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The Rajah of Bobbili Vs. Akkella Suryanarayana Rao Garu and ors. - Court Judgment

LegalCrystal Citation
Decided On
Reported in51Ind.Cas.805
AppellantThe Rajah of Bobbili
RespondentAkkella Suryanarayana Rao Garu and ors.
Cases ReferredBalahrishna Udayar v. Vasudeva Aiyar
.....and effect of--death of highest bidder--revocation of bid--procedure, subsequent--order for fresh auction--declaring next lower bidder as purchaser, illegality of--re-sale, order for, on default of payment of deposit--jurisdiction, wrong exercise of--appeal, maintainability of--revision. - - 2. the foregoing appears from the original sale list more clearly than from the print, because the orders of the subordinate judge have been recorded with an informality, which the importance of the proceedings should have led him to avoid; bat the course of decisions in this presidency as well as in the other high courts have left this question of the representative character of the auction-purchaser in so confused a state that i do not think it safe to base my decision upon the assumption that..........and when that is succeeded by the offer of b if a wants to purchase the property, he must have a higher offer. otherwise be walks out of the bargain. there may be c, d and e and so on, who may bid higher than their immediate preceding bidders. it is the highest bidder that is regarded as having made the final proposal, which may or may not be accepted by the auctioneer. if it is not accepted there is no contract. the procedure at a court sale exactly corresponds to what i have stated above, it is not different in any main particulars from any private proposal for the sale of property. according to the subordinate judge every offer that was made remained in abeyance pending acceptance by the auctioneer. if this is carried to its logical extent, the first or the lowest offerer may still.....

Oldfield, J.

1. This petition and appeal relate to the circumstances in which a Court Bale was concluded by the Temporary Subordinate Judge of Vizagapatam. The decree under execution was for over Rs. 2,50,000 and eight villages of a Zsmindari belonging to the judgment-debtors, here respondents, were put up for sale in one lot on 27th September 1918. The sale was continued from that date until 22nd October 1918, when other bidders having dropped out, competition was confined to the Rajah of Bobbili, the petitioner and appellant here, and one Perla Ramamurthi Chetty. On that date the former by his Muktyar or agent bid Rs. 3,25,000. On 28th October 1918, however, the Chetty bid Rs. 3,25,000. The sale was then continued until 3th November 1918, although no further bids were received, apparently in compliance with the requests of the Rajah and the Chetty contained in two of the telegrams marked as Exhibit III Meanwhile news was received of the Chetty's death and on the date last mentioned an adjournment to the next day was granted to enable his widow to bid; and there were further adjournments until 18th November 1918, when the Subordinate Judge held quite correctly that the Chetty's bid was revoked by his death. He, however, decided to go on with the sale from the bid of the Rajah as the highest before him. No other bid being made, he at once knocked down the property in the Rajah's favour on his last bid of Rs. 3,25,000 granting him time until the next evening to pay the necessary deposit. As it was not paid by 20th November 1918, he held that a default was established and directed the re-sale of the property forthwith at the Rajah's risk. The re sale went on until 27th November 1918, when the present proceedings had been initiated and a stay order was passed by this Court. The appeal and the petition before us are against the order of 20th November 1918 directing a re-sale.

2. The foregoing appears from the original sale list more clearly than from the print, because the orders of the Subordinate Judge have been recorded with an informality, which the importance of the proceedings should have led him to avoid; and, it may be added, in slipshod language, unbecoming an officer of his standing. There are, moreover, portions of his orders, of which it is necessary to express disapproval on other grounds. On 22nd November 1918 he said, in adjourning the rale, 'let the competitors think over and stop.' On 31st October 1918 he expressed the opinion in his order on one telegram included in Exhibit III that the price was already too much. On 18th November 1918, he stated that he had already granted adjournment for the benefit, not only of the Chetty's widow and the Rajah, but also to enable other bidders such as the Maharajah of Jeypore to come forward and he referred to the possibility of the Court of Wards, which had taken over the Cbetty's estate, wishing to purchase, although there was no application of any sort from the Maharajah and nothing formal from the Court of Wards before him. The only duty of the Subordinate Judge was to hold a fair sale, giving reasonable opportunity to purchasers to come forward; and these public references to his own opinion as to the price and as to possible competitors were out of place and should not have been made.

3. We are not, however, concerned directly with them or their effect, but with the Subordinate Judge's action in knocking down the property on the last bid of the Rajah when the Chetty's higher bid had been revoked, the former's contentions being that this procedure was irregular because either his own bid had been in fact retracted on 5th November 1918, or it had been discharged by (1) the suspension of the sale on its adjournment at the close of the day or (2) the higher bid of the Chetty. As regards first, the alleged retraction, the plea rests on the affidavit of the Rajah's Muktyar dated 25th November 1918. The facts are denied in the respondent's affidavit of 24th December 1918. In these circumstances it is impossible to reach any conclusion regarding them without taking oral evidence and calling on the Subordinate Judge for a report; and, as one of the other contentions advanced affords ground for an immediate decision, I turn to it at once.

