Kerala High Court
M/S.A.G.M.Constructions (P) Ltd vs S.Shibu Kumar on 30 July, 2010
Author: Thomas P.Joseph
Bench: Thomas P.Joseph
IN THE HIGH COURT OF KERALA AT ERNAKULAM
CRP.No. 60 of 2010()
1. M/S.A.G.M.CONSTRUCTIONS (P) LTD.,
... Petitioner
Vs
1. S.SHIBU KUMAR,
... Respondent
2. VISRUTHA KUMAR,
3. DR.KRISHNA MOHAN,
For Petitioner :SRI.P.B.KRISHNAN
For Respondent :SRI.G.S.REGHUNATH
The Hon'ble MR. Justice THOMAS P.JOSEPH
Dated :30/07/2010
O R D E R
"C.R."
THOMAS P.JOSEPH, J.
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C.R.P. No.60 of 2010
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Dated this the 30th day of July, 2010
O R D E R
The following points arising for a decision.
(i) Is a pendente lite purchaser of property placed under court attachment a 'representative' of the transferor - defendant entitled to challenge the court auction sale?
(ii) Could a sale be set aside for non-
compliance of Rule 64 of Order XXI of the Code of Civil Procedure, 1908 (for short, "the Code") in an application preferred under Section 47 of that Code after the period 60 days prescribed under Article 127 of the Limitation Act, 1963 (for short, "the Act")?
(iii) Whether the executing court was correct in rejecting the application of petitioner to set aside the auction sale on the ground of C.R.P. No.60 of 2010 -: 2 :- illegality, fraud and collusion in publishing and conducting the sale?
2. This Revision is brought from the order passed by learned Sub Judge, Ottappalam on E.A. No.57 of 2009 in E.P. No.56 of 2002 in O.S. No.405 of 2001. Respondent No.1-decree holder instituted the suit for recovery of money due from respondent No.2. 25 cents and a marriage hall situated thereon belonging to respondent No.2 was placed under attachment before judgment on 16.11.2001. The court passed a decree in favour of respondent No.1 allowing him to recover the amount from respondent No.2. That decree was put into execution. Notice under Rule 22 of Order XXI of the Code was served on respondent No.2-judgment debtor but there was no response. Respondent No.1 waned to sell the attached property and produced draft proclamation of sale of the said 25 cents and marriage hall. Notice under Rule 66(2) of Order XXI was issued to respondent No.2. Allegedly on behalf of respondent No.2, that notice was served on one Dr.P.G. Menon (later he informed the executing court that he was not authorised to receive the notice on behalf of respondent No.2). The proclamation of sale was settled fixing the upset price at Rs.5 lakhs (subject to the liability to the Kerala Financial Corporation - for short, "the KFC" to the C.R.P. No.60 of 2010 -: 3 :- tune of Rs.80 lakhs). Respondent No.3 purchased the property for Rs.5.50 lakhs (subject to the liability to the KFC) in the court auction held on 04.03.2008. Executing court confirmed the sale in favour of respondent No.3 on 06.08.2008 and issued sale certificate on 30.12.2008. Petitioner, a Private Limited Company claimed to have purchased 44 cents including the 25 cents and marriage hall (sold in court auction) as per sale deed No.2067 of 2002 dated 10.06.2002 executed by respondent No.2 through his Power of Attorney Holder, Dr. P.G. Menon. According to the petitioner, it got possession of the said property on execution of the said sale deed. It was agreed between petitioner and respondent No.2 that the latter would discharge liability to the KFC or other financial institutions due as on the date of sale. While so, the KFC initiated steps against petitioner for recovery of amount and two Directors of petitioner volunteered to clear major portion of that liability. On 15.01.2009 petitioner learnt that in execution of the decree in O.S. No.405 of 2001, 25 cents and marriage hall (which formed part of the 44 cents covered by sale deed No.2067 of 2002) was sold in court auction and purchased by respondent No.3 who is the son of Dr.P.G. Menon. Petitioner filed E.A. No.57 of 2009 to set aside the sale on following grounds:
C.R.P. No.60 of 2010 -: 4 :-
1. Respondent No.2 did not inform the executing court about the assignment (of the property) in favour of petitioner as per document No.2067 of 2002 dated 10.07.2002.
2. The 25 cents and marriage hall worth more than Rs.2 crores was sold in court auction for a paltry sum of Rs.5.50 lakhs. Even the annual income from the said property was Rs.2.40 lakhs which would show that market value shown and upset price fixed are low.
3. Respondent No.1 has not produced the relevant document and affidavit as required by the Rules of procedure before settlement of proclamation of sale.
4. Considering the prevailing market value of property at the time of settlement of proclamation respondent No.1 had no right to sell the entire property for realization of the decree amount.
Only a portion of the property proportionate to the amount due as per the decree alone ought and need to have been sold. There was no finding arrived at by the executing court whether entire property or what extent of property should be sold considering market value of the property.
5. Executing court has not entered into any finding as to the market value of the property at the time of settlement of proclamation.
C.R.P. No.60 of 2010 -: 5 :-
6. Sale conducted without complying with the mandatory duty cast on the executing court made the sale null and void.
7. Respondent No.3 who purchased the property is a major shareholder of petitioner-company and is the son of Dr. P.G. Menon, Power of Attorney Holder of respondent No.2. Respondent No.3 was fully aware that value of the property is more than Rs.two crores. Suppressing that fact from the executing court respondent No.3 has purchased the property playing fraud on court and petitioner. Respondent No.3 bid the auction in collusion with respondent Nos.1 and 2 and Dr.P.G. Menon. Hence sale held on 06.08.2008 is null and void.
