Madras High Court
Kotta Govindarajulu Chettiar vs Sivarama Krishnan Minor By Guardian ... on 14 November, 1951
Equivalent citations: AIR1953MAD785, (1953)1MLJ475, AIR 1953 MADRAS 822
JUDGMENT Venkatarama Ayyar, J.
1. Defendant 1 is the appellant before us. The facts leading to this litigation are these. Defendant 2 and his sons, defendants 3 and 4, executed two mortgages in favour of defendant 1 each for Rs. 7000, one on 13-8-1932 and the other on 14-8-1932, Exs. D-17 and D-18. Defendant 1 filed O.S. No. 14 of 1937 on the file of the Sub-Court, Trichinopoly, for recovering the amounts due under those two mortgages. He also applied for the appointment of a Receiver on the allegation that the security was insufficient. On 21-6-1937 he was appointed Receiver and he took possession of the properties some time in November or December 1937. Meantime, a preliminary decree was passed on 21-6-1937 and a final decree on 18-1-1938. In execution of this decree, the mortgaged properties were brought to sale. Defendant I applied in E. A. 378 of 1940 for permission to bid at the auction and set off the amount due to him and this was granted on 12-7-1940. The sale was actually held on 4-12-1940 and defendant 1 became the purchaser for a sum of Rs. 15,400.
The sale was duly confirmed and he was discharged from receivership. Then defendant 5 applied in E. A. 14 of 1941 for setting aside the sale under Order 21, Rule 90 and Section 47, C. P. C. It may be mentioned that no objection was taken that the purchase by defendant 1 on 4-12-1940 was bad for want of permission of the Court. This petition was dismissed on the ground that no security was furnished. The present suit was filed on 29-4-1944. The plaintiff is the son of defendant 3 and he was born some time in 1938. The object of the suit is to get rid of the mortgage decree and the sale. The allegations in the plaint are of the usual kind in this class of suits. It is alleged that the mortgage bonds were not supported by consideration, that defendant 3, the father, was leading an immoral life and that therefore the debts were illegal and immoral and not binding on the plaintiff. It is further stated that the proceedings in O.S. 14 of 1937 are not binding on the plaintiff because the interests of the joint family were not properly safeguarded by defendant 2, the Manager. Then it is alleged that the execution sale was vitiated by several irregularities and that the price of Rs. 15,400 was too low. The prayer is that ignoring the decree and the sale, the plaintiff should be given his share in the property. Defendant 1 denied these allegations. The other defendants who are members of the family supported the plaintiff. Obviously they are behind the plaintiff. The subordinate Judge held that the mortgage bonds were fully supported by consideration, that the allegations about immorality were baseless, that defendant 2, the manager, duly and adequately represented the entire joint family, that there were no irregularities in the conduct of the sale and he accordingly held that the decree and the sale were all binding on all the members of the family including the plaintiff.
2. Apart from the above allegations, the plaintiff also stated that defendant 1 purchased the property without getting the sanction of the Court as he was bound to do as a Receiver and for want of that sanction, the sale was illegal and void. Dealing with this question, the subordinate Judge reviewed the authorities and held that the sale was not a nullity and that it was only voidable at the instance of the members of the family. He further held that the sale having been confirmed without any steps being taken by any members of the family for having it set aside, the order of confirmation having been made under Order 21, Rule 92(3), neither the plaintiff nor the other members of the family were entitled to attack the sale. On these findings, the suit should have been dismissed. But the subordinate Judge took up a new point. Relying upon certain observations in the case of -- 'Nugent v. Nugent', (1907) 2 Ch. 292 (A) the learned subordinate Judge held that defendant 1 was in the position of a trustee by reason of the purchase on 4-12-1940 and that he was a trustee for the mortgagors as well as himself and therefore the plaintiff was entitled as a beneficiary to recover his one-ninth share of the property, but at the same time the plaintiff was bound to pay one-third of the mortgage amount and other incidental expenses. It is against this decree that defendant 1 has preferred this appeal. The plaintiff has also filed a memorandum of cross-objections.
3. The first question that has to be decided is whether the purchase by defendant 1 on 4-12-1940 is a nullity or it is only voidable at the instance of the judgment-debtors or the other members of the family. We agree with the subordinate Judge that the sale is not a nullity. It was only liable to be set aside in appropriate proceedings at the instance of the members of the family. A Receiver is in a fiduciary relationship to the owners of the property over which he is appointed Receiver. For that reason, the law prohibits a purchase of the property by him without the sanction of the Court. To permit him to purchase the property without such sanction would be to put him in a position where his interest would conflict with his duty. But this rule is intended only for the benefit of the owners of the property. That benefit can be waived by them, and they can affirm the sale. The subordinate Judge rightly relies upon the following passage in Halsbury's Laws of England, Vol. 28, page 73, para. 137, as supporting the position that the sale is not a nullity:
"If all parties interested are 'sui juris', they may, of course, elect to affirm the sale."
