(1) Where an attachment has been made, any private transfer or delivery of the property attached or any interest therein and any payment to the judgment-debtor of any debt, dividend or other moneys contrary to such attachment, shall be void as against all claims enforceable under the attachment.
(2) Nothing in this section shall apply to any private transfer or delivery of the property attached or of any interest therein, made in pursuance of any contract for such transfer or delivery entered into and registered before the attachment.
Explanation:
ADVERTISEMENTS:
For the purposes of this section, claims enforceable under an attachment include claims for the rateable distribution of assets.
Requirements of the section:
For the interdiction against alienation to have effect and invalidate private transfer of an attached property under section 64, C.P.C., the requirement is that the attachment must have been ‘made’. For section 64 to have effect the mere fact that an order of attachment has been passed is not sufficient.
The order is only the beginning and not the end of attachment and till there is punctilious observance of the requirements of the Code of Civil Procedure, as to the attachment, an attachment cannot be said to have been ‘made’ and section 64 will have no application.
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ADVERTISEMENTS:
Thus, in the case of attachment of immovable property the -attachment to have the effect of invalidating private sale under section 64, all the requirements of Order XXI, Rule 54 of the Code of Civil Procedure have to be strictly adhered to and punctiliously followed. The directions as to the mode of attachment in Order XXI, Rule 54 cannot be construed as merely directory.
As to whether a provision in a statute is mandatory or merely directory, no universal rule can be laid down and the court will have to get at the real intention of the Legislature by carefully considering the whole scope of the provision, the object intended and its effect on the rights of the parties.
With reference to every one of the steps to be taken under Order XXI, Rule 54(2) the language used is imperative. The object of the provisions is to protect bona fide transferees from the penal provisions of section 64 of the Code of Civil Procedure.
ADVERTISEMENTS:
The requirements are insisted upon as protection for safeguarding of the right of property. An attachment not only prohibits the judgment-debtor from transferring his properties, but there is an interdiction against the public generally from taking benefit under any transfer from the judgment-debtor.
Any purchaser for consideration however bona fide and even though he be totally unaware of the attachment, would after attachment had been made of the property take it subject only to the claim enforceable under the attachment.
There is an embargo on the acquisition and enjoyment of property after an attachment even though there may be no actual notice of the attachment, notice being only constructive to be inferred from the promulgation of the order of attachment as provided for under Order XXI, Rule 54(2).
This is a restriction on the fundamental rights in property; it may be reasonable in the context, but as in all restrictions its application must be strictly within the letter of the law. The requirements of Order XXI, Rule 54(1) and (2) are therefore mandatory and everyone of the prescribed things must be done before an attachment could be said to have been ‘made’ for section 64 of the Code to come into operation.
Private transfer of the attached property only affected:
The above section refers only to private transfer of the attached property by the judgment-debtor and not to a sale in execution of a decree, and is intended to prevent fraud on the decree-holder and also to preserve intact the rights of the attaching creditor against attached property by prohibiting private alienation pending litigation.
Section 64 hits, as said above, only private transfer or delivery of property attached or of any interest therein. The passing of a decree by a court of law declaring a charge on such property or the court sale and delivery of the property in execution of such a decree can in no sense be said to be a private transfer or delivery of the property or of any interest therein.
The attachment merely prevents and avoids alienation and confers no right on the attaching creditor. Nor does it affect subsisting equitable rights which could be enforced against the property at the date of the attachment.
It has, however, to be clearly understood that a private transfer does not avoid transactions which in no way prejudice the executing creditor. It is not altogether void but is only subject to a sale that may be effected pursuant to attachment. Alienation pending attachment is inoperative only as regards the attaching creditor.
P.G. Munnaswami Reddi v. P.R. Panduranga Chetty:
Any private transaction or any title created by the judgment-debtor pending the attachment cannot in any way affect the right of the attaching creditor to have the property sold and delivered free of the title created by the judgment-debtor.
The provisions of section 64 are clear in its terms that no one gets a title from a judgment-debtor pending attachment against the attaching creditor or execution purchaser. Thus, the rights of the attaching creditor as well as the execution purchaser are protected as against an alienation pending attachment of the property. Thus the transactions entered into by the judgment-debtor during the pendency of the attachment are of no consequence either against the attaching creditor or the execution purchaser.
Sale and Delivery of Property:
Power to order property to be sold:
Any court executing a decree may order that any property attached by it and liable to sale, or such portion thereof as may seem necessary to satisfy the decree, shall be sold, and that the proceeds of such sale, or a sufficient portion thereof, shall be paid to the party entitled under the decree to receive the same. (Order XXI, Rule 64).
In pursuance of decree for refund of earnest of agreement for sale the auction sale was ordered. The agreement for sale was for particular land decree-holder managed to get all other lands included in execution and got sale in his favour. The auction sale is not valid as no attempt was made for sale of reasonable portion.
Lakaseel Pedda Subba Reddy v. Pujari Padmavathamma:
It is manifest that where the amount specified in the proclamation of sale for the recovery of which the sale was ordered is realised by sale of certain items, the sale of further items should be stopped. Under Order XXI, Rule 64, C.P.C., the executing court derives jurisdiction to sell properties attached only to the point at which the decree is fully satisfied.
The words “necessary to satisfy the decree” clearly indicate that no sale can be allowed beyond the decretal amount mentioned in the sale proclamation. In other words, where the sale fetches a price equal to or higher than the amount mentioned in the sale proclamation and is sufficient to satisfy the decree, no further sale should be held and the court should stop at that stage.
The fact that the judgment-debtor did not raise an objection on this ground before the executing court is not sufficient to put him out of court because this is a matter which goes to the very root of the jurisdiction of the executing court to sell the properties and the non-compliance with the provisions of Order XXI, Rule 64 of the Code is sufficient to vitiate the sale.
In execution of money-decree for auction sale the receiver was appointed after thirty years. These properties were not attached and no notice of auction sale was given to receiver to the legal representatives. The judgment-debtor died and his legal representatives sold the properties without any collusion with the purchasers. Subsequent auction sale of such properties in execution of money decree was not valid.
Procedure regarding sale:
Sales in execution of decrees are conducted by an officer of the court and are made by public auction or through a broker at the market rate in the case of a negotiable instrument or share in a corporation. (Order XXI, Rules 65 and 76).
In case of sale by public auction in execution of a decree, the sale proclamation is made in the language of the court. [Order XXI, Rule 66(1)]. The sale proclamation shall be drawn up after notice to the decree-holder and the judgment-debtor and shall state the time and place of sale.
The sale proclamation shall also specify as fairly and accurately as possible—(a) the property to be sold or where a part of the property would be sufficient to satisfy the decree, such part; (b) the revenue assessed on it; (c) any incumbrance to which it is liable; (d) the amount for the recovery of which the sale is ordered; and (e) every other thing which the court considers material for a purchaser to enable him to judge of the nature and value of property. [Order XXI, Rule 66(2)].
The salutary provisions of Order XXI, Rule 66 cast duties on the court to be careful, cautious and circumspect before sale proclamation is issued from the court. Undoubtedly it is a serious business as on the authority of the sale proclamation property of a person may be seriously affected. While issuing a sale proclamation the court must act judicially and judiciously in view of the very object for which the rule stands.