3. Respondent No.3 resisted the application contending that it is bared by limitation as the application is filed beyond 60 days of the date of sale prescribed under Article 127 of the Act; that petitioner has no locus standi to file the application, signatory to the application (Managing Director of the Company) has no right to present the application or represent petitioner- Company, its Board of Directors has not resolved to file any such application and that sale deed dated 10.06.2002 relied on by petitioner is invalid and void as it is executed after the property was attached before judgment and cannot prevail over the court sale. It is incorrect to say that property is worth more than Rs.two C.R.P. No.60 of 2010 -: 6 :- crores. Even as per the sale deed relied on by petitioner value of the 44 cents (including property sold in auction) is only Rs.19 lakhs and that property was subject to a mortgage in favour of the KFC for Rs.80 lakhs, there were also several other creditors who had initiated action against respondent No.2 and the said property. Respondent No.3 purchased the property in court auction subject to all those claims and hence the sale price of Rs.5.50 lakhs is reasonable. Respondent No.3 denied the allegation of illegality, fraud and collusion in publishing and conducting the sale.
4. In the Executing court Exts.A1 and A2 were marked for petitioner. Exhibit A1 is the Certificate of Incorporation of petitioner-Company while Ext.A2 is a letter dated 30.03.2007. Executing court held that there is no evidence of any agreement for sale preceding execution of the sale deed as argued on behalf of petitioner. On the other hand property was attached before judgment on 16.11.2001 but even the sale deed relied on by petitioner is executed only on 10.06.2002, pendente lite after attachment and is hit by Sec.64 of the Code. Exhibit A1 shows that petitioner - company came into existence only on 13.04.2002. Exhibit A2, letter dated 30.03.2007 shows that petitioner was aware of attachment of the property even before C.R.P. No.60 of 2010 -: 7 :- 2009. Executing Court held that grounds urged by petitioner to set aside the sale squarely fell under Order XXI Rule 90 of the Code and hence the application (E.A. No.57 of 2009) filed beyond 60 days from the date of sale prescribed under Article 127 of the Act is time barred. It is also found that no evidence is produced to show that petitioner was in possession of the auctioned property at the relevant time. According to the executing court property could not have been sold piece meal since its extent is only 25 cents and the building covered major portion of that property. Hence sale of a portion of the property would have affected convenient enjoyment of rest of the property. Executing court also observed that though property was sold for Rs.5.50 lakhs the sale was subject to liability to the KFC to the tune of Rs.80 lakhs. In the circumstances contention that property was sold for a paltry amount was not accepted. E.A.No.57 of 2009 was dismissed. That order is under challenge in this revision. Learned counsel for petitioner contended that though transfer in favour of petitioner was pendent lite and subsequent to the attachment, petitioner is a 'representative' of respondent No.2 entitled to challenge the court auction sale in the same way respondent No.2 could challenge it. According to the learned counsel non-compliance with Rule 64 of Order XXI of C.R.P. No.60 of 2010 -: 8 :- the Code in settling the proclamation of sale affected jurisdiction of the executing court to sell the property and hence sale effected without complying with the said provision is a nullity which could be urged by respondent No.2 and/or as his 'representative' under Sec.47 of the Code. The period of limitation for an application under Sec.47 of the Code is three years (from the date of sale) as per Article 137 of the Act. E.A. No.57 of 2009 has been preferred within the said period. Hence the finding of executing court that E.A. No.57 of 2009 is barred by limitation is not correct. So far as allegation of fraud is concerned it is contended by learned counsel that facts and circumstances of the case indicated that there was fraud and collusion between respondent Nos.1, 3 and Dr.P.G. Menon. Learned counsel contends that though all the relevant documents could not be produced in the executing court those documents are appended to the revision petition and may be received in evidence. Those documents would show the fraud played by Dr.P.G.Menon in obtaining property in the name of petitioner and later getting the property sold in the name of his son for a paltry amount. Learned counsel contended that fraud vitiated even the solemn proceedings of the court. In response it is contended by learned counsel for respondent No.3 that the C.R.P. No.60 of 2010 -: 9 :- alleged sale in favour of petitioner is hit by Sec.64 of the Code, it is invalid as against all claims arising under the attachment and hence petitioner has no locus standi to challenge the court sale. It is contended that at any rate on the grounds pleaded it is Rule 90 of Order XXI of the Code that applied and the application ought to have been preferred within 60 days of the sale as required by Article 127 of the Act. It is incorrect to say that there is no compliance with Rule 64 of Order XXI of the Code. Learned counsel has referred me to the order of executing court to buttress his contention that the sale though for Rs.5.50 lakhs was subject to the liability to the KFC to the tune of Rs.80 lakhs and at a time when the property was subject to several attachments at the hands of other creditors. It is contended by learned counsel that as observed by the executing court in the order under challenge property could not have been sold piece meal as severance would have affected enjoyment of rest of the property.
Points 1 & 2.
5. The property sold in court auction was attached by respondent No.1-decree holder on 16.11.2001 and according to the petitioner, it purchased 44 cents including the said C.R.P. No.60 of 2010 -: 10 :- property as per sale deed No.2067 of 2002 dated 10.6.2002. A copy of that sale deed is produced along with the Revision Petition. That document states that petitioner purchased 44 cents (including the property attached and sold) for a total consideration of Rs.19 lakhs. Section 64 of the Code states that where an attachment has been made any private transfer or delivery of the property attached or of 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. Could petitioner in the circumstances challenge the court sale?
6. Relevant provisions of Sec.47 of the Code reads, "47. Questions to be determined by the Court executing decree:- (1) All questions arising between the parties to the suit in which the decree was passed, or their `representatives', and relating to the execution, discharge or satisfaction of the decree, shall be determined by the Court executing the decree and not by a separate suit.
(2) ...................
(3) Where a question arises to whether C.R.P. No.60 of 2010 -: 11 :- any person is or is not the 'representative' of a party, such question shall, for the purposes of this section, be determined by the Court."
