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Ramasesha Iyer and anr. Vs. C.V. Ramanujachariar - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported inAIR1935Mad459; 157Ind.Cas.251
AppellantRamasesha Iyer and anr.
RespondentC.V. Ramanujachariar
Cases ReferredAmbika Ranjan v. Manikgani Loan Office Ltd.
Excerpt:
.....merely as an abstract proposition of law we fail to see why notice should not be given to the official receiver. 13. it is further argued that there is no evidence to show that on account of the under valuation complained of, the properties fetched a very low price. but the language of the code has since been altered and the words 'unless upon the facts proved the court is satisfied' have been substituted for the words 'unless the applicant proves to the satisfaction of the court' found in section 311. 15. as a result of this alteration it is clear that substantial injury by reason of the material irregularity may be proved not only by direct evidence connecting the material irregularity with the substantial injury, but also by circumstantial evidence, that is evidence from which a..........is the auction-purchaser of the properties sold in execution of that decree. the respondent is the official receiver in i.p. no. 19 of 1918 on the file of the district court of salem. this appeal arises out of a petition under order 21, rule 90, civil p.c., filed by the respondent to set aside the sale of the properties sold in execution of the decree in o.s. no. 59 of 1917 on account of various alleged irregularities. the circumstances are these. on 26th september 1917 appellant 1 obtained a decree for money in o.s. no. 59 of 1917 against defendant 1 therein, the father, and three other defendants, his sons.2. in execution of the decree he attached on 23rd november 1917 the properties belonging to the defendants. on 11th december 1919 defendant 1, the father, was adjulged insolvent in.....
Judgment:

1. Appellant 1 is the decree, holder in O.S. No. 59 of 1917 on the file of the Sub-Court, Trichinopoly. Appellant 2 is the auction-purchaser of the properties sold in execution of that decree. The respondent is the Official Receiver in I.P. No. 19 of 1918 on the file of the District Court of Salem. This appeal arises out of a petition under Order 21, Rule 90, Civil P.C., filed by the respondent to set aside the sale of the properties sold in execution of the decree in O.S. No. 59 of 1917 on account of various alleged irregularities. The circumstances are these. On 26th September 1917 appellant 1 obtained a decree for money in O.S. No. 59 of 1917 against defendant 1 therein, the father, and three other defendants, his sons.

2. In execution of the decree he attached on 23rd November 1917 the properties belonging to the defendants. On 11th December 1919 defendant 1, the father, was adjulged insolvent in I. P. No. 19 of 1918 and his property became vested in the respondent, the Official Receiver, appointed by the Court. On 10th September 1920 the sons, (defendants 2, 3 and 4 in O.S. No. 59 of 1917) instituted a suit for partition, O.S. No. 31 of 1920, in the District Court of Salem against their father and the other defendants therein in which the Official Receiver, the respondent therein, was made defendant 4. Amongst other things the decree in the suit, dated 28th October 1925, stated that

defendant 4 is entitled to sell the shares of the plaintiffs for debts of defendant 1 which are not proved to be illegal or immoral.

3. An appeal to the High Court against that decree was filed by the sons, defendants 2 to 4, the plaintiffs in the suit, on 18th November 1926. In the meanwhile, on 9th November 1925, E.P. No. 22 of 1926 was presented by appellant 1, the decree-holder, and notice was ordered to defendants 1 to 4 on 12th March 1926. The Receiver in I. P. No. 19 of 1918, the respondent herein, was directed to be made a party to the execution proceedings on 12th December 1927 and this was accordingly done. Finally the decree-holder sought for the sale of only the share of defendants 2 to 4. After hearing the objections of the receiver the learned District Judge ordered on 23rd March 1928 that the sale of the shares of defendants 2 to 4 should be proceeded with. Notice for the settlement of the proclamation of the intended sale required under Order 22, Rule 66, Civil P.C., was not given to defendant 1 or the Official Receiver; it was given only to defendants 2 to 4. On 23rd August 1928 the three-fourths share of defendants 2 to 4 was sold for Rs. 815 subject to certain encumbrances, and this share was purchased by appellant 2. Thereupon the application out of which this appeal arises was presented by the respondent (Official Receiver) to set aside the sale. Order 21, Rule 90, Civil P.C., provides that,

no sale shall be set aside on the ground of Irregularity or fraud unless upon the facts proved the Court is satisfied that the applicant has sustained substantial injury by reason of such irregularity or fraud.

4. The irregularities alleged in support of the application are contained in two affidavits by two of the creditors of defendant 1. These affidavits are identical in material particulars. They state' that proper notices were not issued to-all the parties, that the proclamation of sale was not published in the village, that the recitals in the sale proclamation are not correct, and that the properties are 'under valued. They also-state that if proper notices were issued to all the parties, the proclamation would have been made to contain correct particulars and if the sale proclamation were properly published many of the creditors of the places where the-property was situate would have turned up to bid at the auction-sale. In para. 13 they further state that,

as proper notices and proclamations -were not issued the properties have been sold for this very low price.