4. The contention that the Rajah's bid was discharged at the end of the day on which it was made by the adjournment of the sale is supported by the reasons given in the argument in Jones v. Nanney (1824) 147 E.R. 925 and the qualified acceptance of them in two of the judgments in that case. But it was not the ground of decision; and I hesitate to adopt it here. For a bid is merely an offer or, in the language of the Indian Contract Act, a proposal vide Payne v. Cave (1789) 3 T.R. 148 and Agra Bank v. Hamlin 5 Ind. Dec. 165 and although it may be that in particular cases the facts, such as a change in the circumstances during the suspension of the sale or the possibility that the bidder has exhausted his resources in the purchase of other lots, those being the contingencies referred to in Jones v. Nanney (1824) 147 E.R. 925 may justify a presumption in favour of retractation, there is nothing of that sort alleged in the present case, and in the absence of any plea of a special custom relating to auctions in India we must, in my opinion, decide in accordance with Section 6, Indian Contract Act. Under that provision the lapse of time before acceptance of a proposal, whether arising from the adjournment of auction proceedings or otherwise, is ground for presuming revocation, only when it is unreasonably long; and here the adjournments were authorised by the sale proclamation and Order XXI, Rule 69, of the Code of Civil Procedure and are not said to have been excessive. If the Rajah's bid is to be held to have been discharged, it must be on the other ground above referred to, that it was impliedly refused, when the Subordinate Judge continued the sale and received the bid of the Chetty.

5. No doubt no authority has been adduced to show that acceptance of a higher bid involves rejection of the preceding lower one. But that is perhaps because it is so dear that it would be impossible to rest an auction-sale on any principle, if the contrary were the case. Condition No. 3 of the sale proclamation in the present case provides that the highest bidder must be the purchaser; and, when a higher bid has been received, as no possibility of a lower bid succeeding can remain, the latter must be taken to have been finally refused. It is argued for the respondents that an auction should be viewed as the successive submission of a number of offers to the auctioneer, of which he is hound to select the highest made by a competent bidder, and that the one to be selected is ascertainable by him only at the conclusion of the sale, when the hammer falls, all remaining effective until such ascertainment and it being open to him in case the apparently highest offer turns out to be that of a disqualified person, such as a lunatic or minor, to accept the next highest forthwith. But it would, I think, be extremely inconvenient in practice to regard the proceedings in this way and in the absence of authority I am not prepared to do so. In Boberts v. Bozon (1825) 3 L.J. 113 such a construction was adopted only because it was specially authorised by the conditions of sale. The case of a bid being ultimately refused, as made by an incapacitated person, supports no argument, since in it the proper course, consistently with the foregoing, would not be to proceed from the next highest or any other bid, but to restart the sale from the beginning; and there would be no inconvenience in doing so and no prejudice to other bidders. My conclusion is that the Subordinate Judge fell into a fundamental error in not taking that course in the present care and in not treating the Rajah's bid as discharged.

6. This being the conclusion as to the legality of the Subordinate Judge's action, the question remains whether his order can be displaced either by an appeal or in revision. It is conceded that an appeal can lie against it, only if the question between the Rajah and the respondent, judgment debtor, is one arising between the parties to the decree and necessary to its execution and it is not disputed that it fulfils the latter requirement. As regards the former the Rajah can be treated as the representative of a party, only if his character as a purchaser is admitted. But that character and the Subordinate Judge's attribution of it to him are exactly what he is seeking to disclaim by these proceedings. True, the respondent, judgment debtor, does not dispute and in fact in here to support that attribution. But I can find no case under Section 47 of the present Code of Civil Procedure or the section previously corresponding with it, in which a representative character was allowed to be pleaded in order to give the Court jurisdiction to negative its existence and it is impossible to understand how any logical course of pleading could permit it. No doubt again in Order XXI, Rule 71, the reference is to the defaulting purchaser; although a re-sale consistent only with the cancellation of his purchase is in question. But this is inconclusive, since the rule is concerned only with the legal relation created by the purchase assumed to be regularly made, not with the consequence of its repudiation by the bidder. In these circumstances the application of Section 47 has not, in my opinion, been justified and the appeal is, therefore, unsustainable.