A 'representative' of a party to the suit is a person coming under sec.47 of the Code. Section 244(c) of Code of Civil Procedure, 1882 (for short "the old Code") contained a provision almost similar to Sec.47 of the Code. Section 244 read, "The following questions shall be determined by (order of) the Court executing a decree and not by separate suit (namely):-
(a) ...................
(b) ...................
(c) any other questions arising between the
parties to the suit in which the decree was passed, or their 'representatives', and relating to execution, discharge or satisfaction of the decree (or to the stay of execution thereof)."
7. Is an assignee pendente lite from a party to the proceeding a `representative' of such party as understood in Section 47 of the Code?. The word 'representative' occurring in Sec.47 of the Code includes not only a legal representative in C.R.P. No.60 of 2010 -: 12 :- the sense of heirs, executors or administrators but also takes in a "representative in interest", i.e., a transferee of a party to the proceeding or a transferee of such party's interest who so far as such interest is concerned is bound by the decree in the case. The word 'representative' is used in Sec.47 of the Code as meaning a person in whom an interest in the property is vested either by an act of party or by operation of law. A Full Bench of the Calcutta High Court considered the significance of the word "representative" which occurred in Sec.244(c) of the Old Code in Ishan Chunder Sirkar v. Beni Madhub Sirkar ([1896] ILR [24] Calcutta 62). The court held that the word 'representative' occurring in Sec.244(c) of the Old Code has a wider significance than 'legal representative' and hence the word 'representative' included a person who is a representative in interest of the judgment debtor. Speaking for the Bench Banerjee, J, observed, "The Code of Civil Procedure in Sec.244 uses the term 'representative' which may well include a 'representative in interest', that is, a purchaser of interest of the judgment debtor in any property, which is affected by the decree, and this is the view C.R.P. No.60 of 2010 -: 13 :- taken by Mr.Justice Pontifex in Rash Mehary Mookhopadhya v. Surnomoyee (ILR 7 Calcutta
403)."
The following tests were laid down in Ajodhya Roy v. Hardwar Roy ([1909] 9 Calcutta Law Journal 485) to determine whether a person is a 'representative' of a party to the suit:
"(1) Whether any portion of the interest of the decree holder or of the judgment debtor which was originally vested in one of the parties to the suit, has, by act of parties or by operation of law, vested in the person who is sought to be treated as representative, and;
(2) If there has been a devolution of interest, which so far as such interest is concerned, that person is bound by the decree."
It was held that the word 'representative' used in Sec.244(c ) of the Old Code includes any 'representative' in interest, i.e., any C.R.P. No.60 of 2010 -: 14 :- transferee of the interest of the decree holder or judgment debtor, who so far as such interest is concerned is bound by the decree. The Allahabad High Court in Gulzari Lal v. Madho Ram and Another (1904 [26] ILR (All.) 447), Calcutta High Court in Nishi Kanta v. Kumar Promatha (AIR 1934 Calcutta 145), Privy Council in Parameshari Din v. Ram Charan (AIR 1937 PC 206), Mysore High Court in Madam Naranappa v. P.D. Khurana (AIR 1953 Mysore 153), Madras High Court in R.D.Deshpande v. R.Srinivasan and Others ([1954] 1 MLJ 501) and the Delhi High Court in J.L.Arora v. M.E. Periera (AIR 1977 Delhi 12) have taken that view. This Court in Saju George v. Thomas (2008 [4] KLT 486) has also taken the view that a pendent lite transferee is a 'representative' of the defendant. Though initially the Bombay High Court did not agree with the above view (See Basappa v. Bhimangowda - AIR 1928 Bombay 65) that court also later accepted the view that a pendent lite transferee is a `representative' of his vendor (See Gopal Attu Tippe v. Dnyanu Maruti Khade - AIR 1938 Bombay 649). Thus the expression 'representative' occurring in Sec.47 of the Code is wide enough to take in a transferee in C.R.P. No.60 of 2010 -: 15 :- interest of any of the parties to the suit provided the interest transferred is bound by the decree that may be passed in the suit. Petitioner being a transferee of the attached property from respondent No.2 though pendente lite is a 'representative' of respondent No.2 coming within the scope of Section 47 of the Code since the property transferred to the petitioner is bound by the decree passed in the case.
8. Would the fact that property purchased by petitioner pendente lite was subject to an attachment change the character of petitioner as a `representative' of respondent No.2 and disable it from challenging the court auction sale? Section 64 of the Code does not make the transfer after attachment invalid or ineffective between the defendant and his transferee. That provision only makes the transfer to the extent it concerned claims enforceable under the attachment void. The transaction continues to be valid between the transferor and transferee but the only limitation is that the transaction cannot prevail over claims arising under the attachment. The transfer in favour of petitioner being pendente lite and being after the court attachment on 16.11.2001, property is bound by the decree that may be passed in the suit. Referring to Sec.244(c ) of the old C.R.P. No.60 of 2010 -: 16 :- Code (quoted supra) the Allahabad High Court in Gur Prasad and Others v. Ram Lal and Others ([1898] 22 Allahabad
20) held that the purchaser of property which at the time of purchase is under attachment in execution of a decree is also a 'representative' of judgment debtor-vendor within the meaning of Sec.244(c) of the old Code. In Mathewson v.