The receiver was appointed after thirty two years. In the meantime the judgment-debtor and his properties were sold by legal representatives to purchasers without any collusion. These properties were not attached and receiver gave no notice about auction sale and sold those properties in auction sale. Such sale was invalid.
Service of notice on judgment-debtor under Order XXI, Rule 66(2), C.P.C., unless waived by appearance or remained ex parte, is a fundamental state in the procedure of the court in execution.
The judgment-debtor should have an opportunity to give his estimate of the property. The estimate of the value of the property is a material fact to enable the purchaser to know its value. It must be verified as accurately and fairly as possible so that the intending bidders are not misled or to prevent them from offering adequate price or to enable them to make a decision in offering adequate price. Rule 66(2)(e) requires the court to state only nature of the property so that the purchaser should be left’ to judge the value himself.
But, the essential facts which have a bearing on the very material question of value of the property and which could assist the purchaser in forming his own opinion must be stated, i.e., the value of the property, that is, after all, the whole object of Order XXI, Rule 66(2)(e), C.P.C. The court has only to decide what are all these material particulars in each case.
We think that this is an obligation imposed by Rule 66(2) (e). In discharging it, the court should normally state the valuation given by both the decree-holder as well as the judgment-debtor where they both have valued the property, and it does not appear fantastic. It may usually state other material facts, such as the area of land, nature of rights in it, municipal assessment, actual rents realised.
Service of notice on the judgment-debtor is mandatory. Sale without notice is a nullity. The court should apply its mind to the need for furnishing the relevant and material particulars in the sale proclamation. The record should indicate application of judicial mind.
In every case, where the property has been attached and is sought to be sold, in order to find out as to which portion of the property would be sufficient to satisfy the decree, it would be necessary for the Court to draw proclamation and include therein such particulars as are required to be stated in accordance with the instructions contained in the High Court Rules and Orders for which purpose it is necessary to hear the judgment-debtor as also the decree-holder.
A review of the authorities as well as the amendments to Rule 66(2)(e) of Order XXI, Civil Procedure Code, by different High Courts makes it abundantly clear that the court, when stating the estimated value of the property to be sold, must not accept merely the ipse dixit of one side.
It is certainly not necessary for it to state its own estimate. If this were required, it may, to be fair, necessitate insertion of something like a summary of a judicially considered order, giving its grounds, in the sale proclamation, which may confuse bidders.
It may also be quite misleading if the Court’s estimate is erroneous. Moreover, Rule 66(2) (e) of Order XXI requires the Court to state only the facts it considers material for a purchaser to judge of the value and nature of the property himself. Hence, the purchaser should be left to judge the value for himself.
But essential facts which may have a bearing on the very material question of value of the property and which would assist the purchaser in forming his own opinion must be stated. That is after all, the whole object of Order XXI, Rule 66(2)(e). The court has only, to decide what all these material particulars are in each case.
That is an obligation imposed by Rule 66(2)(e). In discharging it, the court should normally state the valuation given by both the decree-holder as well as the judgment-debtor where they have both valued the property, and these do not appear fantastic.
It may usefully state any other material facts, such as the area of land, nature of rights in it, municipal assessment, actual rents realised which could reasonably be expected to affect valuation. What could be reasonably and usefully stated succinctly in a sale proclamation has to be determined on the facts of each particular case. Inflexible rules are not desirable on such a question.
In case of proclamation of sales by public auction it is the duty of Executing Court to fix upset price. But fixation of upset price by the commissioner on the direction of the court is proper.
Every proclamation is made and published by beat of drum or other customary mode at some place on or adjacent the property. A copy of the proclamation is affixed on a conspicuous part of the property and of the court house and in the Collector’s office, where the property is revenue paying land. Where the court so directs, proclamation shall also be published in the Official Gazette or in a local newspaper or both.
Where property is divided into lots for the purpose of being sold separately, it shall not be necessary to make a separate proclamation for each lot unless proper notice of the sale cannot, in the opinion of the court, otherwise be given. (Order XXI, Rule 67).
Execution of sale was notified in village after starting it by beat of drum and people started coming thereafter and certain number of persons including decree-holder participated in bid. The requirements of publication of sale were not followed and there was absence of proper notice of execution sale. Such procedure is illegal.
It is no doubt easy to draw the line between irregularity and illegality in an execution sale, but where a substantial provision like Order XXI, Rule 66 of the Code is violated the sale should be regarded as having been illegally conducted and would be void.
The object of Order XXI, Rule 66, is to afford a security for the fairness of public sales that it has been properly published and that it would attract purchasers. But, if the specific provision as to proclamation is violated there could be no doubt that the sale cannot be allowed to stand. It cannot be said that the total failure to make the proclamation under Order XXI, Rule 66 of the Code is a mere irregularity in the publication or conduct of the sale.
The estimate of the value of the property is a material fact to enable the purchaser to know its value. It must be verified as accurately and fairly as possible so that the intending bidders are not misled or to prevent them from offering inadequate price or to enable them to make a decision in offering adequate price.
Saadatmand Khan v. Phul Kuar and Ban Behari v. Bhukan Lai:
Clause (e) or Rule (2) of Order XXI provides that the proclamation shall specify as fairly and accurately as possible “every other thing which the court considers material for a purchaser to know in order to judge of the nature and value of the property”.
In Saadatmand Khan v. Phul Kuar, the Judicial Committee held that the value of the property to be put up for sale was an essential fact which the court considers material for a purchaser to know. But the rule nowhere requires that the courts should make a valuation.
The Calcutta High Court, after a review of contradictory decisions, laid down in Ban Behari v. Bhukan Lai, that it is the duty of the court (apart from exceptional circumstances) to make valuation, the result of which is to be included in the sale proclamation.
The view of the Calcutta High Court is, however, not shared by the Madras, Allahabad, Bombay and Gujarat High Courts who hold that the court is under no obligation to fix in the proclamation of sale its own valuation of the property to be sold.
The Orissa High Court has in Kuntala Bewa v. Sadhu Charan, gone to the length of holding that in a sale proclamation there is not material irregularity which by itself would be sufficient to set aside the sale and that the court has no duty to see to the real value. The decree-holder or the judgment-debtor or both are not bound to give any value of the property to be inserted in the sale proclamation.
If they give any value, the court would merely insert the same in the sale proclamation with a further declaration that it does not vouch the accuracy of the same. The present rule, as it stands, however, takes away the effect of the decision of the Privy Council in 25 Ind. App. 146 that the value of the property must be inserted as a material fact.
The court sales are now thus put on the same footing as private sales. It hardly makes any difference whether there is non-mention of the valuation or under-valuation of the property in the sale proclamation. The principle of caveat emptor has been embodied in the proviso.
The question about the mention or non-mention of the value of the property or whether the court shall value the property is now governed by rules framed by several High Courts under section 122, which empowers them to make rules regulating their own procedure and the procedure of the civil courts subject to their superintendence and which may, by such rules, annul, alter or add to all or any of the rules in the First Schedule.
