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Sheonath Doss Vs. Janki Prosad Singh and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKolkata
Decided On
Judge
Reported in(1889)ILR16Cal133
AppellantSheonath Doss
RespondentJanki Prosad Singh and ors.
Cases ReferredHart v. Tara Prasanna Mukherji I.L.R.
Excerpt:
sale in execution of decree - civil procedure code, 1882, section 294--decree-holder purchase by--satisfaction pro tanto--mortgagee not trustee for mortgagor in sale proceeds--leave to bid at sale in execution when granted--permission of the court to decree-holder to buy--practice. - .....to bid put an end to the disability to purchase under which the party may have laboured.5. the decree-holder, under our code of civil procedure, can only buy with leave of the court, and when the mortgagee decree-holder has bought the mortgaged property with such leave, we do not find any reason- or authority for holding that he takes the property in trust far ,the mortgagor.6. the only authority referred to by the court below and relied upon by the respondent in this case is the case of hart v. tara prasanna mukherji i.l.r. 11 cal. 718; but that case is clearly distinguishable from the present. there the question was not one between the decree-holder mortgagee and the judgment-debtor mortgagor, but was one between the decree-holder and other creditors of the judgment-debtor ; and.....
Judgment:

Banerjee, J.

1. The only question raised in this appeal, and the only question tried in the Courts below, is, whether the mortgagee, who has bought the mortgaged property at a sale in execution of a decree upon the mortgage bond, is at liberty to take out further execution for the balance of the amount decreed left after deducting the price for which the property was sold; or whether he is bound to give the mortgagor judgment-debtor, credit, not only for such price, but for the real value of the property sold to be ascertained by the Court; in other words, whether the mortgagee, by his purchase, became the absolute owner of the property, or took it in trust for the mortgagor. Both the Courts below have answered this question in favour of the mortgagor, and the Lower Appellate Court has ordered execution to issue only for the balance left after deducting from the amount of the decree what it found to be the real value of the property sold. We think the decision of the Courts below is not right.

2. The rule deducible from Downes v. Grazebrook 3 Mer. 200; In re Bloye's Trust 1 Mac. & C. 488; Tenant v. Irenchard L.R. 4 Ch. Ap. 537; Martinson v. Clowes L.R. 21 Ch. D. 857; and other cases bearing on the question which are referred to in White and Tudor's Notes to Fox v. Mackreth. is thus stated in Fisher on Mortgages and other well-known text books, that neither the mortgagee, whether he claims under an ordinary power or under a trust for sale, nor his trustee, can buy the mortgaged property, unless, when the sale is made by the Court, he has obtained leave to bid, and if the mortgagee be a trustee he will not have leave to bid where the cestui que trust objects, unless attempts to sell to others have failed, and that the same rule applies to a pledgee. See Fisher on Mortgage, 4th Edition, p. 458; Coete on Mortgage, 4th Edition, p. 257 ; Dart on Vendors and Purchasers, 6th Edition, pages 35 and 41.

3. In the second of the above cases Lord Cottbnham explains the reason of the prohibitory rule to be this, that it would be improper to place a person in a situation in which his interest, as intending purchaser, might conflict with his duty to secure the highest price for the property to be sold ; and in Tenant v. Trenchard L.R. 4 Ch. Ap. 537 Lord Hathekley points out that, if the Court is satisfied that no purchaser at an adequate price can be found, then it is not impossible that the trustee might be allowed to make proposals and to become the purchaser.

4. The above rule is in perfect accord with reason and common sense. While it prevents the mortgagee from taking any unfair advantage of his position by prohibiting him to buy, it removes the prohibition, to prevent the very result it was meant to guard against, when that becomes necessary. But a hard and fast rule that the mortgagee can never become the purchaser is not only unnecessary but would be inexpedient, even in the interests of the mortgagor. In the ease of Warner v. Jacob L.R. 20 Ch. D. 220 it was held that the mortgagee selling was not in a fiduciary position towards the mortgagor, and in Coaks v. Boswell L.R. 11 Ap. Cases 232 under somewhat similar circumstances it was held that the leave to bid put an end to the disability to purchase under which the party may have laboured.

5. The decree-holder, under our Code of Civil Procedure, can only buy with leave of the Court, and when the mortgagee decree-holder has bought the mortgaged property with such leave, we do not find any reason- or authority for holding that he takes the property in trust far ,the mortgagor.

6. The only authority referred to by the Court below and relied upon by the respondent in this case is the case of Hart v. Tara Prasanna Mukherji I.L.R. 11 Cal. 718; but that case is clearly distinguishable from the present. There the question was not one between the decree-holder mortgagee and the judgment-debtor mortgagor, but was one between the decree-holder and other creditors of the judgment-debtor ; and though in one place the rule laid down by the learned Judges is stated somewhat too broadly, the distinction pointed out above is clear from another part of the judgment where the reason of the rule is stated. ' It would manifestly be inequitable,' say the learned Judges, ' to allow a mortgagee to buy in the mortgaged property at an auction for a sum tar below its real value, and then to go on against other property of the mortgagor to the injury of the other creditors.' This makes the distinction between that case and the present one perfectly clear.

7. Whilst we attach so much importance to the leave of the Court to the decree-holder to bid, and consider that it removes all disability in him to bid we deem it our duty to observe that such leave should be very cautiously given. It should, in our opinion, be given only when it is found, after proceeding with the sale, that no purchaser at an adequate price can be found, and even then it should be given only after some enquiry, that the sale proclamation has been duly published. And if, after all, the mortgagor, judgment-debtor, is in any way injured, he has ample remedy provided for him in the Code.

8. He can, under Section 2941, question the propriety of the leave to bid, by showing, either that it was obtained by misrepresentation, or that it was granted through inadvertence and without the exercise of judicial discretion by the Court, and he can have the sale set aside under Section 3112, or obtain compensation under Section 2983 of the Code, according to the nature of the property sold.

9. The present may be a hard case ; but if there was any real hardship, the respondent was not without remedy; and for ought we know he may still have his remedy. All we say at present is, that the decision of the Court below, so far as it goes, is incorrect, and that the application of the decree-holder for further execution should be granted, subject, of course, to any objections or proceedings that it may still be open to the judgment-debtor to take. The appeal must be decreed with costs.

1 Decree-holder not to bid for or buy property without permission.

[Section 294 : 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.

If decree-holder purchase, amount of decree may be taken as payment.

When a decree-holder purchases with such permission the purchase-money and the amount due on the decree may, if he so desires, be set off against one another, and the Court executing the decree shall enter up satisfaction of the decree in whole or in part accordingly.

When a decree-holder purchases, by himself or through another person, without such permission, the Court may, if it thinks fit on the application of the judgment-debtor or any other person interested in the sale, by order set aside the sale; and the costs of such application and order, and any deficiency of price which may happen on the resale, and all expenses attending it, shall be paid by the decree-holder.]

2 Application to sot aside sale of land on ground of irregularity.

[Section 311 :-The decree-holder, or any person whose immoveable property has been sold under this chapter, may apply to the Court to set aside the sale on the ground of a material irregularity in publishing or conducting it; but no sale shall be set aside on the ground of irregularity unless the applicant proves to the satisfaction of the Court that he has sustained substantial injury by reason of such irregularity.]

3 Irregularity not to vitiate sale of moveable property, but any person injured may sue.

[Section 298 : No irregularity in publishing or conducting the sale of moveable property shall vitiate the sale; but any person sustaining any injury by reason of such irregularity at the hand of any other person may institute a suit against him for compensation, or (if such other person be the purchaser) for the recovery of the specific property and for compensation in default of such recovery.]


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