7. As regards the revision petition this Court can, of course, only use its powers in case the Subordinate Judge committed not merely an error in law, but also a material irregularity in the exercise of his jurisdiction. The distinction between such an error and such an irregularity must inevitably be difficult. But the latter is, I think, in question here. For the Subordinate Judge's mistake arose, not incidentally or from any wrong application of or deduction from legal principles, but from a fundamental misconception of the nature of the transaction he was engaged in and his powers. It is urged also for the respondents that the Rajah can await the result of the re sale he objects to and sue, when the extent of his grievance has been ascertained; and no doubt this Court does not ordinarily use its re-visional powers, when another remedy is available. But the rule is not absolute; and in the present case where the efficacy of that remedy is doubtful and a re-sale will only complicate the relations between those concerned, there is sufficient reason for immediate interference with the irregular course taken by the proceedings.

8. The result is that the civil revision petition is allowed, the Subordinate Judge's order of 20th November 1918 being set aside with a direction for the re-sale of the property. The judgment-debtors Nos. 3 to 5. appellants will pay the costs of the petitioner, The decree-holders Nos. 1 and 2 respondents will bear their own costs.

9. We consider it advisable that the proceedings should not be continued from this point before the Subordinate Judge referred to in this order. The Exhibit A is transferred to the District Court for disposal according to law.

10. Under Rule 41 of the Rules framed under the Legal Practitioners Act we fix Rs. 500 as the appellant's Vakil's fee.

11. The appeal Civil Miscellaneous Appeal No. 295 of 1918 is dismissed. No order as to costs.

Seshagiri Aiyar, J.

12. I agree.

13. The facts set out by my learned brother show that there has been material irregularity and illegality of a pronounced type in the procedure of the Subordinate Judge. I wish to say a few words on the question of law argued in the case. Apart from authority the ordinary understanding of an auction-sale is this. In the presence of the auctioneer who maybe regarded as the acceptor, successive proposals are made for the purchase of the property. A makes the first offer and when that is succeeded by the offer of B if A wants to purchase the property, he must have a higher offer. Otherwise be walks out of the bargain. There may be C, D and E and so on, who may bid higher than their immediate preceding bidders. It is the highest bidder that is regarded as having made the final proposal, which may or may not be accepted by the auctioneer. If it is not accepted there is no contract. The procedure at a Court sale exactly corresponds to what I have stated above, It is not different in any main particulars from any private proposal for the sale of property. According to the Subordinate Judge every offer that was made remained in abeyance pending acceptance by the auctioneer. If this is carried to its logical extent, the first or the lowest offerer may still be regarded as keeping alive his offer on the possibility of the auctioneer accepting his proposal. In the first place, this view of the Subordinate Judge is opposed, as pointed out by my learned brother, to the conditions of the sale. Because the third condition is: 'The highest bidder shall be declared to be the purchaser of any lot, provided he is legally qualified and provided it shall be in the discretion of the Court to decline acceptance of the highest bid when the price offered appears so dearly inadequate as to make it advisable to do so.' In the present case, in the auction list, even when the bid had not reached the present figure, the Subordinate Judge made a note that the price already offered was too high. Therefore, according to condition No. 3 when Ramamurthi Chetty offered Rs. 3,26,000, one would have expected the Subordinate Judge to have accepted the offer. But for some reason, notwithstanding his view that the price offered was unduly high, be adjourned the sale to a future date. Before the adjourned date, as pointed out by my learned brother, the highest bidder had died and the bid became a nullity. For this result the Subordinate Judge is mainly responsible, instead of directing a fresh auction on the death of the highest bidder, because under Section 6 of the Contract Act, Clause 4, the death of the proposer revokes the proposal, he has declared the next highest bidder as the auction purchaser. This conclusion of the Subordinate Judge seems to me to be utterly unwarranted by the conditions of the sale and by the recognised rules of auction-fales. I would have been content to overrule the Subordinate Judge on what seems to me elementary rules relating to Court sales. Naturally enough Mr. K. Srinivasa Aiyangar, who appeared for the next highest bidder who has been declared the purchaser, had great difficulties in finding authority for his contention. Fortunately, however, there are tome decisions which he has been able to bring to cur notice which support one's a priori notions of such matters. In Payne v. Cave (1789) 3 T.R. 148it was stated: 'The auctioneer is the agent of the vendor, and the assent of both parties is necessary to make the contract binding; that is signified by the seller knocking down the hammer, which was not done here till the defendant has retracted.'* * * * * * 'Every bidding is nothing more than an offer on one side, which is not binding on either side till it is assented to.' The only addition which need be made to this statement of law is 'or till a person makes a higher bid.' In Jones v. Nanney (1824) 147 E.R. 925 a case which is also reported in McClelland Reports 25, the facts are these: There were three plots for sale. The first plot was put up to auction. After there was a bid for 4, 000 for it, the auctioneer thought that higher price should be secured for it, and informed the bidders that he would proceed to sell plots Nos. 2 and 3 and then come back to plot No. 1. He then disposed of the next two plots and found that there was no higher offer than 4,000 for plot No. 1. Thereupon he declared the person who offered 4,000 to be the purchaser. This latter person refused to accept the sale. The question was whether there was a concluded bargain. The learned Barons who took part in the case held that by not knocking down the plot to the person who offered 4,000 and by proceeding to sell the other two plots the auctioneer must be taken not to have accepted the offer, and that it was not competent for him subsequently to regard the offer as still open so as to enable him to accept it. This principle applies with great force to the present case. Here the Subordinate Judge accepted neither the offer of the appellant nor of Ramamurthi but adjourned the sale to some other date, because, in his opinion, there were two other persons who were likely to make a higher bid. When he took this step, he could not have insisted upon Ramamurthi Chetty, if he were alive, purchasing the property. Much less was it open to him to have asked the defendant to take the property. It was argued by Mr. Narayanamurthi that this English decision enunciates a principle too revolutionary for acceptance in this country. I do not think so. Under Section 6 of the Contract Act, Clause 2, 'a proposal is revoked by lapse of a reasonable time without communication of the acceptance.' It may be that the few minutes which elapsed between the offer and acceptance in the case of Jones v. Nanney (1824) 147 E.R. 925 may not be regarded in this country as reasonable time'. The question of reasonableness is a question which depends upon the business habits of particular communities. But even in this country where it is said that people conclude their contracts more leisurely than in England, when the Judge in the lower Court adjourned the sale to another date with a view to get a higher bid for the property, he certainly must be regarded not to have intended to accept the previous offer, I, therefore, think that the principle of the case is applicable to India, subject to reservations on the question of reasonableness of the time. The result is that the appellant's offer, which was made on the 22nd of October 1918 not having been accepted within a reasonable time, was no longer in existence. This result would follow even if there were no higher offers than his. The acceptance of the conclusion of the Subordinate Judge must lead us to hold that every bid at an auction sale is a subsisting offer which can be converted into a contract at the option of the auctioneer at any moment of time. The theory that every bid is a contract has been repudiated long ago in England see Warlow v. Rarrisson (1859) 1 El. & El. 309 ; 8 W.B. 95 and is not law in this country. The reasoning in the above case applies against accepting the position that every bid is a subsisting offer. I have, therefore, come to the conclusion that the decision of the Subordinate Judge is wrong from every point of view.

