Andhra Pradesh High Court - Amravati
M/S.Sai Balaji Housing Pvt.Ltd vs Sri Bharathi Warehousing Corporation on 28 February, 2024
IN THE HIGH COURT OF ANDHRA PRADESH
****
CIVIL MISCELLANEOUS APPEAL NO: 542 OF 2023
Between:
M/s Sai Balaji Housing Private Limited and others. ...APPELLANTS
AND
...RESPONDENT
Sri Bharathi Warehousing Corporation.
Counsel for the Appellants: Sri Siva Rama Krishna Kolluru.
Counsel for the Respondents: Sri K. Sairam Murthy.
DATE OF JUDGMENT PRONOUNCED: 28.02.2024
SUBMITTED FOR APPROVAL:
THE HON'BLE SRI JUSTICE A.V. SESHA SAI
&
THE HON'BLE SMT JUSTICE SUMATHI JAGADAM
1. Whether Reporters of Local Newspapers
may be allowed to see the judgment? Yes / No
2. Whether the copies of judgment may be
marked to Law Reporters /Journals? Yes / No
3. Whether His Lordship wish to
see the fair copy of the Judgment? Yes / No
___________________
A.V. SESHA SAI, J
________________________
SUMATHI JAGADAM, J
2
AVSS,J & JS,J
C.M.A.No.542 of 2024
* THE HON'BLE SRI JUSTICE A.V. SESHA SAI
&
* THE HON'BLE SMT JUSTICE SUMATHI JAGADAM
+ CIVIL MISCELLANEOUS APPEAL NO: 542 OF 2023
% 28.02.2024
Between:
M/s Sai Balaji Housing Private Limited and others. ...APPELLANTS
AND
...RESPONDENT
Sri Bharathi Warehousing Corporation.
! Counsel for the Appellants: Sri Siva Rama Krishna Kolluru.
^ Counsel for the Respondents: Sri K. Sairam Murthy.
< Gist:
> Head Note:
? Cases referred:
1. AIR 1986 A.P.29 (paragraph Nos.5, 6 and 7).
2. MANU/KE/0636/2005 (paragraph Nos.4, 7 & 12, Pg.90
of the CMA).
3. 2008 (6) ALD 685 (paragraph Nos.10, 14, 15, 20,21,22,
23 & 24, pg.98 of the CMA)
4. AIR 1998 Kerala 219 (paragraph Nos.2, 4, 11, 12, 13, 14
& 15 pg. 111 of the CMA).
5. (1997) 10 SCC 65 (paragraph Nos.2 and 3)
6. AIR 1971 SC 2337 (paragraph Nos.7 & 8).
7. 2017 (3) ALT (SC) 55 (DB) (paragraph Nos.14 and 23).
8. (2006) 4 SCC 476 (paragraph Nos.12,13 & 14).
9. 2000 (1) ALT 422 (paragraph No.29).
10. 2003 (3) ALT 240 (paragraph No.12).
11. 2015 (4) ALD 693 (paragraph Nos.7 & 8).
3
AVSS,J & JS,J
C.M.A.No.542 of 2024
APHC010513402023 IN THE HIGH COURT OF ANDHRA PRADESH ::
AMARAVATI
(Special Original Jurisdiction)
[ 3455 ]
WEDNESDAY, THE TWENTY EIGHTH DAY OF
FEBRUARY
TWO THOUSAND AND TWENTY FOUR
PRESENT
THE HONOURABLE SRI JUSTICE A V SESHA SAI
THE HONOURABLE SMT JUSTICE SUMATHI JAGADAM
CIVIL MISCELLANEOUS APPEAL NO: 542 OF 2023
Between:
M/S.SAI BALAJI HOUSING PVT.LTD AND OTHERS ...APPELLANTS
AND
SRI BHARATHI WAREHOUSING CORPORATION ...RESPONDENTS
Counsel for the Appellant(s):SRI. SIVA RAMA KRISHNA KOLLURU
Counsel for the Respondents
Respondents: K SAIRAM MURTHY
The Court made the following:
JUDGMENT:(per Hon'ble Sri Justice A.V.Sesha Sai) Order, dated 21.08.2023, passed by the Court of the learned II Additional District Judge, Guntur, dismissing E.A.No.09 of 2014 in E.P.No.64 of 2012 in O.S.No.110 of 2009, is under challenge in the present Civil Miscellaneous Appeal, preferred under Section 115 of the Code of Civil Procedure.
2. Judgment-Debtors Debtors in the aforementioned Execution Petition are the appellants in the present appeal. In O.S.No.110 of 2009, instituted 4 AVSS,J & JS,J C.M.A.No.542 of 2024 by the respondent, on the foot of a mortgage, a Preliminary Decree was passed on 28.02.2011 and a Final Decree was also passed on 20.01.2012. The subject property is an extent of 200 Sq.Yards of site and RCC Building in it, situated within the Guntur Municipal Corporation limits. Seeking enforcement of the decree, plaintiff-decree-
holder filed E.P.No.64 of 2012, by way of sale of the mortgaged property, under Order 21 Rule 64 CPC. Sale was conducted on 30.06.2014, wherein the Executing Court permitted the Decree-holder to participate. On 25.08.2014, the Judgment-Debtors-appellants filed E.A.No.09 of 2014 in E.P.No.64 of 2012 under Order 21 Rule 90 CPC, seeking to set aside the sale. The Decree-holder-respondent herein filed counter, resisting E.A.No.09 of 2014, and the learned II Additional District Judge, Guntur, by way of the impugned order, dated 21.08.2023, dismissed E.A.No.09 of 2014. Hence, the present Civil Miscellaneous Appeal.
3. Heard Sri N.Subba Rao, learned Senior Counsel, representing Sri K.Siva Rama Krishna, learned counsel for the appellants on record, and Sri K.Sai Rama Murthy, learned counsel for the respondent, apart from perusing the entire material available on record.
4. According to the learned Senior Counsel, Sri N.Subba Rao, the impugned order is highly erroneous, contrary to law and opposed to 5 AVSS,J & JS,J C.M.A.No.542 of 2024 the very spirit and object of the provisions of Order 21 Rule 90 CPC. It is further contended that the questioned order is in violation of the provisions of Order 21 Rules 72 and 72-A CPC; that the leave was granted to the Decree-holder i.e., Sri Bharathi Warehousing Corporation, Guntur, but Sri Nonne Madhava Siva Prasad, in his individual capacity, participated in the auction, which is contrary to the permission accorded by the Executing Court. In support of his submissions and contentions, learned counsel places reliance on the following judgments:
1. AIR 1986 A.P.29 (paragraph Nos.5, 6 and 7).
2. MANU/KE/0636/2005 (paragraph Nos.4, 7 & 12, Pg.90 of the CMA).
3. 2008 (6) ALD 685 (paragraph Nos.10, 14, 15, 20,21,22, 23 & 24, pg.98 of the CMA)
4. AIR 1998 Kerala 219 (paragraph Nos.2, 4, 11, 12, 13, 14 & 15 pg. 111 of the CMA).
5. (1997) 10 SCC 65 (paragraph Nos.2 and 3)
6. AIR 1971 SC 2337 (paragraph Nos.7 & 8).
5. Emphatically refuting the contentions of the learned counsel for the petitioners-appellants herein, learned counsel for the respondent submits that there is no error nor there exists any infirmity in the impugned order and, in the absence of the same, the questioned order is not amenable for any correction under Order 43 Rule 1 CPC; that having regard to the facts and circumstances of the case, no interference of this Court is warranted; that though opportunity was given, the Judgment-Debtors did not file any objections for the 6 AVSS,J & JS,J C.M.A.No.542 of 2024 valuation given by the Decree-holder and that the valuation provided by the Decree-holder became final; that the Judgment-debtors did not file their valuation as per Order 21 Rule 66 (2) CPC; that the learned Judge, after taking into account the valuation of the Sub Registrar i.e., Rs.1.00 Crore and the valuation furnished by the Decree-holder i.e., Rs.66.00 Lakhs, fixed Rs.1.25 Crores as reserve price, as such, the same cannot be faulted; that, in view of the provisions of Rule 90 (3) of Order 21 CPC, the very application filed by the Judgment-debtors is not maintainable and the contention of the learned counsel for the Judgment-debtors, touching Order 21 Rule 72-A CPC, cannot sustain in the eye of law in view of Order 21 Rule 90 (3) CPC.