Unless the property ordered to be sold is subject to speedy and natural decay or the expense of keeping it in custody is likely to exceed its value, no sale shall, without the written consent of the judgment-debtor, take place at least before 15 days in the case of immovable property and at least 7 days in the case of movable property from the date of the proclamation. (Order XXI, Rule 68).
The sale may be adjourned by the court, but where the sale is adjourned for a longer period than thirty days, a fresh proclamation shall be made, unless the judgment-debtor consents to waive it. (Order XXI, Rule 69).
The sale shall be stopped if before the lot is knocked down the debt and costs including the costs of the sale, are tendered to the officer conducting the sale or paid into the court which ordered the sale. (Order XXI, Rule 69).
Where a resale has been occasioned by reason of the purchaser’s default, (i.e., due to his failure to deposit the sale price) any deficiency of price and all expenses attending such resale shall be certified to the court by the officer holding the sale and shall be recoverable at the instance of either the decree-holder or the judgment-debtor for the defaulting purchaser. (Order XXI, Rule 71).
Application of Order XXI, Rule 71 is limited to cases in which the deficiency of price has occurred by reason of the auction-purchaser’s default. The words “Any deficiency of price which may happen on a resale by reason of the purchaser’s default” occurring in Rule 71 therefore mean: “Any deficiency of price which on a resale may happen by reason of the purchaser’s default”.
Property once put to sale in execution proceedings may have to be resold for reasons which may or may not be connected with the default of the auction purchaser. A resale consequent on the failure of the auction-purchaser to deposit 25% of the purchase price immediately after he is declared to be the purchaser of the property under Order XXI, Rule 84 or a re-sale consequent upon his failure to deposit the balance of the purchase price within 15 days of the sale as required by Rule 85 are instances when the re-sale is occasioned by the default of the auction-purchaser.
On the other hand, resale consequent upon the setting aside of the sale on the ground of material irregularity in publishing or conducting the sale as provided in Order XXI, Rule 90, may not be attributed to the default of the purchaser. The provisions of Order XXI, Rule 71, come into play only if the property is required to be re-sold on account of the default of the auction-purchaser. If the resale is not due to the auction-purchaser’s default, there can be no question of mulcting him with the deficiency in the price realised in the re-sale.
What is necessary is that the re-sale occasioned by the auction purchaser’s default must result in a deficiency of price, which deficiency is attributable to his default. Where on re-sale the market value of the property is reduced due to the discovery or disclosure of an infirmity in the right, title and interest of the judgment-debtor in the property put to sale, the deficiency of price realised in the re-sale may not be attributable to his default.
An encumbrance existing on the property at the time of the first sale but not disclosed in the proclamation of that sale will have no bearing on ‘the price realised in the auction sale, unless the existence of the encumbrance was otherwise known to the bidders.
The disclosure of that encumbrance in the sale proclamation accompanying the re-sale must, on normal commercial considerations, have a direct impact on the price of the property put to sale. In such a case the deficiency of price realised in the re-sale will be attributable not necessarily to the default of the auction-purchaser but to circumstances extraneous to his default. Order XXI, Rule 71, concerns itself not with that class of cases but with those in which the deficiency of price realised in the re-sale is attributed to the default of the auction-purchaser.
The decree-holder shall not, without the express permission of the court, bid for or purchase the property. No officer or person, in any way concerned in execution sales, shall, either directly or indirectly, bid for or acquire any interest in the property sold. (Order XXI, Rule 72).
Where a decree-holder purchases the property at the auction sale with the permission of the court, the court may, unless there are other decree-holders entitled to rateable distribution of the assets under section 73, set off the purchase money and the amount due on the decree against one another and shall enter up satisfaction of the decree in whole or in part.
If he purchases without such permission the court may set aside the sale on the application of the judgment-debtor or any other person whose interests are affected by sale and the decree-holder shall pay all costs and the deficiency of price on re-sale. It may be noted that the order setting aside or refusing to set aside is an appealable order. (Order XXI, Rule 72).
Notwithstanding anything contained in Rule 72, a mortgagee of immovable property shall not bid for or purchase property sold in execution of a decree on the mortgage unless the court grants him leave to bid for or purchase the property. [Order XXI, Rule 72-A (l)]. If leave to bid is granted to such mortgagee, then the court shall fix a reserve price as regards the mortgagee, and unless the Court otherwise directs, the reserve price shall be
(a) Not less than the amount then due for principal, interest and costs in respect of the mortgage, if the property is sold in one lot; and
(b) In the case of any property sold in lots, not less than such sum as shall appear to the court to be properly attributable to each lot in relation to the amount then due for principal, interest and costs on the mortgage. [Order XXI, Rule 72-A (2)].
Obligatory upon executing Court to fix reserve price:
It was obligatory upon executing Court to fix reserve price while mortgage-decree holder was given leave to purchase. Non-fixation of reserve price amounted to material irregularity which had vitiated very sale. Benefits arising out of statutory obligation of Court to fix reserve price under Order XXI, Rule 72-A (2) could not be waived.
Irregularity and illegality in sale distinguished:
There is a distinction between a case where a property is included in the sale proclamation but in the course of the service of the proclamation the provisions of Rules 67 to 69- of Order XXI are not fully complied with and certain irregularities are committed, and a case where though the service of sale proclamation is regular in law, but in the sale proclamation so effected any particular property is not included at all.
In the case of the first type the non-compliance with Rules 67 to 69 amounts in law to an irregularity; in the case of the second type there is an out and out nullity, for, unless the sale of property is proclaimed in the sale proclamation, the court has got no jurisdiction to sell it, and if it does sell, the sale is a nullity and void in law. In such a case the regular suit for declaration that the sale was a nullity and void is maintainable in law.
Sale of Movable Property:
Agricultural produce:
In case of agricultural produce the sale shall be held (a) if such produce is a growing crop, on or near the land on which such crop has grown; (b) if such produce has been cut or gathered, at or near the threshing-floor or fodder-stack. The court may also direct the sale to be held at the nearest place of public resort.
Where a fair price is not offered, the sale may be postponed till the next day or the next market-day on the application of the owner of the produce. (Order XXI, Rule 74).
Where the growing crop is capable of being stored but has not yet been stored, the day of the sale shall be so fixed as to admit of its being made ready for storing before the arrival of such day. If the crop from its nature does not admit of being stored, it may be sold before it is cut and gathered and the purchaser shall be entitled to enter on the land for tending and cutting or gathering it. (Order XXI, Rule 75).
Movable property:
Where movable property is sold by public auction the price of each lot shall be paid at the time of sale or as soon after as the officer holding the sale directs, and in default of payment the property shall forthwith be re-sold.
When sale becomes absolute in movable property:
On payment of the purchase money the officer shall grant a receipt for the same, and the sale shall become absolute.
In case movable property is a share in goods belonging to the judgment-debtor and a co-owner, the bid of the co-owner shall prevail for such property or for any lot as against a stranger. (Order XXI, Rule 77).
In public auction sale the time can be granted for payment of purchase price. The auction sale cannot be annulled on the ground that purchase price was deposited within fine granted for it and not day of auction sale.
Irregularity not to vitiate sale:
No irregularity in publishing or conducting the sale of movable property shall vitiate the sale; but any person sustaining any inquiry 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 is the purchaser) for the recovery of the specific property and the compensation of such recovery. (Order XXI, Rule 78).