Gobardhan Tribedi (XXVIII Calcutta 492) a property was attached in execution of a decree against the judgment debtor. While the attachment was in force judgment debtor granted a lease of that property to the defendant who set up a right to hold possession of the property. It was held that defendant is a 'representative' of the judgment debtor within the meaning of Sec.244(c) of the old Code. In Paramananda Das v. Mahabeer Dossji (XX ILR (Mad.) 378) decree holder attached the property and prepared to bring it for sale. The judgment debtor executed a mortgage deed in favour of a third person. That person was held to be a 'representative' of the judgment debtor as that word is understood in Sec.244(c) of the old Code. The Allahabad High Court has also taken the same view in Gur Prasad and others v. Ram Lal and others (XXI ILR C.R.P. No.60 of 2010 -: 17 :- (All.) 20). Viewed in that line, that the property transferred pendent lite was subject to an attachment did not change character of the transferee - he continued to be a `representative' in interest of the transferor defendant and hence a 'representative' of the defendant as the expression is used in Sec.47 of the Code. I accept the contention of learned counsel for petitioner that notwithstanding that assignment of the property (sold in auction) was pendente lite and subsequent to the court attachment, petitioner in its capacity as a 'representative' of respondent No.2 is entitled to challenge the sale under Sec.47 of the Code.
9. Could petitioner being a transferee from respondent No.2 pendente lite and subsequent to the attachment bring a petition under Order XXI Rule 90 of the Code?. A judgment debtor could bring an application under that provision as his interests are affected by the sale. In Narayanan v. Pappayi (AIR 1927 Madras 783) a purchaser of one item of the mortgaged property was found entitled to apply under Rule 90 of Order XXI of the Code to have the sale of other items of mortgaged property set aside as he is a person whose interests are affected by the sale. Mitter, J. in Bhupendra Nath Roy Choudhury v. Jatindra Nath Roy Choudhury (AIR 1933 Calcutta 788) held that a C.R.P. No.60 of 2010 -: 18 :- purchaser after attachment and before sale is a person whose interests are affected by the sale within the meaning of Rule 90 of Order XXI of the Code. Hence petitioner by virtue of the assignment in its favour though pendent lite and subsequent to the attachment can be said to be a person the interest of which is affected by the sale. Section 146 of the Code (newly introduced in the Code of 1908) states that save as otherwise provided by the Code or by any law for the time being in force, where any proceeding may be taken or application made by or against any person, then such proceeding may be taken or the application may be made by or against any person claiming under him. The Supreme Court said in Saila Bala v. Nirmala Sundari (AIR 1958 SC 394) that Sec.146 has been introduced in the Code with the object of facilitating the exercise of right by persons in whom they come to be vested by devolution or assignment and that being a beneficient provision, it should be construed liberally so as to advance justice and not in a restricted or technical sense. Petitioner who purchased the property from respondent No.2 though pendente lite could assail the court auction sale in the way its assignor, respondent No.2 could even under Rule 90 of Order XXI of the Code.
C.R.P. No.60 of 2010 -: 19 :-
10. Petitioner has a case that it is pursuant to an agreement for sale which was prior to the court attachment that it purchased the property and hence Sub-sec.(2) of Section 64 of the Code applied. Sub-sec.2 of Section 64 of the Code says that nothing in that Section shall apply to any private transfer or delivery of the property attached or of any interest therein made in pursuance of any contract of such transfer or delivery entered into and registered before the attachment. It is argued by learned counsel for petitioner that it is pursuant to an agreement for sale entered into between 15 persons with respondent No.2 that sale deed was executed in favour of petitioner on 10.06.2002. In support of that contention learned counsel has invited my attention to the copy of an agreement for sale and copy of balance sheet of petitioner (produced along with the Revision Petition). Learned counsel points out from the said documents that of the 15 persons referred to in the agreement for sale (which admittedly was prior to the attachment on 16.11.2001) 13 persons are shareholders of petitioner-Company and another person is one of its Directors. As rightly contended by learned counsel for respondent No.3, there is no plea or evidence that petitioner was a nominee of the persons referred to in the agreement for sale or that the agreement was C.R.P. No.60 of 2010 -: 20 :- taken on its behalf so that petitioner could rely on sub-sec. (2) of Sec.64 of the Code. That contention has to fail.
11. Then the next question is whether sale could be set aside for non-compliance of Rule 64 of Order XXI of the Code in an application filed under Sec.47 of the Code preferred after the period prescribed under Article 127 of the Act. If the allegations in the case brought the application under Rule 90 of Order XXI of the Code, it is not disputed that petitioner is out court since the application is preferred after the period of limitation prescribed under Article 127 of the Act. If on the other hand the application came under 47 of the Code, it is within time since it is preferred within 3 years (of the date of sale) as Article 137 of the Act governed the situation.
