Kerala High Court
K.V. Antony vs Catholic Syrian Bank Ltd. on 20 July, 1994
Equivalent citations: AIR1995KER70, AIR 1995 KERALA 70, (1994) 2 KER LJ 339, (1994) 2 KER LT 341, (1997) 34 BANKLJ 101, (1996) BANKJ 19, (1996) 1 BANKCAS 95, (1996) 1 BANKCLR 78
Author: K.T. Thomas
Bench: K.T. Thomas
JUDGMENT Thomas, J.
1. Decree-holder-bank brought the property of the appellant to sale in execution of a mortgage decree. Sale was conducted on 15-11-1989. The decree-holder purchased the property, in the absence of other bidders, for the decree debt due them. Appellant moved for setting aside the sale, but the execution Court dismissed it as per the impugned order.
2. Among the grounds taken up by the appellant, he pressed two of them into service here. First is that there was gross undervaluation of the properties sold, Second is that the sale is illegal inasmuch as the Court did not fix a reserve price as regards the mortgage as provided in Order 21, Rule 72-A(2) of the Code of Civil Procedure (for short 'the Code').
3. Regarding the first ground, appellant has not adduced any evidence. There is no material to show that the value of the property would have been substantially higher than the bid amount as on the date of sale.
4. For considering the second contention it has to be mentioned that the sale was duly proclaimed and on earlier occasions when sale was to take place it was postponed at the instance of the appellant and on all such occasions he signified in writing his consent to waive the requirement for fresh proclamation. Decree-holder applied for leave to bid in auction and such leave was granted on 5-8-1989.
5. Order 21, Rule 72A of the Code reads thus :
"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 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 attibutable 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."
6. The backdrop of this new rule may throw some light, and hence we would have a glimpse on it. The preceding rule i.e., Rule 72 of the Code, contains an interdict against a decree-holder that he shall not bid or purchase the property "without express permission of the court". It also provides for the situation where decree-holder bids or purchases the property with such permission. In such a situation the purchase money and the amount due on the decree would be set off against each other. The court would then enter up satisfaction of the decree. If a decreeholder happened to purchase the property without such permission Sub-rule (3) confers a discretion on the court to set aside the sale on an application filed in that behalf.
7. When Rule 72 remained like it, Law Commission pointed out in its 34th Report that "the decree-holder, if interested in purchasing the property himself, can, conceivably, keep back or discourage (or even mislead) prospective purchasers and though, ordinarily, the fetching of a higher purchase price would be in his interest, it should not be forgotten that when he is the purchaser this consideration takes leave and he would like the price to be low". Law Commission thereupon recommended that a provision like Rule 72A may be added. A similar provision was earlier inserted by the High Court of Bombay in exercise of its rule making powers. A Division Bench of the Bombay High Court then held that sale of the property under Rule 72A for an amount smaller than the amount due under the mortgage in contravention of Rule 72A is a material irregularity vitiating the sale (vide Mohammed Abdulla v. Sakha-ram, AIR 1930 Bombay 290). Thus, the present Rule 72A has been included.
8. Need to fix a reserve price as regards the mortgage would arise only when leave to bid is granted to the mortgagee. If the mortgagee and the decree-holder are one and the same person a leave obtained under Order 21, Rule 72 (1) will be good enough under this rule as well and no separate leave is necessary. If the decree-holder is a mortgagee and when leave is granted by the court, the legislative requirement is that "then the court shall fix a reserve price as regards the mortgage". The language employed in the sub-rule appears to convey the legislative message that the provision is mandatory that the court has to fix the reserve price in such a situation. The words "unless the court otherwise directs" do not whittle down the mandate that "then the courts shall fix", The former words are intended to cover the clauses which follow thereafter and such clauses relate to the quantum of reserve price to be fixed.
9. The above view gains support from the observations made by K. Ramaswamy, J. (as he then was) in P. Rami Reddy v. P. Sundara Rama Reddy, AIR 1986 Andh Pra 29. "The language couched in R. 72A appears to emphasise the mandatory character of the duty cast on the court". Learned Judge pointed out that the legislature intended to relieve the mortgager from all the liabilities incurred under the mortgage and to nip in the bud the incurable tendency on the pan of the decree holder to take undue advantage of the court sale by purchasing the property at a lower price.