6. To bolster his submissions and contentions, learned counsel for the respondent-Decree-holder takes the support of the following judgments:
1. AIR 1971 SC 2337 (paragraph Nos.7 & 8).
2. 2017 (3) ALT (SC) 55 (DB) (paragraph Nos.14 and 23).
3. (2006) 4 SCC 476 (paragraph Nos.12,13 & 14).
4. 2000 (1) ALT 422 (paragraph No.29).
5. 2003 (3) ALT 240 (paragraph No.12).
6. 2015 (4) ALD 693 (paragraph Nos.7 & 8).
7. In the above background, now the issues, which this Court is called upon to consider and adjudicate are:7
AVSS,J & JS,J C.M.A.No.542 of 2024
1. Whether the sale conducted by the Court on 30.06.2014, is in accordance with law? and
2. Whether the impugned order warrants any interference of this Court under Order 43 Rule 1 CPC?"
8. Broadly, there are two contentions raised by the learned Senior Counsel for the appellants. They are: 1) the Executing Court fixed the reserve price less than the E.P. amount, which is contrary to Order 21 Rule 72-A CPC, and 2) the Executing Court granted leave to the Decree-holder i.e., Sri Bharathi Warehousing Corporation, Guntur, but, Sri Nonne Madhava Siva Prasad, in his individual capacity, participated in the auction.
9. In order to deal with the first contention, advanced by the learned Senior Counsel for the appellants, it would be highly essential and expedient to reproduce Order 21 Rule 72-A CPC, which stipulates as follows:
72A. Mortgagee not to bid at sale without the leave of the Court.
(1) 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.8
AVSS,J & JS,J C.M.A.No.542 of 2024 (2) 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.
(3) In other respects, the provisions of sub-rules (2) and (3) of rule 72 shall apply in relation to purchase by the decree-holder under that Rule".
10. In the case on hand, there is no dispute as regards the reality that the Court sold the property in one lot, as such, Clause (a) of Rule 72-A (2) of Order 21 CPC is applicable and governs the situation.
It is pertinent to note that the Decree-holder indicated Rs.60.00 Lakhs and the Amin mentioned as Rs.1.00 Crore as the value of the property and the fact remains that the amount shown in the E.P. being Rs.1.85 Crores, but the Executing Court fixed the reserve price as Rs.1.25 Crores. Now the issue, which needs to be examined, is:
"Whether fixation of such amount by the Executing Court is in accordance with Order 21 Rule 72-A CPC"?9
AVSS,J & JS,J C.M.A.No.542 of 2024 In this context, it would be appropriate to refer to the judgments cited by the learned counsel.
11. In the case of P.Ramireddy v. P.Sundara Rama Reddy, reported in AIR 1986 AP 29, the composite High Court of A.P., at paragraph Nos.5 to 7, held as follows:
"5. The order is susceptible of two constructions. One is that the decree-holder is permitted to bid in the auction and the bid amount shall not be less than the upset price. The is permitted to set off. The other one as contended for the appellant. It is true that the petition itself is to permit the second respondent to bid in the auction on behalf of the decree-holder. That petition was allowed. Therefore the permission was granted to the second respondent to bid in the auction on behalf of the decree-holder subject to the condition that the bid amount shall not be less than the upset price. On a fair reading of the order, I am inclined to agree with the learned counsel for the appellant that his contention is the correct one. But still the question is Whether the permission granted to the second respondent is legal? In the Code of Civil Procedure (Amendment) Act 104 of 1976, O. XXI, R. 72-A was brought on statute through S. 72 thereof with effect from Feb. 1, 1977, which reads thus:
"72-A. Mortgagee not to bid at sale without the leave of the Court.-- (1) Notwithstanding anything contained in R.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.
(2) 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 10 AVSS,J & JS,J C.M.A.No.542 of 2024
(b) in the case of any property sold in lots, not less than such sum as shall appear to the Court to be properly attributed to each lot in relation to the amount then due for principal, interest and costs on the mortgage.
(3) In other respects, the provisions of sub-rules (2) and (3) of R. 72 shall apply in relation to purchase by the decree-holder under that rule."
6. A reading thereof would postulate that notwithstanding anything contained in R. 72, a mortgagee-decree-holder of immovable property shall not bid for or purchase property sold in execution of a decree without obtaining the leave of the Court to bid for or purchase the property. The leave granted shall be subject to the condition that the reserve price shall be 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. If the leave is granted to the mortgagee-decree-holder to bid in the auction or purchase the hypotheca, the language couched in R. 72-A(2) thereof manifests in mandatory language that the Court "then shall fix" a reserve price as regards the mortgagee and unless the Court otherwise directs, the reserve price "shall be not less than the amount due" for principal, interest and costs in respect of the mortgage if the property is sold in one lot and if it is sold in more than one lot, not less than such sum as shall appear to the Court to be properly attributable to such lots in relation to the amount then due for principal, interest and costs on the mortgage.
7. The contention of Sri Ramana Reddy, learned counsel for the appellant is that the language "unless the Court otherwise directs" would engraft within its ambit, the discretion provided in R. 72(1) and in exercise thereof the lower Court granted permission subject to the condition that the bid shall not be less than the upset price. To appreciate this contention, it is necessary to consider what is the ambit and meaning of the words "unless the Court otherwise directs" in the context of R. 72-A read as a whole. Undoubtedly, the words "unless the Court otherwise directs" would give a meaningful construction of discretion in the Courts while 11 AVSS,J & JS,J C.M.A.No.542 of 2024 granting permission to the mortgagee-decree- holder to participate in the bid. But the exercise of the discretion and direction otherwise granted would be germane to the purpose sought to be achieved under R. 72-A. The question therefore is what is the purpose of R. 72-A. The language couched in R. 72-A appears to emphasise the mandatory character of the duty cast on the Court. The manner of exercise of the power under sub-rule (2) of R. 72-A makes manifest from the words "the Court shall fix the reserve price" for sale shall not be less than the amount due under the decree i.e, the principal amount, interest thereon and costs, if the land is sold in one lot shall be conterminous with the extinguishment of the debt due. If it is sold in more than one lot, the reserve price shall be so apportioned consistent with the nature of the property, the extent thereof or quality and the amount sought to be recovered and shall be evenly distributed so as to apportion the debt and liquidation thereof. From the language thus manifested by the statute, it gives in unmistakable terms the legislative animation that it intended to relieve the mortgagor from all the liabilities incurred under the mortgage. It also seems to eradicate or at least aimed to nip in the bud the incurable tendency on the part of the decree-holder to take undue advantage of the Court sale by purchasing the hypotheca at a lower price by procuring collusive bidders at ja farce of sale and to knock off the property at a minimal price and then to take recourse to recover the residue of the decree debt by other process available under the Code. If the mortgagee-decree-holder opts to make avail of the statutory facility to bid in or purchase the hypotheca in such Court auction he shall abide by law i.e, he should be prepared to purchase the property in discharge of full quids viz., in full satisfaction of the entire outstanding debt due under the mortgage decree in execution. Considered from this perspective, the necessary conclusion is that it is the mandatory duty of the executing Court while granting leave to the mortgagee-decree-holder either under O. XXI R. 72(1) or under O. 21 R. 72-A, to comply with the fixation of the reserve price in conformity with 12 AVSS,J & JS,J C.M.A.No.542 of 2024 the mandatory conditions stipulated under sub- rule (2)(a) or (b) of R. 72-A. That it is mandatory is made manifest when we read the opening language of R. 72-A viz., "notwithstanding anything contained in R. 72." The non- compliance thereof renders the grant of permission to the mortgagee-decree-holder fatal and per se illegal. The exercise of discretion under sub-rule (2) of R. 72-A is in the nature of an exception and for the exercise thereof the legislature carved out large leeway to the Court by employing the language "the Court unless, otherwise directs". It is obviously difficult for the legislature to foresee diverse situations or circumstances that may confront the Court invoking the rule. To meet such situation power is preserved in the Court. In a given case on its peculiar facts and circumstances, for relevant and germane reasons mentioned thereunder the Court may otherwise give directions. But such directions must always be to subserve the object of R. 72-A but not in defeasance thereof. Lest while exercising the wide discretion the purpose and working of R. 72-A would be rendered otiose and nugatory and could easily be frustrated or defeated. When permission to mortgagee is granted in conformity with R. 72-A, then and then only the mortgagee could make avail of the statutory benefit of set off under R. 84(2) of O.