Delivery of movable property:
Where the movable property to be sold has been seized, it shall be delivered to the purchaser. Where it is in the possession of some person other than the judgment-debtor, the delivery to the purchaser shall be made by giving notice to the person in possession prohibiting him from delivering possession to any person except the purchaser.
Debts and shares:
Where the property sold is a debt not secured by a negotiable instrument, or is a share in a corporation, the delivery thereof shall be made by a written order of the court prohibiting the creditor from receiving the debt or any interest thereon, and the debtor from making payment thereof to any person except the purchaser, or prohibiting the person in whose name the share may be standing from making any transfer of the share to any person except the purchaser, or receiving payment of any dividend or interest thereon and the manager, secretary or other proper officer of the corporation from permitting any such transfer or making any such payment to any person except the purchaser. (Order XXI, Rule 79).
Transfer of negotiable instruments and shares:
Where the execution of a document or the endorsement of the party in whose name a negotiable instrument or a share in a corporation is standing is required to transfer the same, the judge may execute such document or make such endorsement in the following form, namely:—
A.B. by C.D., Judge of the Court of…………… in a suit by E.F. against A.B.
Such execution or endorsement shall have the same effect as an execution or endorsement by the party. (Order XXI, Rule 80).
Vesting order:
In the case of any movable property not hereinbefore provided for, the court may make an order vesting such property in the purchaser or as he may direct. (Order XXI, Rule 81).
Sale of Immovable Property:
Court ordering sale:
Sale of immovable property in execution of decrees may be ordered by any court other than a court of small causes. (Order XXI, Rule 82).
Postponement of sale:
The court may, on the application of the judgment-debtor, postpone the sale of the property to enable him to raise the amount of the decree by the mortgage, lease or private sale of the property. (Order XXI, Rule 83).
Deposit by purchaser and re-sale on default:
On sale of immovable property the purchaser shall pay immediately a deposit of 25 per cent on the amount of his purchase money to the officer conducting the sale and the balance into court before the court closes on the 15th day from the sale of the property. In default of payment either of 25 per cent at the time of sale or the balance by the 15th day from the sale, the property shall be resold and in the latter case the deposit may be forfeited to the Government after defraying the expenses of the sale. (Order XXI, Rules 84-86).
Rule 85 of Order XXI provides that full amount of purchase money mandatorily be paid within 15 days from the auction sale. In default the sale becomes nullity in spite of the plea that the short deposit was by mistake of court in referring amount of set-off.
A court is void and invalid due to non-compliance of Rules 84 and 85 in the matter of deposit of sale amount.
Provisions of Order XXI, Rules 84, 85, 96 are mandatory and correspond to provisions of Rules 285-D to 285-E of U.P. and Z.A.L.R. Rules.
When the officer conducting the sale accepts the highest bid and declares such bidder as the purchaser and accepts 25 per cent of the purchase money and the sale is approved by the court, the sale must be held to have been concluded and the date of sale cannot be any other date but the date on which the sale officer accepted the highest bid and declared the purchaser.
Consequently, this would be the date constituting the starting point of the limitation to file an application for setting aside the sale under Rule 89 of Order XXI, C.P.C. The mere fact that the sale officer, in his report, has not stated in so many words that the bidder was declared the purchaser is of consequence. Rule 84 of Order XXI, C.P.C. does not require that the declaration of accepting the bid should take place in particular form or should be made in any selected prescribed words.
Every re-sale of immovable property shall be made after the issue of a fresh proclamation. (Order XXI, Rule 87).
Where the property sold is a share of undivided immovable property and two or more persons, including co-sharer, bid the same sum for it, the bid of the co-sharer shall prevail. (Order XXI, Rule 88).
Setting Aside of Sale:
(1) On Deposit:
Where immovable property has been sold in execution of a decree, any person claiming an interest in the property sold at the time of the sale or at the time of making the application, or acting for or in the interest of such person, may apply to have the sale set aside on his depositing in court
(a) For payment to the purchaser, a sum equal to five per cent of the purchase-money, and
(b) for payment to the decree-holder, the amount specified in the proclamation of sale for the recovery of which the property was ordered to be sold, less any amount which the decree-holder may have received in payment of the decretal amount. [Order XXI, Rule 89(1)].
It will be seen from the above that the application to set aside a sale of immovable property under the above rule may be made by—
(a) Any person owning the property—he may be the judgment-debtor or some other person whose property has been sold as the property of the judgment-debtor;
(b) Any person holding an interest in property by virtue of a title acquired before the sale—a co-sharer of a mortgagee may be such a person; so are the mortgagor and the mortgagee.
Where a person applies under Rule 90 to set aside the sale of his immovable property, he shall not, unless he withdraws his application, be entitled to make or prosecute an application under this rule. [Order XXI, Rule 89(2)].
Nothing in Rule 89 shall relieve the judgment-debtor from any liability he may be under in respect of costs and interest and covered by the proclamation of sale. [Order XXI, Rule 89(3)].
The intention of Rule 89 of Order XXI is to provide simple procedure where at the last moment a judgment-debtor may come and deposit without condition the full decretal amount and five per cent penalty. The making of a deposit is a condition precedent to the making of the application under this rule.
The deposit has to be made for payment to the decree-holder the amount specified in the proclamation of sale. Five per cent deposit has to be paid as compensation to the purchaser in case the sale is set aside.
The compensation is provided for the purchaser who suffers the loss on account of the sale being set aside and not confirmed in his favour and indisputably the decree-holder, unless he be also the purchaser, is not entitled to this amount when the sale is set aside.
The deposit made under Order XXI, Rule 89, should be excluded from the ambit of section 73 of the Code as the rule makes it unequivocally clear that the deposit made must be applied to the two objects enumerated in it and cannot be utilised for any other purpose.
No act of court should harm a litigant and if a person is harmed by a mistake of the court he should be restored to the position he would have occupied but for that mistake, the principles summed up in the maxim Actus curiae neminem gravabit being for the guidance of the courts.
Where a judgment-debtor does not raise an objection in execution that the court had no jurisdiction to execute the decree, the failure to raise such an objection which goes to the root of the matter, precludes him from raising the plea of jurisdiction on the principle of constructive res judicata after the property has been sold to the auction-purchaser.
An application under Rule 89(2), Civil Procedure Code, validly made on the date of its presentation cannot be allowed to be prosecuted until the subsequent application filed under Rule 90 is withdrawn. But it cannot be allowed to be made or be deemed to have been made unless the prior application under Rule 90 is withdrawn.
The words used in Order XXI, Rule 89(2) are “make or prosecute”. If it were to be held that the applicant is not entitled to prosecute his application under Rule 89 unless he withdraws his application under Rule 90, then the word “make” would become redundant.
In order to bring about the true intention of the Legislature, effect must be given to both the words. If a person has applied under Rule 90 to set aside the sale, then unless he withdraws his application, he is not entitled to make and prosecute an application under Rule 89. The application even if made will be deemed to have been made only on withdrawal of the previous application.