10. Now the question is, what is the consequence of non-compliance of the aforesaid mandatory provision. Would its non-compliance entail a quash of the sale. To decide this, the object of incorporation of the provision cannot be overlooked. We pointed, out earlier the background. From it we can discern that the purpose of incorporating such a rider is to safeguard the interest of the morgager. If the mortgager is the judgment debtor, it is open to him to waive the right so granted. In this context we notice that the application to set aside the sale can be filed under Rule 90 of Order 21. Sub-rule (1) enable the affected person to apply to set aside the sale on the ground of "a material irregularity" or fraud in publication of conducting a sale.
11. But Sub-rule (2) contains a restriction which also is couched in a mandatory tone. It reads thus : "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 substantial injury by reason of such irregularity or fraud."
12. Non-compliance with any particular formality, even if it is mandatory, need not necesarily follow that the resultant action is a nullity. In Ashutosh Sikdar v. Behari Lal, (1908) ILR 35 Calcutta 61 Justice Mookerjee, J. has observed thus : "No hard and fast line can be drawn between a nullity and an irregularity, but this much is clear, that an irregulrity is a deviation from a rule of law which does not taken away the foundation or authority for the proceedings, or apply to its whole operation, whereas a nullity is a proceeding that is taken without any foundation for it or is so essentially defective as to be of avail or effect whatever, or is void and incapable of being validated". The aforesaid passage was quoted with approval by the Supreme Court in Dhirendra Nath v. Sudhir Chandra, AIR 1964 SC 1300.
13. Whether non-compliance with a provision would render the resultant action a nullity depends on the nature, scope and object of the particular provision. Justice Coleridge had evolved a pragmatic test in this regard in Holmes v. Russel, (1941) 9 Dowl 487. "It is difficult sometimes to distinguish between an irregularity and a nullity, but the safest rule to determine what is an irregularity and what is a nullity is to see whether the party can waive the objection. If he can waive it, it amounts to an irregulatiry. If he cannot, it is a nullity".
14. Quoting the aforesaid passage, Subba Rao, J. (as he then was) has stated in Dhirendra Nath's case (AIR 1964 SC 1300) (cited supra) that "a waiver is an intentional relinquishment of a known right, but obviously an objection to jurisdiction cannot be waived, for, consent cannot give a court jurisdiction where there is none". In that case, a court sale was sought to be set aside on the ground that it was conducted without complying with the requirements in Section 35 of the Bengal Money Lenders Act, 1940. Supreme Court found that Section 35 is a mandatory provision (or assumed it to be so) and then held that its non-compliance would not be sufficient to set aside the sale as the party for whose benefit the provision was incorporated did not raise any objection before the sale was held.
15. Rule 90(3) of Order 21 contains yet another interdict against setting aside a court sale. It is in the following language : "No application to set aside a sale under this rule shall be entertained upon any ground which the applicant could have taken on or before the date on which the proclamation of sale was drawn up". This provision was brought in the Code only in 1976, and the object is to make the judgment-debtor to be more circumspect and to inform the court, right in time, of his objections. If he omits to do so without satisfactory cause, he cannot be heard to say oh such objections subsequently. In Desh Bandhu Gupta v. N. L. Anand & Rajinder Singh, (1994) 1 SCC 131 : (1993 AIR SCW 3458, Para 15) Supreme Court has observed that Rule 90(3) 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."
16. Here the appellant did not raise the present objection at any time before sale was held though he was participating in the proceedings. That apart, how the non-compliance has caused any injury, much less substantial injury, to the appellant is not established by him. In Jaswantlal Natwarlal Thakkar v. Sushilaben Manilal Dangarwala, AIR 1991 SC 770 Supreme Court pointed out that the party who seeks to set aside the sale must prove by adducing evidence that substantial injury has been caused to him as a result of non-compliance with the provision contained in Order 21, Rule 72. Leave to bid the sale is a condition precedent for a decree-holder to purchase the property in a court sale as indicated in Rule 72(1) of the Code. Court is given a discretion to set aside the sale, as provided in Sub-rule (3) where the purchase was made by the decree-holder without such leave. It must be remembered that even in such a case Supreme Court pointed out that without showing substantial injury no such sale shall be set aside. In other words, courts are not to set aside a sale ordinarily and unless the applicant satisfies the court that he sustained (or would sustain) substantial loss or injury, the court is not obliged to look back for considering whether all formalities have been duly complied with in conducting the sale.
For the foresaid reasons, we uphold the decision of the learned Sub-Judge and dismiss this appeal.