5. It may be mentioned here that in the-proclamation the upset price for the property was stated to be Rs. 750 subject to encumbrances, As mentioned above the property was sold for Rs. 815 subject to encumbrances. In addition to the objections on the merits of the application, the appellants contended that the Official Receiver had no locus standi to present the application. On the main points at issue between the-parties the learned Subordinate Judge held that the Receiver is competent : to-make the application, that the proclamation for sale, was duly published, that the failure to issue notice to the Receiver is a material irregularity, that the property was grossly under valued,

and that this is a material irregularity which caused substantial injury to the petitioner who represents the general body of creditors.

6. On account of the irregularities which he found he ordered that the sale should be set aside. He also held that apart from the irregularities the Court has inherent power to set aside the sale in the interests of justice and that such-inherent power should be exercised having regard to certain special circumstances of the case which will be referred to presently. The first question for determination is whether the respondent, the Receiver, is competent to apply to set aside the sale. Order 21, Rule 90, Civil P.C., is very wide in its terms. It says:

Where any immovable property has been sold in execution of a decree, the decreeholder or any person entitled to share in a rateable distribution of asfets, or whose interests are affected by the sale, may apply to the Court to fet aside the sale on the ground of a material irregularity or fraud in publishing or conducting it.

7. Under this rule any person, 'whose interests are affected by the sale' can make the application to set the sale aside. It is argued that the properties that are now sought to be sold are only the shares of defendants 2 to 4, that these do not vest in the Official Receiver as defendant 1 alone was adjudged insolvent, that the Receiver's power to sell them which he has under the law was lost by the institution of a suit, O.S. No. 31 of 1920, for partition by the sons and that therefore his interests are not affected 'by the sale. It was also contended that the father's power to sell was lost by the attachment effected on 23rd November 1917. These arguments overlook the fact that by the decree in the suit O.S. No. 31 of 1920, the Official Receiver's power to stell the shares of defendants 2 to 4 is expressly reserved and kept alive. It will be remembered that he was made a party to the suit as defendant 4 and that in the decree an express declaration was made that the Receiver is entitled to sell the shares of the sons, defendants 2 to 4, for the debts of defendant 1 which are not proved to be illegal or immoral. As already stated defendants 2 to 4 took up the matter on appeal to the High Court. On the date of the Court sale the appeal was pending. It was disposed of only in October 1931 The appeal was dismissed so that the direction in the decree that the Beceiver is at liberty to sell the shares of defendants 2 to 4 remained effective. At the time of the present application, 21st September 1928, the Receiver had power expressly given to him by a decree of the Court to sell the ;shares of defendants 2 to 4. Even otherwise it is clear that the sale of the son's shares at the instance of lone of the creditors for a low price on account of any material irregularity or {fraud is certainly a matter which affects (the interests of the general body of creditors whom the Receiver represents.

8. If the three-fourths share of defendants 2 to 4 is sold for an unduly low price the Receiver who is interested in the one-fourth share of defendant 1 will certainly be affected. For these reasons we think that the Receiver in this case is a person whose interests are affected by the sale within the meaning of Order 21, Rule 90, and he is therefore competent to make the application. The next question is whether notice of the settlement of proclamation should have been given to the Official Receiver under Order 21, Rule 66, Civil P. C. After stating in Clause 1 that where any properties were ordered to be sold by pulic auction in execution of a decree the Court shall cause a proclomation of the intended sale to be made. Clause 2 of the rules states:

Such proclamation shall be -drawn up after notice to the decree-holder and the judgment-debtor and shall state the time and place of sale, etc.

9. Under this clause notice is required to be given to the decree-holder and the judgment-debtor. If notice is necessary to the Official Receiver in the present case it is clear that he should fall within the description of 'judgment-debtor' as used in Clause 2; judgment-debtor is defined in Section 2 of the Code as meaning

any person against whom a decree has been passed or an order capable of execution has been made.

10. Mr. Seetharama Rao argues that no decree has been passed against the Official Receiver and no order capable of execution has been made or could be made against him and that therefore the Official Receiver does not fall will within the definition of the term 'judgment debtor'. He supplements his argument with this fact also, namely, inasmuch as only the shares of defendants 2 to 4 are sought to be sold in execution, the Official Receiver in whom only defendant l's one-fourth share is vested is not in any event entitled to notice under this Rule. No authority in support of their respective positions has been cited by either side. The point is not free from doubt. Considered merely as an abstract proposition of law we fail to see why notice should not be given to the Official Receiver. Though no proceedings in execution can be taken against him, it is clear that defendant 1 is the judgment-debtor with respect to the decree in O.S. No. 59 of 1917, for he was one of the persons against whom it was passed.