If, however, a person has filed an application under Rule 89 first and thereafter another application under Rule 90, he will not be allowed to prosecute the former unless he withdraws the latter. The applicant has merely to convey to the court that he is withdrawing his application under Rule 90 which he had filed prior to the making of the application under Rule 89. Thereupon he becomes entitled to make the latter application.
Every applicant has a right to unconditionally withdraw his application and his unilateral act in that behalf is sufficient. No order of the court is necessary permitting him to withdraw the application. The court may make a formal order disposing of the application as withdrawn but withdrawal is not dependent on the order of the court. The act of withdrawal is complete as soon as the applicant intimates the court that he withdraws the application.
Auction sale—setting aside due to fraud:
Under valuation by itself may not be sufficient to infer fraud. Gross under valuation coupled with peculiar circumstances, i.e., one of purchasers being son of one of judgment-debtors and another being relative of one of judgment-debtors and enthusiasm exhibited by judgment-debtors in having sale of their own property confirmed were circumstanced indicating fraud.
Sale when to become absolute or be set aside:
(1) Where no application is made under Rule 89, Rule 90 or rule 91, or where such application is made and disallowed, the Court shall make an order confirming the sale, and thereupon the sale becomes absolute:
Provided that, where any property is sold in execution of a decree pending the final disposal of any claim to, or any objection to the attachment of, such property, the Court shall not confirm such sale until the final disposal of such claim or objection.
(2) Where such application is made and allowed, and where, in the case of an application under rule 89, the deposit required by that rule is made within [sixty days] from the date of sale, [or on cases where the amount deposited under Rule 89 is found to be deficient owing to any clerical or arithmetical mistake on the part of the depositor and such deficiency has been made good within such time as may be fixed by the Court, the Court shall make an order setting aside the sale:]
Provided that no order shall be made unless notice of the application has been given to all persons affected thereby:
[Provided further that the deposit under this sub-rule may be made within sixty days in all such cases where the period of thirty days, within which the deposit has to be made, has not expired before the commencement of the Code of Civil Procedure (Amendment) Act, 2002.]
(3) No suit to set aside an order made under this rule shall be brought by any person against whom such order is made.
(4) Where a third party challenges the judgment-debtor’s title by filing a suit against the auction-purchaser, the decree-holder and the judgment-debtor shall be necessary parties to the suit.
(5) If the suit referred to in sub-rule (4) is decreed, the Court shall direct the decree-holder to refund the money to the auction-purchaser, and where, such an order is passed, the execution proceeding in which the sale has been held shall, unless the Court otherwise directs, be revived at the stage at which the sale was ordered. (Order XXI, Rule 92).
Limitation:
An application to set aside the sale must be made within 30 days from the date of the sale, i.e., when the property was put up for sale and marked down by the highest bidder.
An application made for setting aside a sale under Rule 89 of Order XXI, C.P.C. is maintainable even if the deposit contemplated by the said rule is made not within 30 days but is made on or at any time before the date on which the application for setting aside the sale is made under Rule 89 of Order XXI, C.P.C. provided of course that the said application is made within 60 days of the date of sale.
From the Statement of Objects and Reasons appended to the bill in pursuance whereof Act No. 104 of 1976 was passed by the Parliament there seems to be no manner of doubt that 30 days period of limitation as prescribed in Article 127 of the Limitation Act was extended to 60 days on the ground that the period of 30 days fixed for making the deposit contemplated by Rule 89 of Order XXI, C.P.C. was inadequate.
When the difficulty in making the requisite deposit within 30 days by the judgment-debtors was precisely the purpose of extending the period of limitation from 30 days to 60 days, it cannot be said that an application made for setting aside a sale under Rule 89 of Order XXI, C.P.C. within the extended period of limitation of 60 days was yet intended to be dismissed because of non-deposit of the requisite amount under the said rule within 30 days as contemplated by sub-rule (2) of Rule 92 of Order XXI, C.P.C.
The matter can be looked at from another angle. Article 127 of the Limitation Act prescribing 60 days from the date of sale as the limitation for making an application to set aside the sale under Rule 89 of Order XXI, C.P.C. is a specific provision specifically enacted to provide the limitation for an application as aforesaid.
In case sub-rule (2) of Rule 92 of Order XXI, C.P.C. is also taken to be a provision virtually prescribing a limitation for the same purpose, it would fall within the purview of a general enactment in this behalf.
On the principle contained in the maxim generalia specialibus nonderogant general provisions do not derogate from special provisions, Article 127 of the Limitation Act would prevail over sub-rule (2) of Rule 92 of Order XXI, C.P.C.
Court receiver sold properties to the purchaser for Rs. 60 lakhs and the purchaser deposited Rs. 5 lakhs and balance amount was assured to be deposited only after delivery of possession. The single Judge of High Court confirmed the sale.
In appeal the Division Bench pointed out that the sale was vitiated due to the manner in which the single Judge dealing with company law matters, passed the orders in his chamber. There were other offers on the field of a higher denomination and magnitude.
The single Judge was not vigilant enough to scrutinise such offers. The Supreme Court took suo motu judicial notice of the illegality pointed out by the Division Bench, committed by the single Judge of the High Court in bringing the properties to sale. Confirmation of sale was illegal.
The contention was rejected that the sale could not be set aside if for its setting aside the application under Order XXI, Rule 89 or 90 or under S. 48 C.P.C. had not been filed within limitation. The Supreme Court or appellate Court would not remain a mute or helpless spectator to obvious or manifest illegality committed in court sales.
It was also illegal that the purchaser deposited only Rs. 5 lakhs and allowed to deposit balance amount on taking possession. The sale and confirmation was set aside and case was remanded to High Court with direction that appropriate single Judge would proceed to conduct sale by open auction after due publication.
Supreme Court taking notice of illegalities committed in court sale set aside even though application to set aside sale was not filed within time.
(2) On ground of irregularity or fraud:
Where any immovable property has been sold in execution of a decree, the decree-holder, or the purchaser, or any other person entitled to share in a rateable distribution of assets, or whose interests are affected by the sale, may apply to the court to set aside the sale on the ground of a material irregularity or fraud in publishing or conducting it. [Order XXI, Rule 90(1)].
No sale shall be set aside on the ground of irregularity or fraud in publishing or conducting it unless, upon the facts proved, the court is satisfied that the applicant has sustained injury by reason of such irregularity or fraud. [Order XXI, Rule 90(2)].
No application to set aside a sale under Rule 90 shall be entertained upon any ground which the applicant could have taken on before the date on which the proclamation of sale was drawn up. [Order XXI, Rule 90(3)].
Explanation:
The mere absence of, or defect in, attachment of the property sold shall not, by itself, be a ground for setting aside a sale under this rule. [Order XXI, Rule 90(3)].
Under Order XXI, Rule 90, the only persons that may apply for setting aside the sale are:
(i) The decree-holder;
(ii) The purchaser;
(iii) Any other person entitled to share in a rateable distribution of assets under section 73; and
(iv) Any person whose interests are affected by the sale. This includes the judgment-debtor, the legal representative of a judgment-debtor and a purchaser from the judgment-debtor pendente lite.
An appeal by a stranger auction purchaser against an order passed on an application for setting aside sale under Order XXI, Rule 90 and section 47, C.P.C. is incompetent, as he was not a party to the suit.