12. Under Rule 90 of Order XXI of the Code a sale could be set aside on the ground of material irregularity or fraud in publishing or conducting it. The word 'irregular' is defined in Black's Law Dictionary as meaning 'not according to rule, improper or insufficient, by reason of departure from the prescribed course". Under Sec.47 of the Code all questions relating to the execution, discharge or satisfaction of a decree arising between parties to the suit or their representatives is to be decided by the court executing the decree. According to the C.R.P. No.60 of 2010 -: 21 :- petitioner the sale conducted by the executing court is a nullity in that there is total non-compliance of Rule 64 of Order XXI of the Code. In this connection learned counsel has referred to various decisions and argued that non-compliance of Rule 64 Order XXI of the Code results in ousting jurisdiction of the court to conduct sale. Reference is made to the decision in Ambati Narasayya v. M. Subba Rao (AIR 1990 SC 119). There it is held referring to Rule 64 of Order XXI of the Code that there is a duty cast on the executing court to sell only such property or a portion thereof as is necessary to satisfy the decree and that it is a mandate of the Legislature which cannot be ignored. A sale held without examining that aspect and not in conformity with the requirement of law would be illegal and without jurisdiction. Reference was made to the decision of the Supreme Court in T.P.S. Reddi v. Padmavathamma (AIR 1977 SC 1789 at page 1791) where it is held that under Rule 64 reference is made to sell property only to the point at which the decree is fully satisfied and that no sale can be allowed beyond the decretal amount mentioned in the sale proclamation. Desh Bandhu Gupta v. N.L.Anand & Rajinder Singh ([1994] 1 SCC
131) also deals with a similar situation. There of course apart C.R.P. No.60 of 2010 -: 22 :- from alleged non-compliance of Rule 64, no notice was also given to the judgment debtor under Rule 66(2) of Order XXI of the Code. Referring to Rule 64 it is held that court must apply its mind and that non-compliance is a material irregularity which vitiates the sale. It is further held that it is a material irregularity on which sale could be set aside under Rule 90 of Order XXI. A pre-sale illegality in execution is amenable to the remedy under Sec.47 while post-sale illegality or irregularity causing substantial injury to judgment debtor is covered by Rule 90 of Order XXI of the Code. It is held that a total absence of drawing up of proclamation of sale and settlement of its term by judicial application of mind renders the sale a nullity being void. That according to the Supreme Court is covered by Sec.47 of the Code. But non-application of mind to the question whether sale of a part of the property would satisfy decree debt is a material irregularity doing substantial injury to the judgment debtor attracting Rule 90 of Order XXI of the Code. Another decision relied on by learned counsel is Gnan Das v. Paulin Moraes (1998 [2] KLT 88). It refers to Rules 64 and 90(3) of Order XXI of the Code and states that Rule 90(3) is not a bar in considering the question of jurisdiction though not raised by the C.R.P. No.60 of 2010 -: 23 :- judgment debtor in an earlier proceeding. Reliance is also placed by learned counsel on the decision in Balakrishnan v. Malaiyandi Monar (2006(1) KLT 926). There, application of Sec.47 of the Code was considered. In paragraph 8 it is held that the sale held without examining the question whether entire property is required to be sold is not in conformity with the mandate required under Rule 64 of Order XXI and hence would be illegal and without jurisdiction. In Thankamma v. Leelamma (2008 (2) KLT 500) it is held that court could even suo motu consider the question regarding non-compliance of Rule 64 of Order XXI (as such question goes to the root of jurisdiction of the court to conduct the sale). In George v. Sherly Varkey (2009 [2] KLT 30) relied on by the learned counsel sale was challenged under Rule 90 of Order XXI by a shareholder of the company. It is argued that while holding that a shareholder has no locus standi to seek to get set aside sale on the ground of material irregularity or fraud, the shareholder was permitted to raise that question under Sec.47 of the Code. It is argued by learned counsel for petitioner that in so far as there is total non-compliance of Rule 64 of Order XXI of the Code it affected the very jurisdiction of the court to conduct sale, the C.R.P. No.60 of 2010 -: 24 :- sale is a nullity being void and could be raised under Sec.47 of the Code.
13. Learned counsel for respondent No.3 contended that petitioner cannot come within the scope of Sec.47 of the Code in the nature of allegations in E.A.No.57 of 2009. According to the learned counsel what is alleged is material irregularity in publishing and conducting the sale and that being a post-sale illegality came under Rule 90 of Order XXI and hence Article 127 of the Act applied. Learned counsel argued that by giving the application a label under Sec.47 of the Code petitioner cannot get over the period of limitation prescribed under Article 127 invoking Article 137 of the Act. Learned counsel placed reliance on the decisions in Desh Bandhu Gupta v. N.L.Anand & Rajinder Singh (supra), Rajarethna Naikkan v. Parameswara Kurup (1997 [1] KLT 777) and Prakashan v. State Bank of Travancore (2008 (2) KLT 988).
14. I have referred to the decision in Rajarethna Naikkan v. Parameswara Kurup (supra). The Scope of Sec.47 and Rule 90 of Order XXI of the Code was considered. It was held that when a judgment debtor makes an application under Rule 90 of Order XXI of the Code he accepts the factum of sale and seeks C.R.P. No.60 of 2010 -: 25 :- to challenge it on the ground that the sale is vitiated by material irregularity or fraud in publishing and conducting the sale. But when it comes to Sec.47 of the Code sale is challenged as being void for illegality or in any event voidable on grounds other than under Rule 90 of Order XXI of the Code. When the judgment debtor invokes Sec.47 of the Code, Rule 90 of Order XXI has no application. But when a petition under Rule 90 of Order XXI of the Code is dismissed that did not prevent the judgment debtor from moving an application under Sec.47 of the Code. Errors committed in settling the sale proclamation which are mere irregularities cannot be described as errors which render a sale void and hence the application cannot come under Sec.47 of the Code. The decision in Prakashan v. State Bank of Travancore (supra) related to a case of sale of property without notice under Rule 66(2) of Order XXI of the Code. It was held that it is a pre-sale illegality squarely coming under Sec.47 of the Code. On going through the above decisions the principle that can be deduced is that if irregularity or illegality relate to pre- sale proceedings it came within the purview of Sec.47 of the Code while if the allegations relate to post-sale illegality or irregularity (in publishing or conducting the sale) it came under Rule 90 of Order XXI of the Code.
C.R.P. No.60 of 2010 -: 26 :-
15. Where then exactly is the dividing line between pre- sale and post-sale proceedings? Rule 90 of Order XXI of the Code refers to material irregularity or fraud in publishing or conducting the sale. So far as the expression "conducting sale" is concerned it could be said that it refers to the action of the officer who conducts the sale. A Division Bench of the Madras High Court in Kandaswami Mudali v. K.R.Narasimha Aiyar (AIR 1952 Madras 582) said, "....the word 'conducting' refers only to the action of the officer who makes the sale. Anything done antecedent to the order of sale has nothing to do with 'conducting' the sale."