11. It appears to us that his subsequent insolvency does not make him any the less a judgment-debtor in O.S. No. 59 of 1917. The judgment debtor in Jne decree in execution of which the property is to be sold should be given notice of the settlement of proclamation under the Rule and as defendant 1 still remains a judgment-debtor in spite of his insolvency he is in our opinion entitled to notice. As under law it is the Official Receiver who represents the judgment-debtor in proceedings after the insolvency, we think notice should have been given to the Official Receiver in the present case: but it is not necessary to express a definite opinion on the question of law as we have no doubt that having regard to the special circumstances in the present case notice of the intended proclamation should have been sent to the Official Receiver. By the express order of the Court the Receiver was directed to be made a party to the execution proceedings on 12th December 1927, and though the decree-holder sought for the sale of the share of defendants 2 to 4 only, the Official Receiver objected to it and it was after hearing his objections that the District Judge ordered that the sale of the share of defendants 2 to 4 should be proceeded with.

12. In these special circumstances, we think that the Official Receiver was treated by the Courts as if he was a judgment-debtor and notice of the settlement of proclamation should have been given to him. If notice had been given to the Official Receiver he may probably have been able to get included in the proclamation of sale as the proper upset price of the properties a higher amount than the sum of Rs. 750 subject to encumbrances actually mentioned in it. The affidavits in support of the objection petition state that if proper notices were issued to all the parties the proclamation would have been made to contain more accurate particulars and the properties would not have been sold for the very low price for which they were sold: see paras. 9 and 13. Whether the properties were under valued, and whether on account of the under valuation, if any, the applicant has sustained substantial injury, will be considered more properly in discussing the next irregularity which specifically raises the question of undervaluation and the substantial injury caused to the applicant thereby. Having regard to the statements in the affidavits supporting the application of the Official Receiver, Mr. Seetharama Rao argues that it is nowhere stated in them that on account of undervaluation of the properties substantial injury has been caused to the applicant, while what is stated is only this, that

as proper notices and proclamations were not issued the properties have been sold for this very low price.

13. It is further argued that there is no evidence to show that on account of the under valuation complained of, the properties fetched a very low price. It is true that in the affidavits it is not specifically stated that on account of under valuation the properties fetched a low price but it is stated in them, see para. 8, that the recitals in the sale proclamation are not correct and that the properties are under valued. We cannot therefore ignore the plea that under valuation is also one of the irregularities alleged. The two questions arising for consideration with respect to this irregularity are (1) whether there has been as a matter of fact under valuation; and (2) whether it has been proved that substantial injury was caused on account of this under valuation. The learned Sub-Judge has found that as a matter of fact the properties were under valued in the proclamation sale. It was mentioned that the properties were worth Rs. 750 subject to encumbrances. The value of the encumbrances amounted to about Rs. 40,000. We agree with the opinion of the lower Court, that, subject to encumbrances, the properties must be worth about Rs. 25,000. The 'two witnesses Chellapier and Yenkatavaradier depose that they would take the properties for Rs. 10,000 subject to the encumbrances.

14. In these circumstances there can hardly be any doubt that the value of Rs. 750 subject to encumbrances fixed in the sale proclamation is grossly low and that this gross under valuation of the properties is a material irregularity. The next question is whether by reason of this irregularity the applicant has sustained substantial injury. Properties subject to encumbrances worth about Rs. 25,000, or at least Rs. 10,000 were sold for Rs. 815. There can be no doubt that the properties were sold for fery low price. It is true that there is evidence to show that the low price fetched by the properties was the direct result of the under valuation. The Privy Council held in Tasadduk Rasul Khan v. Ahmad Hussain (1894) 21 Cal 66, that Section 311 of the Code of 1882, corresponding to the present Order 21, Rule 90, contemplates that there should be direct f evidence connecting the material irregularity, that is the under valuation in this ease, with the inadequacy of price as cause and effect. But the language of the Code has since been altered and the words 'unless upon the facts proved the Court is satisfied' have been substituted for the words 'unless the applicant proves to the satisfaction of the Court' found in Section 311.