The sale under the above rule can be set aside if the following conditions exist:
(i) Material irregularity or fraud in publishing or conducting the sale;
(ii) Substantial injury to the applicant; and
(iii) Such injury must be connected directly with the result of the irregularity or fraud.
Objection to execution of decree can be made only once and not repeatedly.
The joint family property was hypothecated to Government for recovery of debt taken by brother of respondent and the respondent had undertaken to discharge liability. Sale of such immovable property for recovery of debt on default was legal and valid and order setting aside such sale is not proper.
Income tax can be recovered through auction sale of property by Execution Court and it is not barred by Income-tax Rules under Income-tax Act.
Sale would be in violation of Rule 72 where the decree holder made bid without obtaining prior permission.
Before an application under Order XXI, Rule 90 can succeed, the applicant must allege in his application that there was a material irregularity or fraud in publishing or conducting the sale. It must also be alleged in the application, not only that there was a material irregularity or fraud in publishing or conducting the sale but also that the applicant has sustained injury and that it is by reason of such irregularity or fraud that such substantial injury has been caused. Where there are no such allegations the application is not maintainable.
It was observed by their Lordships of the Judicial Committee in B.N. Naidu v. B.V. Naidu, that mere irregularity or fraud in publishing or conducting the sale will not entitle the court to set it aside, unless upon the facts proved the court is satisfied that the applicant has sustained injury by reason of such irregularity or fraud.
Under Order XXI, Rule 90, C.P.C., an applicant who seeks to set aside a sale should prove that there has been material irregularity or fraud in the publication or conduct of the sale. The mere fact that the property was actually worth much more than what it was sold for, is no ground to set aside the sale.
Where the judgment-debtor had notice at every stage of the execution proceedings and the application for reduction of the upset price, but did not choose to oppose any of them, he cannot be heard to say after the sale is effected that the price fetched is too low.
Where the proclamation of sale was settled and the judgment-debtor did not raise any objection to the description of the property therein, and only wanted time to pay the decretal amount but allows the sale to be proceeded with, he cannot at a later stage be allowed to take advantage of any bona fide error in description, to attack the sale.
Before a sale can be set aside under Order XXI, Rule 90, C.P.C. it is incumbent on the part of the judgment-debtor to prove that there was material irregularity or fraud in publishing or conducting the sale and that he had sustained substantial injury by reason of such irregularity or fraud.
Mere irregularity or fraud in publishing or conducting the sale will not entitle the court to set it aside unless upon the facts proved the court is satisfied that the judgment-debtor has sustained substantial injury by reason of such irregularity or fraud.
The rule speaks of irregularity and not illegality, for if the act complained of is illegal, the sale is void altogether and no substantial injury need be proved as is necessary in the case of material irregularity.
It may also be noted that where a person applies under Order XXI, Rule 90 to set aside the sale of his immovable property (on the ground of material irregularity or fraud and substantial injury resulting there from), he shall not be allowed to make or prosecute an application under Rule 89, unless he withdraws his application under Order XXI, Rule 90.
Where an application under Rule 90 is dismissed for default, the applicant is not precluded from applying under this rule. But where the applicant under Rule 90 is pending the judgment-debtor cannot apply under Rule 89.
It is only where there is an allegation of material irregularity or fraud in publishing or conducting the sale that Order XXI, Rule 90 would be applicable.
Execution sale becomes nullity where purchaser-decree holder fails to deposit full amount of sale within time fixed by Rule 85, Order XXI.
Application for setting aside sale in execution of decree was properly dismissed as the he tried to prolong finalisation of sale. Even after opportunity he failed to pay decretal amount. The applicant was given opportunity to establish whether sale was vitiated by material irregularity or fraud in publishing or conducting proclamation of sale and he produced no evidence to prove them except averments in written arguments.
In case of sale affected by court through its appointed receivers no objection can be made against it under Order XXI, Rule 90. But as the receivers are the agents of the court, the Court can put the receivers to accountability in exercise of its powers under S. 151. This is done by the court to obviate any doubt which is made through the applications of the parties connected with the suit.
On application of co-owner of suit property the Executing Court set aside the execution sale on the ground that the auction purchaser failed to pay purchase money within 15 days. High Court dismissed the revision filed by auction purchaser but directed co-owner to pay loss suffered by auction purchaser for the reason that sale was being set aside after 15 days. Supreme Court held that such direction by High Court was illegal.
Material irregularity:
The term “irregularity” in Order XXI, Rule 90, C.P.C. means not being in conformity with the law or any recognised rule. The material irregularity complained of must be one on the part of the court or its officers and it should be shown that there has been disregard of some positive provision of law relating to execution.
Where the sale proclamation mentions only annual net income but not an adequate price there is a material irregularity. An under-statement of the value of the property in the sale proclamation calculated to mislead bidders is also a material irregularity.
An omission to specify in the proclamation of sale the extent of the property to be sold or the revenue assessed thereon, a sale of immovable property held before the expiration of 15 days from the date on which the copy of the proclamation is affixed on the court-house of the Judge ordering the sale and an omission to issue a fresh proclamation where a sale is adjourned for more than thirty days, are all material irregularities in publishing or conducting the sale and the sale can be set aside if the applicant satisfies the court that he has sustained substantial injury by reason of them.
Order XXI, Rule 90(2) will cover omission, deficiencies of formal defects in a sale proclamation, but not fraud in causing of its drawing up or in the furnishing of particulars of its contents. Where there is a fraud the sale must be set aside in spite of the failure of the judgment-debtor to take his objection in time.
A sale held on a holiday is, however, neither an illegality nor an irregularity.
A sale held after the order of postponement had been passed by the executing court, but before the order could be communicated to the selling officer, is a nullity.
Rule 90 of Order XXI, C.P.C. permits an application to set aside a sale on the ground of irregularity or fraud. But be it noted that such irregularity or fraud must be in publishing proclamation of or conducting the sale. Any irregularity or fraud in the settlement of proclamation which precedes its publication or conduct of the sale is not attracted by Rule 90. This is the view taken by the Madras High Court in Ramalingam v. Sankara Iyer. There it was held:
“But on a closer examination, I am inclined to the view that the words ‘material irregularity or fraud in publishing or conducting it’, cannot be extended to the material irregularity arising out of a breach of the requirements of Rule 66. Separate sets of rules are framed under Order XXI, one set relating to settlement of proclamation and the other to the manner of publication of a proclamation of sale. Nevertheless, Rule 90 speaks of material irregularity or fraud in publishing or conducting a sale. The rule, to my mind, will not, therefore, cover any irregularity in the settlement of proclamation.”
In taking that view the Court followed Neelu Neithiar v. Subramania Moothan, The same view was expressed in Kandaswami Mudali v. Narasimha Iyer, decided by a Division Bench. There it was pointed out:
“Anything done antecedent to the order of sale has nothing to do with conducting the sale. Again, it is observed that the word ‘publishing’ also refers only to what is done antecedent to the actual conduct of the sale but subsequent to the order directing the sale.”