21. Otherwise the mortgagee on the sale being knocked down in his favour shall pay immediately 25% of the amount of purchase money as envisaged, under R. 84(1) and in default thereof the property shall forthwith be resold. A reading of the order of the Court below extracted earlier would clearly show that the lower Court did not accord permission to the appellant in compliance of R. 72-A(2) and thereby he is denuded the benefit of set off under R. 84(2). Admittedly no deposit of 25% of the amount of purchase money was immediately deposited by the second respondent either by himself personally or on behalf of the appellant. As a fact, no deposit was made nor the property was resold forthwith. The non-compliance of the mandatory requirement of R. 84(1) renders the sale per se illegal. Brouched from this perspective, I have no hesitation to conclude that 13 AVSS,J & JS,J C.M.A.No.542 of 2024 the permission granted to the appellant is palpably illegal and the sale also became illegal land so the Court below has rightly set aside the sale warranting no interference in this appeal. The lower Court is directed to proceed with the execution as expeditiously as possible. In view of O. XXXIV, R. 5 of the Code of Civil Procedure, it is still open to the judgment-debtor to pay the decretal amount in terms thereof and get the debt discharged. The appeal is accordingly dismissed. Since none are appearing for the respondent, there is no order as to costs".
12. In the case of P.Bahu Leyan v. Moossa E.P. and others, reported in MANU/KE/0636/2005, the Kerala High Court, at paragraph Nos.4, 7 and 12, held as follows:
4. The contention of the judgment-debtor is that the Executing Court did not fix the reserve price under Rule 72-A of Order XXI of the Code of Civil Procedure and, therefore, the sale is vitiated. It is further contended that the Executing Court erroneously fixed the upset price of the property at Rs. 4 lakhs while the amount sought to be realised was more than Rs. 7 lakhs and the value of the property sought to be sold was more than Rs. 20 lakhs. It is also contended that sale of a portion of the property was sufficient to satisfy the decree and it was not necessary to sell the whole property including the residential house belonging to the judgment-debtor where he is residing with his wife and children, aged mother and a dumb sister.
7. Now, the question to be decided is whether the sale is vitiated due to the failure to fix the reserve price under Rule 72-A of Order XXI of the Code of Civil Procedure. Rule 72-A mandates that 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. It is also mandatory under Rule 72-A that the Court shall for a reserve price as regards the mortgagee and the reserve price shall be not less than the amount due under the decree, unless the Court otherwise directs. The Executing Court 14 AVSS,J & JS,J C.M.A.No.542 of 2024 has not passed any order fixing the reserve price. Though permission was granted to the decree holder to bid at the auction, the executing Court did not bestow its attention to the necessity of fixing reserve price, nor did the decree holder bring it to the notice of the Court.
When the auction took place, since the Executing Court had fixed the upset price, the decree- holder could make a bid at Rs. 4,00,100/-and there was nobody else to bid at the auction. To my mind, this has resulted in material irregularity in conducting the sale. The sale is liable to be set aside on that short ground.
12. From the records, it is seen that when the sale was scheduled to be held on 7-1-2003 at 2 p.m. The decree-holder was not present to bid at the auction, though his application for permission to bid in auction was granted by the Court on that date. On 7-1-2003 he filed an application to adjourn the sale to another date, wherein he stated that he could not attend the auction in time due to traffic-block. On the date of sale, namely, 7-1-2003, in spite of the newspaper publication, there was no bidder. Even on the adjourned date, namely, on 17-2-2003, there was no other bidder available and the decree holder bid the property in auction. Had the Executing Court fixed the reserve price, the property would not have been sold for a low price. Normally, the reserve price would not be less than the decree amount. The consequence of not fixing the reserve price is that though the appellant/judgment debtor lost his residential property, still his liability under the decree is not fully discharged. I am fully satisfied that the proceedings in the conduct of sale were materially irregular and that the mandatory requirements of a Court auction sale were not satisfied in the case. Consequently, the sale held on 17-2-2003 and the confirmation of sale on 25- 8-2003 were illegal. The executing Court was not justified in dismissing E.A. No. 578 of 2003, I am of the view that the grounds under Rule 90 of Order XXI are made out by the judgment-debtor and the execution sale is liable to be set aside. It is also apposite to note here that the decree- holder is a financier and the property which is 15 AVSS,J & JS,J C.M.A.No.542 of 2024 sold in auction is the residential property of the judgment-debtor.".