Then what is meant by the expression "in publishing" the sale?. A few of the earliest decisions on the point are Ramchhaibar Misr. v. Bechu Bhagat ( 7 All. 641), Gauri v. Ude (AIR (29) 1942 Lahore 193) and Sanjamma v. Anna Sayanna ([1947] 1 MLJ 252). These decisions took the view that fraud in conducting sale must be in the actual process of publishing and proclaiming the sale or in steps taken subsequent to such proclamation. As per the above decisions the expression 'publishing' refers to steps taken subsequent to the proclamation C.R.P. No.60 of 2010 -: 27 :- of sale under Rule 66 of Order XXI of the Code. Relying on the said decisions the Madras High Court in Kandaswami Mudali v. K.R. Narasihma Aiyar (supra) held that the word 'publishing' refers only to what is done antecedent to the actual conduct of sale but subsequent to the order directing sale.
16. I pause here for a moment to refer to the scheme of the provisions of Order XXI of the Code for publishing and conducting sale of immovable property. Rules 64 to 73 of Order XXI of the Code come under the category of "Sale Generally". Rule 66 deals with the proclamation of sale. Sub-rule (2) of that Rule states that proclamation of sale referred to in sub-rule (1) shall be drawn up after notice to the decree holder and the judgment debtor and shall state the time and place of sale and specify as fairly and accurately as possible the matters referred to in clauses (a) to (e) of sub-rule (2) of Rule 66. Under Rule 64 of Order XXI the 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 proceeds of such sale or a sufficient portion thereof shall be paid to the party entitled under the decree to receive the same. It is at this stage that executing court is required to apply its mind and decide whether it is necessary to sell the entire property or C.R.P. No.60 of 2010 -: 28 :- sale of a portion of the property is sufficient to satisfy the decree debt. That is a matter which the executing court has to decide before proclamation of sale is published as provided under Rule
66. Hence literally speaking it is possible to say as the Madras High Court said in Kandaswami Mudali v. K.R.Narasimha Aiyar (supra) that the expression 'publishing' appearing in Rule 90 of Order XXI refers to all matters subsequent to the order directing the sale in which case non-compliance of Rule 64 of Order XXI of the Code must be taken as forming part of pre-sale proceedings coming under Section 47 of the Code. For, I stated that as per the view of the Madras High Court the expression 'publishing' refers only to what is done antecedent to the actual conduct of the sale but subsequent to the order directing sale. The same view was taken by the Madras High Court in Ramalingam v. Sankara Iyer (AIR 1964 Madras 424). Veeraswamy, J. (as His Lordship then was) referring to Rule 66 of Order XXI of the Code stated that the words "material irregularity or fraud in publishing or conducting it" in Rule 90 of Order XXI cannot be extended to material irregularity arising out of a breach of the requirement of Rule 66 of Order XXI. In that case judgment debtor contended that settlement of proclamation C.R.P. No.60 of 2010 -: 29 :- was without notice to him and hence the sale was a nullity. He filed a separate suit challenging court sale. Trial court held that judgment debtor should have moved the executing court under Order XXI Rule 90 of the Code and consequently dismissed the suit as not maintainable. Appellate court confirmed that verdict. In the High Court it was contended that Rule 90 of Order XXI has no application as the illegality referred to a pre-sale proceeding. It was held that separate sets of rules are framed under Order XXI, one set relating to settlement of proclamation of sale and the other, to the manner of publication of a proclamation of sale. It was held that Rule 90 of Order XXI does not cover any irregularity in the settlement of proclamation. Here, again I go back to the decision in Kandaswami Mudali v.
K.R.Narasihma Aiyar (supra) where it was held that the expression 'publishing' refers only to what is done antecedent to actual conduct of sale but subsequent to the order directing sale in which case non-compliance of Rule 64 must be taken as a proceeding forming part of pre-sale proceedings. In Natarajan v. Chandmull Amerchand ([1971] 1 MLJ 474) question considered was whether want of notice under Rule 64 or 66 of Order XXI is a stage anterior to publication of C.R.P. No.60 of 2010 -: 30 :- proclamation of sale under Rule 67 or conducting the sale. It was held that such irregularity or illegality would not fall under Rule 90 of Order XXI of the Code but came under Sec.47 of the Code.
Same view was taken in Gnanabaranam Pillai v.
Rathinam Pillai (AIR 1972 Madras 364).
17. But this view did not last for long. A contra view came to be accepted by the Full Bench of the Madras High Court in A.P.V. Rajendran v. S.A. Sundararajan (AIR 1980 Madras 123 (F.B.). Overruling the decisions in Ramalingam Pillai v. Sankara Iyer, Natarajan v. Chandmull Amerchand and Gnanabaranam Pillai v. Rathinam Pillai (supra) the Full Bench held that a defect or irregularity in the sale proclamation will be an irregularity in publishing and conducting the sale attracting Rule 90 of Order XXI. Though settlement of sale proclamation preceded publication and conduct of the sale, in so far as the irregularity in the settlement of sale proclamation relates to the essential steps to be taken by the court in the matter of publishing and conducting the sale, it has to be taken as an irregularity in the publication itself.
18. The Supreme Court in S.A.Sundararajan v.
A.P.V. Rajendran (AIR 1981 SC 693) affirmed the Full Bench C.R.P. No.60 of 2010 -: 31 :- decision of Madras High Court in A.P.V. Rajendran v. S.A. Sundararajan (supra). Contention raised in that case was that proclamation of sale was not drawn up in accordance with law. It was held that settling the proclamation of sale is part of the integral process of publishing the sale and irregularities committed in the process of settling the sale proclamation are irregularities which fall within the amplitude of Rule 90 of Order XXI of the Code.
19. Thus, post-sale proceedings commence from the stage of settlement of proclamation of sale. It follows that proceedings upto the stage of settlement of proclamation are pre-sale proceedings coming under Section 47 of the Code. Compliance with Rule 64 of Order XXI while settling the proclamation of sale being part of the integral process of settling and publishing the proclamation of sale, non-compliance of Rule 64 of Order XXI while drawing up the proclamation of sale must be taken as a post-sale illegality or irregularity falling under Rule 90 of Order XXI.