Navalkha & Sons v. Ramanya Das:
The Court’s activist obligation to exercise a discretion to make a fair sale out of court auction—and avert a distress sale—is underscored by the provisions contained in Order XXI, Rule 90, C.P.C. In all public sales the authority must protect the interests of the parties and the rule is stated by the Supreme Court in Navalkha and Sons v. Ramanya Das, thus:
“The principles which should govern confirmation of sales are well established. Where the acceptance of the offer of the Commissioners is subject to confirmation of the court the offer-or does not by mere acceptance get any vested right in the property so that he may demand automatic confirmation of his offer.
The condition of confirmation by the court operates as a safeguard against the property being sold at inadequate price whether or not it is a consequence of any irregularity or fraud in the conduct of the sale. In every case it is the duty of the court to satisfy itself that having regard to the market value of the property the price offered is not unreasonable.
Unless the court is satisfied about the adequacy of the price the act of confirmation of the sale would not be a proper exercise of judicial discretion”. The expression “material irregularity in the conduct of the sale” must be benignantly construed to cover the climax act of the court accepting the highest bid. Indeed, under the Civil Procedure Code, it is the court which conducts the sale and its duty to apply its mind to the material factors bearing on the reasonableness of the price offered is part of the process of obtaining a proper price in the course of the sale.
Therefore, failure to apply its mind to this aspect of the conduct of the sale may amount to material irregularity. Mere substantial injury without material irregularity is not enough even as material irregularity not linked directly inadequacy of the price is insufficient.
And where a court mechanically conducts the sale or routinely signs assent to the sale papers, not bothering to see if the offer is too low and a better price could have been obtained, and in fact the price is substantially inadequate, there is the presence of both the elements of irregularity and injury.
But it is not as if the court should go on adjourning the sale till a good price is got, it being a notorious fact that court sales and market prices are distant neighbours. Otherwise, decree-holders can never get the property of the debtor sold.
Nor is it right to judge the unfairness of the price by hindsight wisdom. May be, subsequent events, not within the ken of the executing court when holding the sale, may prove that had the sale been adjourned a better price could have been had.
What is expected of the judge is not to be a prophet but a pragmatist and merely to make a realistic appraisal of the factors and if satisfied that, in the given circumstances, the bid is acceptable, conclude the sale.
The court may consider the fair value of the property, the general economic trends, the large sum required to be produced by the bidder, the formation of a syndicate, the futility of postponements and the possibility of litigation, and several other factors dependant on the facts of each case.
Once that is done, the matter ends there. No speaking order is called for and no meticulous post-mortem is proper. If the court has fairly, even silently, applied its mind to the relevant considerations before it while accepting the final bid, no probe in retrospect is permissible. Otherwise, a new threat to certainty of court sales will be introduced.
Applicability of section 47 and Order XXI, Rule 90 with regard to an objection by a judgment-debtor against an auction sale:
If a judgment-debtor seeks to set aside the sale on the ground of an irregularity, his application is covered by Order XXI, Rule 90, C.P.C., but if he seeks a declaration that the sale is null and void, he gets relief under section 47, C.P.C. A saie attended with an irregularity is quite distinct from a sale that is null and void—the former exists and is in force so long as it is not set aside, whereas the latter does not exist in the eye of law at all.
A sale attended with an irregularity has to be set aside; whereas in a null and void sale only a declaration to that effect may be necessary, if at all. Order XXI, Rule 90 does not deal at all with a sale that is null and void or with a declaration that is so.
Where an objection contains two parts, one against the very existence of the sale and the other against its legality—there is no reason why it should not be dealt with partly as an objection under section 47 and partly as an objection under Order XXI, Rule 90. The part containing the plea that the sale was null and void may be dealt with as an objection under section 47 and the other part complaining of a’ material irregularity, may be treated as an objection under Order XXI, Rule 90, C.P.C.
It cannot be said that an objection to a sale cannot be taken under section 47 even after the confirmation of the sale, on the ground that the sale is a nullity; but at the same time if the sale cannot be shown to be wholly null and void or a nullity in law, an application under Order XXI, Rule 89 or Rule 90 is a must before a sale in execution of a decree could be set aside on the ground mentioned in these two rules.
Objection to execution of decree can be made only once and not repeatedly. Heir of original owner cannot raise objection again when the title of original owner was once negative and became final. Also objection cannot be raised when objection as to excess execution having not been raised to proclamation sale and thereby title had been lost and sale became final.
Death of one Judgment-debtor:
Where after the death of one of several judgment-debtors under a decree for rent obtained by a co-sharer landlord, execution is taken out and a sale is held without impleading the legal representatives of the deceased judgment-debtor the sale is void to the extent of the interest of the deceased in the property and his legal representatives are not, therefore, entitled to apply to set aside the sale under Order XXI, Rule 90, C.P.C. as they are not persons whose interests are affected by the sale within the meaning of the rule.
Under Rule 90 of Order XXI, C.P.C., as amended by this Court, no sale can 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.
The question as to whether any substantial injury has been sustained by the petitioner by the alteration of the date of sale in the sale proclamation is purely a question of fact and the courts below have recorded concurrent finding that the petitioner has not sustained any substantial injury by reason of the irregularity alleged by him. Held that the impugned orders are perfect and do not call for any interference by the Court.
The special rule under Rule 90(3) was brought on statute by 1976 Amendment Act. It is like a ‘caveat emptor’ that the judgment-debtor be vigilant and watchful to vindicate pre-sale illegalities or material irregularities. He should not stand by to procrastinate the execution proceedings. If he so does, Rule 90(3) forewarns him that he pays penalty for obduracy and contumacy.
Equally it is a reminder that the court should be strict to comply with the procedural part under Rule 54(1-A) before depriving the judgment-debtor of the remedy under Order XXI, Rule 90, C.P.C. If he had notice from court and acquiesced by taking no action before the date of sale, he would be precluded to assail its legality or correctness thereafter.
Under section 47 all questions relating to execution, discharge, or satisfaction of the decree should be determined by the executing court alone. The pre-sale illegalities committed in the execution are amenable to the remedy under section 47. Post-sale illegalities or irregularities causing substantial injury to the judgment-debtor are covered under Order XXI, Rule 90. The total absence of drawing up of the proclamation of sale and settlement of its term by judicial application of mind renders the sale a nullity being void.
It is covered by section 47. The Code has taken special care charging the duty on the executing court and it has a salutary duty and legislative mandate to apply its mind before settling the terms of proclamation and satisfy that if part of such property as seems necessary to satisfy the decree should be sold if the sale proceeds or portion thereof is sufficient for payment to the decree-holder or the person entitled under the decree to receive the amount and so much of that property alone should be ordered to be sold in execution.
It is a mandate of the legislature which cannot be ignored. The non-application of mind to the question whether sale of a part of the property would satisfy the decree debt is a material irregularity doing substantial injury to the appellant attracting Order XXI, Rule 90. In either case the sale is liable to be set aside.
It is true that there is distinction between mere irregularity and material irregularity and the sale is not liable to be set aside on proof of mere irregularity. It must be material irregularity and the court must be satisfied that on account thereof substantial injury was sustained by the appellant. The sale 550sq. yds. For recovery of a paltry sum of RS. 7,780.33, without selling a portion thereof, caused substantial injury to the appellant judgment-debtor in this case.