13. In the case of N.Prabhakara Naidu v. Nellore Finance Corporation, reported in 2008 (6) ALD 685, the composite High Court of A.P., at paragraph Nos.10, 14, 15, 20 to 23, held as follows:
"10. The learned Counsel representing the revision petitioner placed strong reliance on the decision in Gajadhar Prasad v. Babu Bhakta Ratan, (1973) 2 SCC 629 : AIR 1973 SC 2593, wherein the Apex Court at Paras 13 and 15 observed as hereunder:
"It was submitted that the Court should not have put its own valuation on the property, as such a procedure was certain to prejudice the minds of prospective purchasers with regard to the value of the property to be auctioned. We find that there is some conflict of opinion in the High Courts on this question. The Madras High Court, in S.K. Veeraswami Pillai v. Kalyanasundaram Mudaliar, AIR 1927 Mad 1009 (1); Srinivasan v. Andhra Bank Ltd., AIR 1949 Mad 398; Yellappa Naidu v. G. Venugopal, AIR 1958 Mad 423 and the Allahabad High Court, in Md. Said Khan v. Md. Abdus Sami Khan, AIR 1932 All 664; Dwarka Dass v. Bhawani Prasad, AIR 1960 All 510, have held that it is unnecessary for the Court to give its own estimate. The Calcutta High Court in Rajah Ramessur Prashad Narain Singh v. Rai Sham Kissen, (1904) 8 Cal WN 257; Saurendra Mohan Tagore v. Hurruk Chand, (1908) 12 Cal WN 542; Bejoy Singh Dadhtdia v. Ashutosh Gossain, AIR 1924 Cal 589; Lachira v. Rameshvar Singh, AIR 1930 Cal 781; Pashupati Nath v. Bank of Behar, AIR 1932 Cal 141; New Birbhum Coal Co. Ltd. v. Surendra Nath Laik, AIR 1934 Cal 205 the Patna High Court in Raghunath Singh v. Nazari Sahu, AIR 1917 Pat 381 and Mt. Golab Kuer v. Mt. Bibi Saira, AIR 1919 Pat 372 and the Rangoon High Court in A.M.K.M. Firm v. Baishmaw, AIR 1937 Rang 137, have expressed opinions favouring giving of the Court's own estimate of the value of 16 AVSS,J & JS,J C.M.A.No.542 of 2024 the property to be sold. But, a mere acceptance of the valuation given by the decree-holder has been held to be material irregularity in A.M.K.M. Firm v. Baishmaw (supra). The High Court of Bombay, in Charandas Vasanji v. Dossabhoy Maganlal, AIR 1939 Bom 182; Premaraj Pannalal Shop v. Sadabai, AIR 1935 Bom 331, has held that, although, it is not necessary for the execution Court to value the property to be sold, yet, it may do so if it thinks fit. In Sitabai Rambhau Marathe v. Gangadhar Dhanram, AIR 1935 Bom 331, however, the Bombay High Court held that the Court is bound to hold an enquiry as to the value of the property and to state it in the sale proclamation. Although the Madras High Court had held that it is not necessary for the Court to give its own valuation, it expressed the opinion that it is desirable, where there is a wide divergence between the valuation of the decree- holder and of the judgment-debtor, to have property valued through an Amin and to state it in the proclamation: The Calcutta view, in some of the cases mentioned above, was that, although the Court need not give its own valuation of the property in the sale proclamation, it would be justified in stating the valuation given by the parties.
A review of the authorities as well as the amendments to Rule 66(2)(e) make 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) requires the Court to state only the facts it considers material for a purchaser to judge the value and nature of the property himself. Hence, the purchaser should be left to judge the value for himself. But, essential facts which 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 17 AVSS,J & JS,J C.M.A.No.542 of 2024 stated. That is, after all, the whole object of Order 21 Rule 66(2)(e), Civil Procedure Code. The Court has only to decide what all these material particulars are 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 have both valued the property; and these do not appear fantastic. It may usefully state other material facts, such as the area of land, nature of rights in it, municipal assessment, actual rents realized, which could reasonably be expected to effect 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."
14. Further strong reliance was placed on the decision in P. Rami Reddy Vs. P. Sundara Rama Reddy and Others, wherein the learned Judge of this Court at paras 6 and 7 observed as hereunder.
A reading thereof would postulate that notwithstanding anything contained in Rule 72, a mortgagee-decree-holder of immovable property shall not bid for or purchase property sold in execution of a decree without obtaining the leave of he Court to bid for or purchase the property. The leave granted shall be subject to the condition that the reserve price shall be 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. If the leave is granted to the mortgagee-decree-holder to bid in the auction or purchase the hypotheca, the language couched in Rule 72-A(2) thereof manifests in mandatory language that the Court "then shall fix" a reserve price as regards the mortgagee and unless the Court otherwise directs, the reserve price "shall be not less than the amount due for principal, interest and costs in respect of the mortgage if the property is sold in one lot and if it is sold in more than one lot, not less than such sum as shall appear to the Court to be properly attributable to such lots in 18 AVSS,J & JS,J C.M.A.No.542 of 2024 relation to the amount then due for principal, interest and costs on the mortgage.
15. The contention of Sri Ramana Reddy, learned Counsel for the appellant is that the language "unless the Court otherwise directs"
would engraft within its ambit the discretion provided in Rule 72(1) and in exercise thereof the lower Court granted permission subject to the condition that the bid shall not be less than the upset price. To appreciate this contention it is necessary to consider what is the ambit and meaning of the words "unless the Court otherwise directs", in the context of Rule 72-A read as a whole. Undoubtedly, the words "unless the Court otherwise directs" would give a meaningful construction of discretion in the Courts while granting permission to the mortgagee-decree-holder to participate in the bid. But the exercise of the discretion and direction otherwise granted would be germane to the purpose sought to be achieved under Rule 72A. The question therefore is what is the purpose of Rule 72A. The language couched in Rule 72-A appears to emphasize the mandatory character of the duty case on the Court. The manner of exercise of the power under Sub-rule (2) of Rule 72A makes manifest from the words "the Court shall fix the reserve price" for sale shall not be less than the amount due under the decree i.e., the principal amount, interest thereon and costs, if the land is sold in the one lot shall be conterminous with the extinguishment of the debt due. If it is sold in more than one lot, the reserve price shall be so apportioned consistent with the nature of the property, the extent thereof or quality and the amount sought to be recovered and shall be evenly distributed so as to apportion the debt and liquidation thereof. From the language thus manifested by the statute, it gives in unmistakable terms the legislative animation that it intended to relieve the mortgagor from all the liabilities incurred under the mortgage. It also seems to eradicate or at least aimed to nip in the bud the incurable tendency on the part of the decree-holder to take undue advantage of the court sale by purchasing the hypotheca at a lower price by procuring collusive bidders at a farce of sale and to knock 19 AVSS,J & JS,J C.M.A.No.542 of 2024 off the property at a minimal price and then to take recourse to recover the residue of the decree debt by other process available under the Code. If the mortgagee-decree-holder opts to make avail of the statutory facility to bid in or purchase the hypotheca in such Court auction he shall abide by law i.e., he should be prepared to purchase the property in discharge of full quids viz., in full satisfaction of the entire outstanding debt due under the mortgage decree in execution. Considered from this perspective, the necessary conclusion is that it is the mandatory duty of the executing Court while granting leave to the mortgagee-decree-holder either under Order XXI Rule 72(1) or under Order 21 Rule 72A, to comply with the fixation of the reserve price in conformity with the mandatory conditions stipulated under Sub-rule (2) (a) or (b) of Rule 72A. That it is mandatory is made manifest when we read the opening language of Rule 72- A viz., "notwithstanding anything contained in Rule 72." The non-compliance thereof renders the grant of permission to the mortgagee-decree- holder fatal and per se illegal. The exercise of discretion under Sub-rule (2) of Rule 72-A is in the nature of an exception and for the exercise thereof the legislature carved out large leeway to the Court by employing the language "the Court unless otherwise directs". It is obviously difficult for the legislature to foresee diverse situations or circumstances that may confront the Court invoking the rule. To meet such situation power is preserved in the Court. In a given case on its peculiar facts and circumstances, for relevant and germane reasons mentioned thereunder the Court may otherwise give directions. But such directions must always be to sub-serve the object of Rule 72-A but not in defeasance thereof. Lest while exercising the wide discretion the purpose and working of Rule 72-A would be rendered otiose and nugatory and could easily be frustrated or defeated. When permission to mortgagee is granted in conformity with Rule 72- A, then and then only the mortgagee could make avail of the statutory benefit of set off under Rule 84(2) of Order 21. Otherwise the mortgagee on the sale being knocked down in his favour shall pay immediately 25% of the amount of purchase 20 AVSS,J & JS,J C.M.A.No.542 of 2024 money as envisaged under Rule 84(1) and in default thereof the property shall forthwith be resold. A reading of the order of the Court below earlier would clearly show that the lower Court did not accord permission to the appellant in compliance of Rule 72-A(2) and thereby he is denuded the benefit of set off under Rule 84(2). Admittedly no deposit of 25% of the amount of purchase money was immediately deposited by the second respondent either by himself personally or on behalf of the appellant. As a fact, no deposit was made nor the property was resold forthwith. The non-compliance of the mandatory requirement of Rule 84(1) renders the sale per se illegal. Grouched from this perspective, I have no hesitation to conclude that the permission granted to the appellant is palpably illegal and the sale also became illegal and so the Court below has rightly set aside the sale warranting no interference in this appeal. The lower Court is directed to proceed with the execution as expeditiously as possible. In view of Order XXXIV, Rule 5 of the CPC it is still open to the judgment-debtor to pay the decretal amount in terms thereof and get the debt discharged. The appeal is accordingly dismissed. Since none are appearing for the respondent, there is no order as to costs. Appeal dismissed.