20. The decision of the Supreme Court in Desh Bandhu Gupta v. N.L.Anand & Rajinder Singh (supra) relied on by either side in my view follows the decision in C.R.P. No.60 of 2010 -: 32 :- S.A.Sundararajan v. A.P.V.Rajendran (Supra) though on the factual matrix there could be some distinction. In Desh Bandhu Gupta's case petition was originally filed under Rule 90 of Order XXI of the Code. Judgment debtor then filed application to impugn the sale under Sec.47 read with Sec.151 of the Code. A reading of the decision would show that in that case there was no notice issued or served on the judgment debtor as required under Rule 66(2) of Order XXI and no proclamation of sale was also drawn up. The Supreme Court considered consequence of the illegality which went to the root of jurisdiction of the executing court and (in paragraph 17) observed that total absence of drawing up of a proclamation of sale and settlement of its term by judicial application of mind renders the sale a nullity being void and it is covered by Sec.47. It is further held that non- application of mind (while drawing up the proclamation of sale with notice to the judgment debtor) whether sale of a part of the property would satisfy the decree debt is a material irregularity doing substantial injury to the judgment debtor which attracted Rule 90 of Order XXI. Learned counsel for petitioner has referred me to the decision of the Division Bench of this Court in George v. Shirley Varkey (supra). The Division Bench has not held that irregularity committed in drawing up the proclamation in that C.R.P. No.60 of 2010 -: 33 :- there was no application of mind as required under Rule 64 of the Code came within the scope of Sec.47 of the Code. Thus what could be discerned from the above decision is that if no notice is served on the judgment debtor under Rule 66(2) of Order XXI and/or no proclamation of sale is drawn up which made the court sale a nullity being void, it came within the scope of Section 47 of the Code being pre-sale illegality. But mere non-application of mind (while drawing up the sale proclamation with notice to the judgment debtor) whether sale of a part of the property would satisfy the decree debt is a material irregularity in publishing the sale falling under Rule 90 of Order XXI of the Code.
21. A few instances of pre-sale illegality coming under Sec.47 of the Code can be illustrated as under:
(i) Property is purchased by the decree holder pursuant to an ex parte decree and the ex parte decree is later set aside under Order IX and Rule 13 of the Code. The sale cannot stand even though it has been confirmed. Sale can be set aside under Section 47 of the Code (See Set Umedmal and another v. Srinath Ray and another - 1904 ILR (27) Calcutta C.R.P. No.60 of 2010 -: 34 :-
810). An assignee from decree holder - auction purchaser would also come under the above principle but not a third party - auction purchaser who was not aware of pendency of application under Order IX Rule 13 of the Code.
(ii) Sale effected by a court which has no jurisdiction to sell the property due to the property being situate outside its territorial jurisdiction (See Prem Chand Dey v.
Mokhoda Debi - [1890] ILR (17) Calcutta 699).
(iii) Sale of property by a court in execution of a decree due to inadvertence or otherwise notwithstanding previous discharge of the decree debt. Sale is null and void and can be set aside under Section 47 of the Code.
(iv) Sale of property of judgment debtor not covered by the decree. Application to restore possession of the property falls under Section 47 of the Code.
(v) Application to set aside sale on the ground of absence of notice under Rule 66(2) of Order XXI of the Code ( See Desh Bandhu C.R.P. No.60 of 2010 -: 35 :- Gupta v. N.L.Anand and Raginder Singh -
[1994] 1 SCC 131).
(vi) 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 and can be set aside under Sec.47 of the Code (See Desh Bandhu Gupta's case - supra).
22. The above finding leads to the question whether E.A.No.57 of 2009 having been filed after 60 days of the impugned sale is bared by limitation. Learned counsel for petitioner argued that a reading of the order of executing court would show that there was no notice to respondent No.2- judgment debtor as required under Rule 66(2) of Order XXI of the Code. It is seen from the records that notice was ordered to respondent No.2 under Rule 66(2) of Order XXI and that notice was served on Dr.P.G.Menon, said to be the Power of Attorney Holder of respondent No.2. It is also seen from the records that Dr.P.G.Menon filed a petition in the executing court on 09.10.2006 stating that he is not authorised to receive the notice on behalf of respondent No.2. Thereon notice under Rule 66(2) was served on respondent No.2 by affixture on his residential building on C.R.P. No.60 of 2010 -: 36 :- 05.12.2006. Records also show that notice was published in the Malayala Manorama daily dated 13.01.2007 requiring respondent No.2 to prefer his objection if any, to the draft proclamation of sale before 18.01.2007. There is also no contention in E.A.No.57 of 2009 that there was no notice to respondent No.2 either personally or by way of substituted service. As such it cannot be contended that there is non-compliance of Rule 66(2) of Order XXI of the Code.
23. Yet another argument learned counsel for petitioner advanced is that this is a case where sale is challenged on the ground of fraud and collusion, fraud vitiated every proceeding including the solemn proceeding of the court and it is possible that sale can be challenged even in collateral proceedings. According to the petitioner, it learnt about fraud and collusion in publishing and conducting the sale only on 15.01.2009 and immediately thereafter filed E.A.No.57 of 2009. But petitioner being a representative in interest of respondent No.2, if the latter had notice under Rule 66(2) of Order XXI it is not open to the petitioner to contended that it had no notice of the proceeding, learnt about fraud and collusion only on 15.01.2009 and hence it is entitled to file a petition within 60 days of date of knowledge of fraud and collusion.