14. The only difficulty I felt was about our powers of interference under Section 115 of the Code of Civil Procedure. There can be no doubt that there has been very great irregularity and grave illegality in the procedure of the Subordinate Judge; and I do think that he has clutched at, jurisdiction by these irregular and illegal methods. The auction had come to an end so far as the appellant was concerned, when his offer was not accepted within a reasonable time and also when there was a higer offer. To foist upon him under these circumstances the position of a purchaser is equivalent to foisting upon any man in the street the status of an auction purchaser when he made no bid at all at the auction. The language of the Judicial Committee in Balahrishna Udayar v. Vasudeva Aiyar 40 Ind. Cas. 650 ; 26 C.L.J. 143 (1917) M.W.N. 628 ; ii Bur. L.T. 44 I.A. 261 was relied upon by Mr. P. Narayanamurthi to show that these irregularities do not affect jurisdiction. I do not think the two cases are in pari materia. In my opinion, the procedure of the Subordinate Judge amounts to acting illegally and with material irregularity is the exercise of jurisdiction. I, therefore, hold that we have power to interfere with the order of the Subordinate Judge.

15. It was contended by Mr. Narayanamurthi that the order of the Subordinate Judge was an interlocutory one and that there was no case for revision until there has been a re-sale and a declaration of the deficiency recoverable from the appellant. I do not agree with this contention either. The Subordinate Judge has declared the appellant to be the purchaser and has given directions to sell the property treating him as the person responsible for any deficiency that may arise in the re sale. I do not see why a man who expects to be damnified and who certainly would be put to the necessity of taking part in the re sale to prevent the property being sold at a low price should not have the right to move the Court to interfere at this stage. I think the order of the Subordinate Judge was a final one, although further orders may follow in the wake of the one which he has passed.

16. Mr. K. Srinivasa Aiyangar has also filed a civil miscellaneous appeal. It is open to argument that the appellant is the representative of either the auction-purchaser or of the judgment debtor. The language of Rules 71 and 84, Order XXI, of the Civil Procedure Code indicates that the appellant may be within Section 47 of the Code. Bat the course of decisions in this Presidency as well as in the other High Courts have left this question of the representative character of the auction-purchaser in so confused a state that I do not think it safe to base my decision upon the assumption that the appellant is the representative of a party to the suit so as to invite the operation of Section 47 of the Civil Procedure Code; if there is an appeal, there can be no doubt that the order should be set aside as wholly unwarranted and illegal. But I think it could be safer to hold that no appeal lies and that the case should be dealt with under Section 115, Civil Procedure Code. The petition should be allowed and the order of the Subordinate Judge should be set aside I agree with the order as to transfer and as to costs made by my learned brother.

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