20. In Mrs. Achamma Cyriac Vs. The Kerala Financial Corporation and Others, while dealing with Order XXI Rules 64 and 72 of the Code and fixation of reserved price less than the decretal amount due to mortgagee, decree-holder it was held that the sale is nullity.
21. Reliance also was placed on the decision in A.C. Nagaraju Vs. N. Sreenivasa Reddy, where the learned Judge of this Court while dealing with setting aside the execution of sale on the ground of irregularity while dealing with an application under Order XXI Rule 90 of the Code held that the decree against respondent had become final and sale proceedings initiated- respondent was not present at the time of sale and he was not aware of value of property as entered in sale proclamation before sale took place, sale notice was published in English which language respondent did not know, the 21 AVSS,J & JS,J C.M.A.No.542 of 2024 respondent produced valuation certificate issued by sub-registrar showing valuation of property much more than indicated in sale proclamation- order setting aside sale on the ground that valuation of property furnished in the sale proceedings was far less than actual value, not to be interfered with.
22. Sri M. Venkata Narayana, learned Counsel representing the respondent-decree-holder placed strong reliance on the decision of the Division Bench of Kerala High Court in Anto Nitto Vs. South Indian Bank Ltd., wherein while dealing with Order XXI Rule 72A(2) of the Code observed at para 21 as hereunder.
Before parting with the consideration of Antony''s case (supra), we would like to refer to one important aspect having a bearing on the question of a party''s right to waive the strict compliance with the mandatory provisions of law like Rule 72A(2). In this connection we would refer to the avowed legislative purpose intended to be achieved by the incorporation of the provisions of Sub-rule (2) of Rule 72A. Justice K. Ramaswamy (as His Lordship then was) had pithily put it in the following words in P. Rami Reddy Vs. P. Sundara Rama Reddy and Others, :
...From the language thus manifested by the statute, it gives in unmistakable terms the legislative animation that it intended to relieve the mortgagor from all the liabilities incurred under the mortgage. It also seems to eradicate or at least aimed to nip in the bud the incurable tendency on the part of the decree-holder to take undue advantage of the Court sale by purchasing the hypotheca at a lower price by procuring collusive bidders at a force of sale and to nock off the property at a minimal price and then to take recourse to recover the residue of the decree debt by other process available under the Code....
We are in full agreement with the above observations. It is clear that of the above two purposes one at least cannot be treated as something intended to benefit the judgment- debtor alone. While the one is exclusively to safeguard the interest of the judgment-debtors, 22 AVSS,J & JS,J C.M.A.No.542 of 2024 the other is intended to serve a public purpose also, namely to nip in the bud itself an incurable and pernicious tendency on the part of the decree-holder to take undue advantage of the court sale and to practice fraud even in Court proceedings. We may also refer in this connection to the observations of Subba Rao, J. in Dhirendra Nath Gorai and Subal Chandra Shaw and Others Vs. Sudhir Chandra Ghosh and Others, , where the learned Judge was dealing with the right of a party to waive strict compliance with certain provisions of law (at page 1305):
...a mandatory provision can only be waived if it is not conceived in the public interests, but in the interests of the party that waives it.... In the light of the above principle regulating the right of a party to waive compliance with mandatory provisions of law had it been necessary for us to take a final decision in the matter, we would have held that compliance with the requirements of Rule 72A(2) cannot be waived by the judgment-debtor since it is not a provision incorporated solely for his benefit. It is a provision intended to remove a social evil. However, we find that it is not necessary for us to pronounce finally upon the above point in this case as we have already held as a finding of fact that the judgment-debtor in this case has not waived his rights in that behalf.
It is pertinent to note that P. Rami Reddy Vs. P. Sundara Rama Reddy and Others, had been referred to by the Division Bench of the Kerala High Court.
23. The learned Counsel also placed strong reliance on the decision of the Division Bench of Madras High Court in A.U. Natarajan and Another Vs. Indian Bank, wherein the learned Division Bench of the Madras High Court at paras 14, 20, 21, 22 and 23 observed as hereunder.
We have already pointed out the difference in meaning between the words ''value'' and ''upset price'' or ''reserve price''. What the proviso in question lays down is that in a proclamation of sale the estimate of the value of the property as 23 AVSS,J & JS,J C.M.A.No.542 of 2024 given by either or both the parties, should necessarily find a place. But, no duty was cast on the court to enter into the sale proclamation its own estimate of the value of the property. The reason for the Legislature having worded the proviso in the manner done is not far off to see. The court making an estimate of the value of the property and entering it in the proclamation of sale would become necessary only when an upset price has to be fixed for the property. Since the Legislature has now made it obligatory that the estimate of the value of the property as given by either or both the parties, should necessarily find a place in the proclamation of sale, the need for the Court to fix an upset price may not arise in all cases. The procedure indicated by P.N. Ramaswami, J. in Yellappa Naidu v. Venugopal Naidu (1957) 70 Mad LW 815 : AIR 1958 Mad 423 can be resorted to i.e., the sale will have to commence at the higher price given by the judgment-debtor and, in the absence of bidders, the price will have to be progressively brought down till it reaches the figure given by the decree-holder and again raised up, depending upon the availability of bidders. If, in spite of such a procedure, the sale does not take place for want of bidders, then it is open to the court, on the application of the decree-holder, to fix an upset price for the property at a rate as near as the property would be worth in the estimation of the court. If, even then, the sale does not take place, the decree-holder can move the executing court to reduce the upset price. It will be open to the executing court to reduce the upset price or not, depending upon the circumstances of the case, and, if a reduction is to be made, to decide the extent to which the upset price should be reduced. It is only for these reasons, the legislature should have enacted the proviso in two parts, the first part relating to the discretionary power of the court to give its own estimate of the value of the property in the sale proclamation and the second part relating to the obligation of the court to include in the sale proclamation the estimate, if any, given by either of both the parties. The first part of the proviso is in the negative and the second part, in the affirmative. The significance of the manner of 24 AVSS,J & JS,J C.M.A.No.542 of 2024 drafting cannot be missed. The affirmative is used to give a mandate and the negative is used only to emphasize that the court is not under a duty to enter its own estimate in the proclamation of sale. If it is the intention of the legislature that the court should, in no circumstances, give its own estimate of the value of the property, then the wording of the first part of the proviso would have been entirely different. The legislature would have clearly mentioned that the court was precluded from making its own estimate of the value of the property and that the proclamation shall not include the estimate, if any, made by the court.
