matter of fact sold for a very low price, then it might be inferred that the inadequacy of the price obtained for the property at the sale was the result of the under-valuation, and the learned Judges (Madhavan Nair and Pandrang row JJ) relied upon the Privy Council's observations in Sadatmand Khan v. Mt., Phul Kuar, 25 Ind App 146 (PC):
"It is a mis-statement of the value of the property which is so glaring in amount that it can hardly have been made in good faith, and which, however, it came to be made, was calculated to mislead possible bidders and to prevent them from offering adequate prices or from bidding at all."
There is also a recent judgment of Jagadisan J. of this court in C. R. P. No. 1248 of 1960 (Mad) where, after referring to several authorities both of this court as well as o f the Privy Council, he observed:
"The fixation of an absurdly low price as the upset value in the sale proclamation deliberately or negligently and a consequent sale by which the property is knocked down in favour of a bidder almost for a trifle, amounts to fraud in the publication or conduct of the sale, justifying its being set aside under Order XXI Rule 90 C. P. Code."
Per contra, we were referred to the judgment of Govinda Menon J. in Srinivasa v. Andhra bank Ltd., 1948-2 Mad LJ 569: (AIR 1949 Mad 398) wherein, after referring to O. 21 R. 66(2)(e) C. P. C. as amended in 1936, the learned Judge observed that where, in compliance with the above rule, the proclamation contained the value of the property as stated by the decree-holder and the judgment-debtor, there was no duty cast on the court by clause (e) of O.21 R. 66(2) to fix its own valuation and to insert it in the proclamation of sale. It will suffice for us to observe that there is no contention that in this case that two sets of valuation one by the judgment debtor and the other by the decree-holder were given in the proclamation. The whole enquiry has proceeded on the basis that the proclamation mentioned only the upset price given by the decree-holder. The decision of Govinda Menon J. has been referred to by Mack J. in Arunachalathammal v. Kangasabapathi Pillai, anddistinguished. Mack J. besides the
extreme valuations given by the decree-holder and the judgment debtor, the proclamation also contained an estimate of the market value by an independent valuer.
The learned Judge also observed that we here there is so wide a divergence between the decree-holder's valuation and the judgment debtor's valuation, it appears to be desirable for the court to have the property valued by an amin and to have such valuation inserted in the proclamation. but in the present case, no such difficulty arises as the proclamation contained only one valuation, namely, that given by the Deere-holders, which, on the evidence adduced, was grossly inadequate. It reveals a clear intention on the part of the decree-holders to conceal from the intending bidders the true value of the property and there by dissuade a good many of them from taking part in the sale. We are of the opinion that the sale in such circumstances is clearly vitiated. The order of the learned Judge, Venkatadri J. is correct. The appeal is dismissed with costs.
9. Appeal dismissed.