C.R.P. No.60 of 2010 -: 37 :-
24. Learned counsel for respondent No.3 placed reliance on the decision of the Supreme Court in Janatha Textiles & Others v. Tax Recovery Officer & Another ([2008] 6 JT 653) to contend that at any rate respondent No.3 being a bona fide purchaser in court auction sale cannot be affected by the alleged irregularity in publishing and conducting the sale. I am unable to accept that contention. Reported decision was a case where the decree pursuant to which sale was conducted was later set aside and consequently question arose whether the sale was affected. It was held that a bona fide purchaser cannot be affected by the subsequent events (annulment or modification of the decree). That decision has no application to the facts of the present case.
25. It follows from my above finding that the application (E.A. No.57 of 2009) challenging the sale on the ground of non- application of mind under Rule 64 of Order XXI of the Code whether sale of a portion of the property was sufficient to satisfy the decree debt is a post-sale illegality or irregularity falling under Rule 90 of Order XXI of the Code. That application having been filed after 60 days from the date of sale it is hit by Article 127 of the Act.
C.R.P. No.60 of 2010 -: 38 :-
26. The contention that executing court did not comply with Rule 64 of Order XXI of the Code is equally unsustainable. Executing court has observed that piece meal sale of the attached property was not possible as the marriage hall occupied major part of the 25 cents and in that circumstance any severance of the property would have adversely affected convenient enjoyment of rest of the 25 cents and hence was not possible.
Point No.3.
27. Next point for a decision is whether fraud and collusion alleged is proved? No evidence in that line was produced in the executing court. Exts.A1 and A2 produced in the executing court are not sufficient to prove the alleged fraud and collusion. Though it is contended by learned counsel for petitioner that property was purchased by petitioner as per assignment deed No.2067 of 2002 dated 10.06.2002 and that petitioner continued to be in possession thereof, no evidence in that line has been produced in the executing court. Learned counsel has invited my attention to the judgment of this Court in F.A.O. No.11 of 2003 and R.P. No.860 of 2004. As per decision of this Court in R.P. No.860 of 2004 petitioner was permitted to hold the property under the Receiver appointed in the case. C.R.P. No.60 of 2010 -: 39 :- Counsel on both sides invited my attention to the proceedings for discharge of Receiver but I do not consider it relevant for decision in this proceeding.
28. So far as allegation of fraud is concerned case of petitioner is that property which is worth more than Rs.two crores is sold for a paltry sum of Rs.5.50 lakhs. That according to the learned counsel is sufficient to indicate the fraud committed by respondent Nos.1 and 3 in collusion with Dr.P.G.Menon, father of respondent No.3. Certainly argument would sound attractive. For, 25 cents and a marriage hall is sold for Rs.5.50 lakhs. But in considering that contention it is necessary to refer to the factual situation. As seen from a copy of sale certificate issued by the executing court and produced by respondent No.3, at the time the property was sold it was subject to a mortgage in favour of the KFC for Rs.80 lakhs. The encumbrance certificate shows liability to the KFC. Executing court fixed the upset price as Rs.5 lakhs and the property was sold for Rs.5.50 lakhs subject to the liability to the KFC. It is revealed from assignment deed No.2067 of 2002 dated 10.6.2002 that petitioner purchased 44 cents (including the 25 cents and marriage hall sold in auction) for a total consideration of Rs.19 lakhs whereas the court sale concerned 25 cents and the marriage hall situated thereon. C.R.P. No.60 of 2010 -: 40 :- Petitioner cannot in view of Section 92 of the Indian Evidence Act contend that sale consideration stated in the assignment deed No.2067 of 2002 is not correct. Learned counsel for petitioner referred me to the agreement for sale in favour of 15 persons executed by respondent No.2 concerning the 44 cents and marriage hall therein. There, sale consideration stated is Rs.1.20 crores - made up by Rs.70 lakhs for the land and Rs.50 lakhs for the building, electrical fittings and utensils. I must bear in mind that the said consideration was for the entire 44 cents with the marriage hall, electrical fittings and utensils but the court sale for Rs.5.50 lakhs is of the 25 cents and marriage hall subject to liability to the KFC to the tune of Rs.80 lakhs which brought the value of the property as assessed by the court to Rs.85.50 lakhs. In that situation I am unable to accept the contention that sale of property is for a paltry amount so that this Court has to draw an inference of fraud and collusion.
29. Then the question is whether there is fraud in conducting the sale of the property. It appears that in the meantime there were moves and counter moves so far as administration of petitioner-Company is concerned, one section trying to remove the Managing Director who signed E.A.No.57 of 2009 as representative of petitioner from the Board of Directors C.R.P. No.60 of 2010 -: 41 :- and making attempt to bring in respondent No.3-auction purchaser (son of Dr.P.G.Menon who continued to be one of the Directors of Petitioner-Company) as additional Director. Those matters are outside the purview of consideration of this Court and the executing court and I leave those matters there. So far as respondent No.3 is concerned he comes to the picture only at the time of auction sale and there is nothing to show that there was any collusion involving him. It is contended that respondent No.3 is only a benami of Dr.P.G.Menon who is a Director of the petitioner-Company. But that allegation is not established. It is not shown that respondent No.3 is financially dependent on Dr.P.G.Menon. There is no material to hold that there was fraud and/or collusion in publishing or conducting the sale.
30. Having regard to the facts and circumstances and in the light of the position of law stated I hold that E.A.No.57 of 2009 squarely fell within the purview of Rule 90 of Order XXI of the Code but has been preferred after the period of limitation prescribed under Article 127 of the Act and hence is barred by limitation. The contention that executing court did not comply with Rule 64 of Order XXI of the Code cannot be accepted. I also hold that the allegation of fraud and collusion in publishing and C.R.P. No.60 of 2010 -: 42 :- conducting the sale are not established. As such there is no reason to interfere with the order passed by the executing court.
Revision fails. It is dismissed.
THOMAS P. JOSEPH, JUDGE.
vsv