In some cases, the court may feel called upon, in the interests of justice, to enter in the proclamation of sale its own estimate of the value of the property. Take, for example, a case where the judgment-debtor, for some reason has not given his value of the property and only the decree-holder has given his value and that value is grossly low. The proclamation of sale would then contain only the value as given by the decree-holder, and if the property is brought for sale, the bidding at the auction can start only at the rate given by the decree-holder and the property may be knocked off at the value given by the decree-holder or for a slightly higher amount. The result will be that the property may get sold for a very low price and the judgment- debtor would be the loser in the bargain. To avoid such a situation, the court can certainly exercise its discretionary power under the first limb of the proviso and give its own estimate of the value of the property in the sale proclamation.
When property is sold in court auction, the court does not merely act as an auctioneer, but has also a duty to protect the interests of the judgment-debtor as well as the decree-holder. It is with reference to this peculiar role, Rule 199(2) of the Civil Rules of Practice has been framed. The said rule is in the following terms:
Upset price: In cases in which the court may consider that the applicant (decree-holder) should not be allowed to bid for less than a sum to be fixed, it shall be competent to the court to 25 AVSS,J & JS,J C.M.A.No.542 of 2024 give leave to bid at the sale only on condition that the applicant''s (decree-holder''s) bid shall not be less than the amount so fixed by the court, which amount shall, as far as practicable, be determined with reference to the probable market value of the property, or of the lot or lots into which the property is divided for sale." When the decree-holder seeks leave of the court to bid at the auction, the court may deem it necessary to fix the upset price of the property with reference to the probable market value of the property or the lots into which it may be divided for sale. It would be strange logic to say that the court should step into safeguard the interests of the judgment-debtor only in those cases where decree-holder seeks leave of court to bid at the auction and at other times, the court need not concern itself with fixing an upset price for the property. If such a narrow view is taken, then the decree-holder can defeat the object underlying the rule by putting up a benamidar as the purchaser. Even as in the case of a judgment-debtor, the court has also to safeguard the rights of the decree-holder by seeing to it that the execution proceedings do not become abortive for want of bidders for purchasing the property at the highly boosted up rate given by the judgment-debtor.
We are therefore of opinion that the court''s power to fix an upset price for the property, which includes within it a right to reduce the upset price whenever necessary has not only been available to the court all through, but such a right is a irremovable one, and the said right has not been impinged in the least by the second proviso introduced by Act 104 of 1976. Of course, as pointed out in B. Susila and Another Vs. Saraswathi Ammal and Others, when the court fixes the upset price, the court is not determining the rights of any of the parties before it, and the fixation of the upset price is only for facilitating the conduct of the sale and, at the same time, safeguarding the interests of the judgment-debtor by fixing a reserve price. Notwithstanding the fixation of the upset price and notwithstanding the fact that a bidder has offered an amount higher than the upset price, it will still be open to the judgment-debtor to 26 AVSS,J & JS,J C.M.A.No.542 of 2024 approach the executing court and adduce proof that the property has been sold for a low price on account of some material irregularity or fraud in the publication or conduct of the sale and have the sale set aside".
14. In the case of Anto Nitto v. South Indian Bank Limited, reported in AIR 1998 Kerala 219, a Division Bench of the Kerala High Court, at paragraph Nos.2, 4, 11, 12, 13, 14, 14A, 15, held as follows:
" 2. The main question arising for consideration is whether the sale in question is liable to be set aside or not which has to be considered in the backdrop of the following facts and circumstances.
4. Briefly stated the main contentions raised in the E.A. are thus: The sale has been effected without fixing reserve price for the properties in accordance with the mandatory provisions contained in Order XXI, Rule 72A, C.P.C. The Sale thus effected is in gross violation of the provisions contained in Order XXI, Rule 72A. The two items of properties will be worth at least Rs. 5 crores. Item No. 1 property is a properly having an extent of more than 30 cents lying by the side of M.G. Road, Emakulam, in an important locality. There is an unfinished building having a plinth area of 30000 sq. ft. and worth about Rs. 1 crore situate in the said property. The upset price fixed and price for which the properties were sold are ludicously low when compared to the actual worth of the properties. If a commission is issued to ascertain the market value of the properties, it will be seen that the market value of the properties will be more than Rs. 5 crores. By the sale of the properties for a paltry amount of Rupees 1,00,02,000/- substantial injury has been caused to the judgment-debtors. The price for which the properties have been sold is unconscionably low. As such the sale offceted is liable to be set aside treating it as ab initio void.
11. Rule 72A incorporated in the Code as per the Amendment Act 104 of 1976 and sub-rule (3) 27 AVSS,J & JS,J C.M.A.No.542 of 2024 of Rule 72 of order XXI, C.P.C. are in the following terms:
"72A. Mortgagee not to bid at the sale without the leave of the Court-- (1) 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.
(2) If leave to bid is granted to such mortgagee, then the Court shall fix a reserve price as regards the mortgage, 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.
(3) In other respects, the provisions of sub-rules (2) and (3) of Rule 72 shall apply in relation to purchase by the decree-holder under that rule.
72(3). Where 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 whose interests are affected by 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 re-sale and all expenses attending it, shall be paid by the decree-holder."
12. The first question to be considered is whether the sale effected was in violation of the mandatory provisions contained in Rule 72A, C.P.C. as contended by the appellant and if so whether the sale is liable to be set aside under sub-rule (3) of that Rule. It is clear from the proceedings in the E.P. that the decree-holder has filed E.A. 1123 of 1992 under Rule 72A of Order XXI on 14-10-1992 to fix reserve price for item No. 1 property as Rs. 95 lakhs and Rs. 5 lakhs for item No. 2 property. Though the E.A. 28 AVSS,J & JS,J C.M.A.No.542 of 2024 was posted for counter and hearing on two or three dates, no counter was filed. Ultimately the Court has fixed Rs. 95 lakhs and Rs. 5 lakhs for items 1 and 2 respectively as 'upset price' on 10- 2-1993. It is also clear from the proceedings that the decree-holder has filed E.A. 483 of 1993 under Rule 72(2) on 3-4-1993 for permission to bid for the properties in auction and the permission was granted on 27-5-1993 recording the submission made on behalf of the judgment- debtors that they have no objection in allowing the application.
13. With respect to the orders passed by the execution Court fixing the upset price and granting permission to bid, the learned Counsel for the appellant has submitted that they are orders passed mechanically without any application of mind. The sequence in which the orders are passed and the contents of the orders would establish the same was the submission of the learned Counsel for the appellant. In this connection it was submitted that though the prayer of the decree-holder was to fix a reserve price, what was fixed was 'upset price'. As such the amount fixed as upset price cannot be treated as reserve price for the purpose of Rule 72A. Normally, it was mandatory on the part of the Court to fix the reserve price at an amount not less than the amount then due for principal, interest and costs as per the decree. For fixing reserve price at an amount lesser than the total amount as indicated in the rule, the Court was bound to give reasons for effecting such deduction. The fact that while passing orders in E.A. 1123 of 1992 the Court has used the words 'upsetprice' would clearly indicate that the Court has neither referred to the prayer made in the application nor to the relevant provisions contained in sub-rule (2) of Rule 72A. Using of the words 'upset price' is a clear indication of the fact that while passing orders on E.A. 1123 of 1992 the Court has not borne in mind the requirements of Rule 72A(2). Further, the fact that the Court has not given any reason for fixing the upset price at Rs. 95 lakhs and Rs. 5 lakhs for items 1 and 2 an amount far below the total amount due as per the decree towards principal, interest and costs would clearly indicate that 29 AVSS,J & JS,J C.M.A.No.542 of 2024 while passing the orders in E.A. 1123 of 1992 the execution Court was acting contrary to the provisions contained in Order XXI, Rule 72A(2) or without bearing in mind the provisions contained in that rule. According to the learned Counsel non-application of the mind is writ large on the face of the order. The Court was only adopting the value stated by the decree-holder in the application forgetting its responsibility to fix a reserve price in accordance with the provisions contained in sub-rule (2) of Rule 72A of Order XXI. Such a mechanical or literal compliance cannot be treated as a proper compliance of the provisions at all. Even assuming that there is literal compliance with the requirements of the provision, it had not been complied with in spirit. Further, it was submitted that the scheme of the provisions contained in Rule 72A would show that the Court is bound to fix the reserve price either at the time of giving permission to the mortgagee-decree-holder to bid for the properties at the auction or at least simultaneously after granting such permission. In this case the sequence of the orders passed would show that at the time when upset price was fixed there was not even a prayer for permission to bid and such a prayer was made only long after the upset price was fixed. The question of fixing a reserve price would arise only at the time of giving permission for the mortgagee-decree- holder to bid or thereafter and not earlier. All these aspects stressed according to the learned Counsel for the appellant would establish his contention that the executing Court has acted in a casual manner without applying its mind and without bearing in mind its obligation to take extreme care in complying with the mandatory requirements of the provisions contained in Rule 72A while ordering sale of the properties in execution.