15. As a result of this alteration it is clear that substantial injury by reason of the material irregularity may be proved not only by direct evidence connecting the material irregularity with the substantial injury, but also by circumstantial evidence, that is evidence from which a reasonable inference may be drawn that substantial injury was the result of the irregularity. The Madras and the Calcutta High Courts have always been of this opinion: see Venkatasubbaraya Naidu v. Chidambaram Chettiar (1899) 22 Mad 440, Bommayya Naidu v. Chidambaram Chettiar (1899) 22 Mad 440, Sheorutton Singh v. Net Lall Sahu (1903) 30 Cal 1 and Mahabir Pershad Singh v. Dhanukdhari Singh (1904) 31 Cal 815, though the High Court of Allahabad took a different view. As pointed out by Sir Din-shaw Mulla in his Commentary on the Code of Civil Procedure, the words 'unless upon the facts proved the Court is satisfied' have been substituted in the proviso to give effect to the Madras and Calcutta decisions. It follows that, though direct evidence is wanting, if substantial injury can be inferred from the circumstances relating to the material irregularity, the sale can be set aside under the rule. It has been held that if properties have been grossly 'under valued and have been as a matter of fact sold for a very low price, then it may be inferred that the inadequacy of the price obtained for the property at the sale was the result of the under valuation. In a case like this Ramesam, J., pointed out

where the irregularity is an under statement, of the probable price of the property, the connexion is so near that it is difficult to adduce evidence showing that the injury has resulted from the irregularity;

and then relying on Saadatmand Khan v. Paul Kaur (1898) 20 All 412 wherein their Lordships of the Privy Council say:

It is a misstatement of the value of the property which is so glaring in amount that it cam hardly have been made in good faith, and which, however it came to be made, was calculated to. mislead possible bidders and to prevent thera from offering adequate prices or from bidding at all.

The learned Judge further pointed out:

So long as that consideration applies I think. it is open to the District Judge to infer without any other evidence that the injury has resulted from the irregularity: see Adanamoli v. Chinnaswami 1926 Mad 959.

16. Relying on the same Privy Council decision the learned Judges of the Calcutta High Court observed in Ambika Ranjan v. Manikgani Loan Office Ltd. 1929 Cal 818 that

gross under valuation of the properties must have deterred intending purchasers from bidding at the sale and offering reasonable value

and they set aside the sale. Judged in the light of these observations, though direct evidence is lacking to connect the material irregularity and the substantial injury, we hold that the gross under valuation of the properties must have deterred intending purchasers from bidding at the sale and offering reasonable value. It therefore follows that on account of this material irregularity which as been completely proved, substantial injury has occurred to the appellant and' that the sale should be set aside. The 1st point argued relates to the Inherent powers of the Court relied on by the Sub-Judge to set aside the auction ' sale. It is not necessary to discuss this question as we have already held that on account of the material irregularity of under valuation the sale should be set aside in this case. However the special circumstances referred to by the learned Sub Judge may be very briefly adverted to We have referred to the fact that while the appellant was objecting to the sale of the shares of defendants 2 to 4 the appeal against the decree in O.S. No. 31 of 1920 was pending in the High Court. In the order passed directing the sale overruling the objections of the appellant, the learned District Judge pointed out,

if it is ultimately held that the shares of the same defendants are liable to be sold at the instance of the Official Receiver the sale by the petitioner (decree-holder) would become invalid.

17. It will be observed that in the decree of the trial Court in O.S. No. 31 of 1920 the Official Receiver was expressly given power to sell the shares of defendants 2 to 4. Defendants 2 to 4 preferred an appeal against this decree to the High Court. Eventually the appeal was dismissed and the Official Receiver's power was confirmed. Having regard to the dismissal of the appeal the learned Sub Judge has now held that the condition in the order of the District Judge dated 23rd March 1928 referred to above has happened and that the sale in accordance with it could be set aside whether there were any irregularities or not. It is a matter for argument whether the statement in the order above quoted is in the nature of an express 'condition' on which the order was passed or whether it is merely a 'reason' for the order. It is also a matter for argument whether it will be binding on the auction purchaser in whichever light it is considered. In our opinion it cannot obviously bind an auction purchaser who was an utter stranger to the proceeding in which the order was passed. However that may be, it is clear that in acting on that condition, treating it as a condition, and setting aside the sale the learned Sub Judge cannot in any sense of the term be said to have acted on the inherent powers of the Court to set aside the sale assuming such power exist3, for, the very fact that he is invoking the express condition mentioned in the order as a justification for his decision shows clearly that he cannot be considered to be giving effect to any inherent power of the Court. In these circumstances, it is not necessary to consider the abstract question whether the Court has inherent power to set aside an execution sale if none of the conditions mentioned in Order 21, Rule 90, Civil P.C, exists, though we may say as. at present advised we are not satisfied that the Court has such inherent' power.

18. Before we conclude we may note that the respondents' counsel wanted that his contention that the Official Receiver's interest is of the nature of a charge should be mentioned though it may not be decided. For the above reasons we confirm the order of the Court below and dismiss this Civil Miscellaneous Appeal with costs.


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