(3) No Saleable Interest:
The purchaser at any such sale in execution of a decree may apply to the court to set aside the sale, on the ground that the judgment-debtor had no saleable interest in the property sold (Order XXI, Rule 91). This rule applies only where the judgment-debtor has no interest at all, e.g., when the property sold turns out to be not the property of the judgment-debtor or when the interest was not saleable. It does not apply when the judgment-debtor has no saleable interest in a portion of the property. Even a saleable interest in one of the parcels sold at one time is sufficient.
Besides the above provisions the court has an inherent power to set aside an auction sale if the decree in question has been obtained by fraud or if it appears to have been passed by a court without jurisdiction or if subsequently to the passing of the decree and pending the execution proceeding it has been set aside by a court of appeal.
When sale becomes absolute:
(1) In case of immovable property where no application is made under Rule 89, Rule 90 or Rule 91 or where such application is made and disallowed, the court shall make an order confirming the sale, and thereupon the sale shall become absolute:
Provided that, where any property is sold in execution of a decree pending the final disposal of any claim to or any objection to the attachment of such property, the court shall not confirm such sale until the final disposal of such claim or objection. [Order XXI, Rule 92(1)].
Where such application is made and allowed, and where in the case of an application under Rule 89, the deposit required by that rule is made within thirty days from the date of sale, or in cases where the amount deposited under Rule 89 is found to be deficient owing to any clerical or arithmetical mistake on the part of the depositor and such deficiency has been made good within such time as may be fixed by the court, the Court shall make an order setting aside the sale: provided that no order shall be made unless notice of the application has been given to all persons affected thereby. [Order XXI, Rule 92(2)].
No suit to set aside an order made under Rule 92 shall be brought by any person against whom such order is made. [Order XXI, Rule 92(3)].
Where a third party challenges the judgment-debtor’s title by filing a suit against the auction-purchaser, the decree-holder and the judgment-debtor shall be necessary parties to the suit. [Order XXI, Rule 92(4).]
If the suit referred to in sub-rule (4) is decreed the court shall direct the decree-holder to refund the money to the auction-purchaser, and where such an order is passed the execution proceeding in which the sale had been held shall, unless the court otherwise directs, be revived at the stage at which the sale was ordered. [Order XXI, Rule 92(5).]
A sale cannot be confirmed within 30 days of acceptance of the bid. It is not to be confirmed straightaway without declaring the auction-purchaser as the successful bidder under Order XXI, Rule 84, and without allowing a period of one month for application under Order XXI, Rules 89 to 91, C.P.C.
An examination of the relevant provisions of Order XXI of the Code will show that the title to the property put on auction sale passes under the law when the sale is held. The owners and certain other interested persons are afforded opportunity under the Code to make a prayer for setting aside the sale on enumerated grounds, and after all such matters are disposed of without disturbing the sale, the sale is confirmed under Rule 92.
The title passes under the auction sale by force of law and the transfer becomes final when an order under Rule 92 confirming it is made. By the certificate issued under Rule 94, the court is formally declaring the effect of the same and is not extinguishing or creating title.
The object of issuance of such a certificate is to avoid any controversy with respect to the identity of the property sold, and of the purchaser thereof as also the date, when the sale becomes absolute.
The use of past tense in the rule stating that the sale “became” absolute is consistent with this interpretation. The certificate, therefore, cannot be termed to be an instrument of sale so as to attract section 147 of the Delhi Municipal Corporation Act.
Setting aside of Court auction sale:
In absence of any allegation of fraud or material irregularity in conduct of sale, mere inadequacy of price cannot be a ground for setting aside Court auction sale.
Application for setting aside sale of immovable property:
Period of limitation for making deposit is not prescribed in Order XXI, Rule 92(2), held that application can be made within enlarged period of 60 days prescribed under Article 127, Limitation Act and deposit can also be made within 60 days from the date of sale.
Obstruction for possession of immovable property:
In a case where an application filed under Order XXI, Rule 97 or Rule 99 is dismissed at its threshold on the ground of the maintainability without making any inquiry into the right, title or interest of the parties, then such an order cannot be said to have been passed under Rule 98 or Rule 100 of Order XXI. Such an order cannot be termed to be an order passed under Rule 98 or Rule 100 of Order XXI.
If the order does not meet the mandatory requirement contained under Rule 98 or Rule 100, then such an order would not confer upon the party a right to file an appeal before the appellate Court because such an order cannot be deemed to be a decree for the purposes of appeal or for the purposes of Rule 103.
Objection of execution of decree for eviction:
Where property in dispute was let out by decree holder in his own personal capacity and not on belief of joint Hindu family. There was specific concurrent finding of lower Courts to that affect. Held that tenant or any person claiming through him even if he was one of co-sharers or may be one of the members of joint Hindu family could not resist decree for eviction.
Execution of decree for specific performance for delivery of property:
Where the obstructing party was not having subsisting right or outstanding claim of right, in terms of settlement deed and the clause relied on by him in the settlement deed was not found to be valid, it was held that the claim made by him or obstruction offered by him was unsustainable.
Objection to decree for possession of immovable property:
Not only the decree-holder or a person dispossessed in the execution of the decree has a right to make an application to the executing Court but a person who is apprehending dispossession can also make an application to the Court and when such an application is brought before the Court, the said Court shall be obliged to make an enquiry into the allegations and pass an order after making the enquiry into the right, title or interest of the party.
A court sale is a compulsory sale and the title to the property sold does not vest in the purchaser immediately on the sale thereof unlike in the case of private sale. It does not become absolute before the expiry of at least 30 days from the date of sale. During this period sale can be set aside at the instance of judgment-debtor under Rules 89 and 90 of Order XXI.
Where no such application is made the Court confirms the sale. Upon such confirmation the sale becomes absolute in terms of Order XXI, Rule 92 and certificate of sale is issued under Order XXI, Rule 94. Certificate bears the date as an which the sale becomes absolute.
On the sale becoming absolute the property sold vests in purchaser. The vesting of property relates back to the date of sale as required under S. 65 C.P.C. The title of the court auction-purchaser becomes complete on the confirmation of sale under Order XXI, Rule 65 and by virtue of S. 65, C.P.C. the property vests in purchaser from the date of sale.
The certificate of sale does not create any title but is merely evidence thereof. The sale certificate is formal acknowledgment of a fact already accomplished and for malis action of what stood sold. It is a ministerial act of the court and not judicial one.
In court auction the confirmation of sale makes the title of purchaser complete. Auction sale becomes absolute after its confirmation.
On confirmation of sale, the auction purchaser applied for possession. The sale was cancelled and his application for cancellation was dismissed. But the appellate court reversed the order cancelling sale. Thereupon the auction purchaser made another application for possession which was time barred.
The Appellate Court ordered the delivery of possession on the basis of earlier application. The Supreme Court held the order of appellate court as proper as the possession cannot be denied on the ground that the second application was barred by limitation.
Auction sale by executing court of a property valued at Rs. 75,000/- and subject to discharge of mortgage for sum of Rs. 40,000/- was sold to mortgagee for mere sum of Rs. 15,000/- as none else came forward to purchase the property. Sale executing court was held to be illegal in the circumstances of the case.