14. We do not find much force in the contention of the learned Counsel for the appellant that there is no fixation of reserve price. The only reason for taking such a contention is that the word used is 'upset price' and not 'reserve price' as it ought to be as per Rule 72A. Upset price is not a word used in any of the provisions in the CPC. It is not a word defined either in the CPC or 30 AVSS,J & JS,J C.M.A.No.542 of 2024 in the General Clauses Act. As per Rule 72A what is to be fixed is the reserve price of the properties sought to be sold. According to the learned Counsel for the respondent the word upset price is synonymous with reserve price and the fact that the Court has used the word upset price instead of reserve price may not be a reason for holding that the Court has not fixed a 'reserve price'. In this connection learned Counsel for the respondent has strongly relied upon the decision reported in Dr. A.U.L. Natarajan v. Indian Bank, Madras, AIR 1981 Mad 151, where a Division Bench of the Madras High Court has held thus:
".........the term 'upset price' means last selling price or reserve price."
Having due regard to the fact that the Court has fixed the amount while passing orders in E.A. 1123 of 1992 wherein the decree-holder has prayed for fixing a reserve price for the two items of properties sought to be sold, we are of the view that it may not be reasonable to proceed on the basis that the Court has not fixed any reserve price for properties in this case solely for the reason that the word used is 'upset price' and not reserve price.
14A. Similarly, we do not find much force in the contention of the learned Counel for the appellant that the fixation of the upset price or reserve price was prior to the granting of permission for bidding the properties in auction and that would violate the provisions contained in Rule 72A of Order XXI. If at all it is a violation it can only be considered as a technical violation of the requirements which cannot be taken note of seriously.
15. However, we find force in the submission of the learned Counsel for the appellant that while fixing reserve price the executing Court has acted casually without any application of mind and that there is gross violation of the mandatory provisions contained in the Rule at least in spirit if not in its letter. As is evident from sub-rule (2) of Rule 72A normally Court should fix the reserve price at an amount not less than the amount covered by the decree towards the principal, 31 AVSS,J & JS,J C.M.A.No.542 of 2024 interest and costs decreed as regards the mortgagee-decree-holder unless the Court finds reasons to direct otherwise. The mandatory duty of the Court to state reasons while fixing 'reserve price' below the amount due as per the decree has been highlighted in the decisions of this Court reported in Abdulla v. Syndicate Bank, 1996 (1) Ker LT 9; Sreedharan v. Federal Bank Ltd., 1996 (1) Ker LJ 20 and the decision of the Bombay High Court reported in Mahomed Abdulla v. Sakharam, AIR 1930 Bom 290. In this case the order passed in E.A. 1123 of 1992 on 10-2-1993 is only to this effect:
"Upset price fixed".
Admittedly the amount in the E.P. itself is Rs. 1,37,30,901.03 and the amount actually due as per the decree on the date when the Court passed the above order is about Rs.
1,63,00,000/- which is much more than the total amount of Rs. 1 crore fixed as upset price for the two items of the properties. The order passed does not state any reason for fixing an amount which is much lesser than the amount actually due under the decree as on that day as 'upset price'. The words 'unless the Court directs' would in our view indicate that it is mandatory on the part of the Court to indicate its reasons for fixing the reserve price at an amount lesser than the amount covered by the decree as on the date of fixing the reserve price departing from the normal rule of fixing it at an amount not less than the amount covered by the decree. The fact that the amount of Rs. 95 lakhs and Rs. 5 lakhs suggested by the decree-holder was fixed as 'upset price' and not as 'reserve price' and that too without giving any reasons for adopting such an amount which is very much less than the amount due as per the decree as on that date would clearly indicate that the Court was only adopting mechanically the value suggested by the decree-holder in the application without keeping in mind the mandatory requirements of sub-rule (2) of Rule 72A of Order XXI and without reference to the wide disparity between the value suggested by the decree-holder and the judgment-debtors in their objection filed with reference to the details contained in the 32 AVSS,J & JS,J C.M.A.No.542 of 2024 proclamation. It is relevant in this connection to note that Rs. 95 lakhs and Rs. 5 lakhs were the estimated value of the properties given by the decree-holder in the proclamation and it was the same figure which was requested to be fixed as the reserve price of the properties as per E.A. 1123 of 1992. The appellant has seriously disputed the correctness of the value of the properties shown by the decree-holder in the proclamation and has asserted that the value of item No. 1 property would be more than Rs. 4 crores including the value of the incomplete building estimated to be worth Rs. 1 crore. We would in the circumstances agree with the contention of the learned Counsel for the appellant that non-application of mind is writ large on the face of the order fixing the reserve price and that even accepting the price fixed as reserve price it cannot be treated as one fixed legally in compliance with the requirements of the provisions contained in Rule 72A.
15. In the case of Saju George v. Thomas and others, reported in ILR 2008 (3) KLT 616, the Kerala High Court, at paragraph Nos.15 and 28, held in the following manner:
15. Rule 72A was introduced in the Code by CPC Amendment Act 104 of 1976 which came into force with effect from 1.2.1977. Rule 72A reads:-
Mortgagee not to bid at sale without the leave of the Court- (1) 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.
(2) 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 33 AVSS,J & JS,J C.M.A.No.542 of 2024
(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.
(3) In other respect, the provisions of sub-rules (2) and (3) of rule 72, shall apply in relation to purchase by the decree holder under that rule.
28. Sub rule (3) of Rule 72 provides for the procedure whereunder a sale conducted in violation of the provisions of sub rule (1) of Rule 72 . If in the sale conducted, the decree holder purchases of the property without the express permission of the court, he is not entitled to the set off as provided under sub rule (2). But the sale is liable to be set aside on an application filed under sub rule (3) of Rule 72. Thus the right given to the judgment debtor or any person effected by such sale, which was conducted in violation of the provision of sub rule (1), is to set aside the sale at the risk and expenses of the decree holder. Similarly, if such a sale is conducted and the mortgagee decree holder bid for and purchases the property on the mortgage in violation of sub rule (1) or without the court fixing a reserve price as provided under sub rule (2) of Rule 72A , the sale is liable to the set aside under sub rule (3) of Rule 72A . In both the cases, as in the case of an application filed under Rule 90 of Order XXI, petitioners need not establish any substantial injury resulted by such sale. If the sale is conducted in violation of sub rule (1) of Rule 72 or sub rule (1) or (2) of Rule 72A of Order XXI that itself is sufficient to set aside the sale without establishing any substantial injury caused by such sale. But in both cases, if the sale is not set aside under sub rule (3), the sale will be a valid sale. If so it cannot be said that the sale is void. It cannot be said that sale conducted by the court without fixing the reserve price, though leave was granted to the mortgagee decree holder to bid and purchase the property on the mortgage is without jurisdiction making the sale void or a nullity. Therefore the court auction sale, though conducted in violation of sub rule (2) of Rule 72A is not a sale conducted without the inherent jurisdiction. If that be so, the sale cannot be void 34 AVSS,J & JS,J C.M.A.No.542 of 2024 for violation of sub rule (1) or sub rule (2) of Rule 72A of Order XXI of the Code. The violation under sub rule 72A would only enable the judgment debtor or any person effected by such sale to apply to the executing court under sub rule (3) to set aside the sale. Though he need not establish, in such an application, that substantial injury has resulted by such sale, his remedy is to get the sale set aside as provided under sub rule (3). It may be that instead of filing a petition under sub rule (3) an application is filed under Rule 90 of Order XXI and in that application the sale may be set aside treating the petition as one filed under sub substantial injury provided under sub rule (2) of Rule 90 of Order XXI. But neither the judgment debtor nor his representative nor any person affected by such sale is entitled to file a petition under section 47 contending that the sale is void. Both provisions operate on different spheres. It is more so because sub rule (3) of Rule 72A or Order XXI provides a special remedy for the specific violation. Affected party can opt only that remedy. Any other view would make sub rule (3) of Rule 72A of Order XXI of the Code otiose. Moreover when an application to set aside the sale as provided under sub rule (3) can be filed only within sixty days from the date of sale as provided under Article 127 of Limitation Act 1963, it cannot be allowed to be circumvented by recourse to Section 47 of Code of Civil Procedure. The legislative intent behind incorporating Rule 72A of Order XXI of Code of Civil Procedure is that when the mortgagee decree holder is granted leave to bid and purchase, the mortgagor shall be relieved from all the liabilities incurred under the mortgage in addition to eradicate the evil tendency on the part of the mortgagee decree holder to take undue advantage of purchasing the property at a lower price by procuring collusive bidders at a farce sale. It is to prevent knocking off the property at a minimal price resulting in leaving no residue of the decree debt. If that be the purpose of providing Rule 72A of Order XXI, when the mortgage property was sold and purchased by first respondent for Rs. 1,91,443/-, which covers the entire liability on the mortgage at that time, 35 AVSS,J & JS,J C.M.A.No.542 of 2024 and is not less than the reserve price that could have been fixed under sub rule 2 of Rule 72A , it cannot be said that the sale is bad in law. It is more so when the value seen in the sale deeds obtained by the petitioners from the second respondent is less than the value at which the property was purchased by the first respondent in the auction sale. In such circumstances, there is no merit in the Civil Revision Petitions. They are dismissed".
16. In the case of D.S.Chohan and another v. State Bank of Patiala, reported in (1997) 10 SCC 65, the Hon'ble Apex Court, at paragraph Nos.2 and 3, held as follows:
"2. These appeals arise out of proceedings for execution of a decree passed in favour of the respondent Bank. In the said execution proceedings the moveable and immovable properties of the appellants which were mortgaged with the respondent were attached and were ordered to be sold. Earlier an auction was held for sale of all the properties in one lot. The upset price of Rs 13,67,750 was fixed by the court and the highest bid that was received in the auction was for Rs 6,50,000. Thereafter at the request of the g respondent, it was decided to sell the properties in two lots, i.e., moveable in one lot and immovable in another lot. Fresh auction was held for moveable and immovable properties separately, Insofar as the sale of moveable property is concerned, the sale has been confirmed and no appeal was filed against the said order. As regards the sale of immovable property, it appears that the respondent, being the mortgagee decree- holder, had applied before h the court for permission to make the bid under Order 21, Rule 72-A CPC. Such permission was granted to the respondent by the court by order dated 2-1-1981. Although in the application the respondent had submitted that the reserve price may not be fixed, there is no consideration of the said prayer of the respondent in the said order and no reasons have been given for not fixing the reserve price in the sale proclamation. In pursuance of the order dated 2-1-1981 the respondent participated in the auction and the bid of 36 AVSS,J & JS,J C.M.A.No.542 of 2024 the respondent for Rs 6,75,000 was accepted. An objection was raised by the appellants against the acceptance of the said bid of the respondent on the ground that there was non-compliance with the mandatory provisions of Order 21, Rule 72-A CPC. The said objection was rejected by the learned Single Judge and the appeal filed by the appellants has been dismissed by the Division Bench of the High Court by the impugned judgment.
3. In view of the specific requirement contained in sub-rule (2) of Rule 72-A of Order 21 CPC that in cases where leave to bid is granted to the mortgagee, the Court shall fix a reserve price as regards the mortgagee and unless the Court otherwise directs the said reserve price has to be in consonance with requirement of clauses (a) and (b), it was incumbent for the Court to fix the reserve price. In the order dated 2-1-1981 the Court, while permitting the respondent mortgagee to make the bid, did not give any direction regarding fixing the reserve price. The sale in favour of the respondent having been made in violation of the mandatory provisions of Order 21. Rule 72-A(2) CPC cannot be upheld and has to be set aside".
17. Coming to the judgments cited by the learned counsel for the Decree-holder-respondent, in the said cases, the impact and non-
compliance of the mandatory provisions of Order 21 Rule 72-A CPC never fell for consideration, as such, the same would not render any assistance to the case of the Decree-holder-respondent.
18. The non-compliance or non-adherence to the provisions of Order 21 Rule 72-A CPC, which deals with the sale in execution of Mortgage decree, is certainly a material irregularity having regard to the laudable object behind incorporation of the said provision of law in the Code of Civil Procedure, i.e., to prevent the Decree-holder-Mortgagee to 37 AVSS,J & JS,J C.M.A.No.542 of 2024 take away the property at throwaway or paltry price. In view of the above reasons and the mandatory provisions of Rule 72-A of Order 21 CPC and the law laid down in the above referred judgments, the first contention of the learned counsel for the appellants is required to be upheld.
19. With regard to the second contention advanced by the learned counsel for the appellants, that the participation of the Power of Attorney, in his individual capacity, is impermissible, it is to be noted that, admittedly, the Executing Court granted permission to the Decree-holder i.e., Sri Bharathi Warehousing Corporation, Guntur, represented by its partner-Sri Polisetty Syam Sundar, represented by its Special Power of Attorney Holder, Sri Nonne Madhava Siva Prasad.
But a perusal of sale proceedings/Bidders' List shows that Sri Nonne Madhava Siva Prasad participated in his individual capacity.
Therefore, on this ground also the sale is liable to be set aside.
20. For the aforesaid reasons, Civil Miscellaneous Appeal is allowed, setting aside the order, dated 21.08.2023, passed by the Court of the learned II Additional District Judge, Guntur and, consequently, E.A.No.09 of 2014 in E.P.No.64 of 2012 in O.S.No.110 of 2009 is allowed and the sale of the subject property conducted on 30.06.2014 is hereby set aside. However, this order will not preclude the Decree-
38AVSS,J & JS,J C.M.A.No.542 of 2024 holder from proceeding in accordance with law and E.P.No.64 of 2012 stands restored to file for taking steps by the Decree-holder as per law.
There shall be no order as to costs.
Consequently, miscellaneous petitions, if any, pending in the Civil Miscellaneous Appeal, shall stand closed.
__________________ A.V.SESHA SAI, J ________________________ SUMATHI JAGADAM, J 28th February, 2024.
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