4. There are other provisions in the Civil Procedure Code which also enact similar prohibitions in the interests of the judgment-debtors. For example, Order 21, Rule 72 expressly prohibits a decree-holder from purchasing the property unless it be with the sanction of the Court. It was nevertheless held by the Privy Council in -- 'Radha Krishna v. Bisheshar Sahay', AIR 1922 PC 336 (B) that such a purchase is not a nullity and that it will stand until it is set aside in appropriate proceedings. It is unnecessary to refer to other analogical instances. The decisions in which purchases by the Receivers without the sanction of the Court have been set aside are all cases in which applications are made in the very proceedings in which the Receiver was appointed. In -- Jiteswari Dassi v. Sudha Krishna', AIR 1932 Cal 672 (C), where the facts are similar to those in the present case, the decree-holder having purchased the property without the sanction of the Court, an application was made under Section 47, C.P. C. and Order 21, Rule 90 for setting aside the sale. It was in those proceedings that the sale was set aside. In -- 'Subramanyam v. Venkatasubba Reddi', AIR 1935 Mad 421 (D), this decision was followed. That was also a case in which an application was made on the execution side to set aside the sale and the sale was set aside. There is a similar decision in -- 'Sankara Pursa v. Govinda Bhatta, AIR 1949 Mad 641 (E) where also there was an application under Section 47 for setting aside the sale and the sale was set aside. We have not been referred to any case in which a sale has been set aside collaterally in independent proceedings.
5. Mr. T.V. Muthukrishna Ayyar relied upon an unreported decision of this Court in -- 'A.S. No. 589 of 1947 (Mad) (F)'. That was a case in which the decree-holder who was appointed Receiver became the purchaser without obtaining the sanction of the Court, as Receiver. A suit was filed by the judgment-debtor within 12 years of the sale. The defendant contested the suit on the ground that an independent suit did not lie and that the appropriate remedy of the plaintiff was to apply for relief in execution proceedings. That was upheld by this Court and the suit was held to be not maintainable. So far as this decision is concerned, we agree with it. But there are observations in the judgment that the sale would be void. Those observations were not made with reference to the point with which we are dealing and they were also made on the basis of the decisions already referred to. The very fact that a separate suit is held to be barred is ground for holding that the sales should be set aside in appropriate proceedings, and unless they are set aside, they cannot be impeached in independent proceedings. We are accordingly of opinion that the purchase by defendant 1 was not a nullity and it stood unless and until it was set aside in appropriate proceedings. Judgment-debtors were entitled to apply to set aside the sale and it would have been so set aside even without proof of damage or any loss if an appropriate application had been put in: but that was not done and the sale was confirmed. It is now too late for the judgment-debtors to have the sale set aside. The order of confirmation has become final and under the circumstances, so far as the judgment-debtors are concerned, defendant 1 has got an indefeasible title.
6. The plaintiff was not a judgment-debtor and it is argued that whatever the rights of the judgment-debtors the plaintiff is not affected. But defendant 2 in the suit was the Manager. He represented the entire joint family in the litigation. The finding of the subordinate Judge is that he did so represent the joint family. It is well settled that proceedings taken against the Manager of the joint family will bind all the members of the family. The plaintiff will accordingly be bound by it. That in fact is the decision of the subordinate Judge and we agree with it.
7. Mr. Muthukrishna Ayyar, learned counsel for the respondents, relied on a case in -- 'Venkatasubba Rao v. Kanakaraju', (G) and on the strength of some observations in that judgment, he contended that the rights of defendant 2 as manager to represent the other members of the family came to an end when once a decree was passed and thereafter the rights of the parties should be regulated only by the provisions of the Code of Civil Procedure. In that case there were minors who were represented in the suit by their father. After the decree, the father died and the mother was appointed guardian 'ad litem'. Notice under Order 21, Rule 22 which has been held to be the foundation of the jurisdiction for execution proceedings was not served upon the mother. It was served only upon one of the other members. The argument which was advanced on behalf of the purchaser was that the service of notice on a major member was sufficient because they were all members of a joint family. That argument was repelled. It was held that when once they are made parties to the suit, the provisions of the Civil Procedure Code control the provisions of the Hindu law and therefore where there are minors who ought to have notice under Order 21, Rule 22 unless the notice is served on the person who is in that suit their guardian, the proceedings would be bad for want of notice. This is no authority for the broad proposition that a guardianship terminates as soon as a decree is passed. Such a proposition will lead to very startling results. If a suit is filed only against the Manager with the object of making the entire joint family properties liable and a decree is obtained, the position will be that as soon as the decree is obtained, the right of representation will be gone, and any proceedings taken in execution against a manager can pass only his own interests. That certainly is not law. The true position is that the provisions of the Civil Procedure Code to the extent to which they go will control the provisions of the Hindu Law. No provision in the Code of Civil Procedure has been brought to our notice which helps the respondent.
We are accordingly of opinion, that the general rule of Hindu law that action taken against the Manager will be binding on all the members of the family must prevail. In this case the Manager did not take any action. He might have applied to set aside the sale in which case the entire sale would have been set aside but he did not do so and it is well settled that members of the family are bound not merely by the action taken by the Manager but even by his omissions. In--'Krishnamurthi v. Chidambaram Chettiar', AIR 1946 Mad 243 (H) this Court has held that a minor member of a joint Hindu family cannot seek to set aside a decree passed against the manager on the ground that he was negligent in the conduct of the defence, and that while a minor who is the sole proprietor is entitled to have a decree re-opened on the grounds of the guardian's negligence, where he is a member of the joint family and there is a manager this principle is not applicable and a decree passed against a manager would be binding on him notwithstanding that he was a minor and notwithstanding that he alleges negligence in the conduct of the suit. The result then is that the plaintiff and all the members of the family would be bound by the result of the sale and the confirmation under Order 21, Rule 92(3), C. P. C. That is the view taken by the subordinate Judge and we agree with him.
8. It now remains to consider the new point taken by the subordinate Judge. He held that defendant 1 became a trustee by reason of the purchase and that the plaintiff and the members of the family had an independent right against him for enforcing their rights as beneficiaries.
This is what the subordinate Judge says:
"This sale to defendant 1 was wrongful because he did not obtain leave as Receiver to purchase the property. When that sale was made, the judgment-debtors had two remedies open to them. The first was to apply under Section 47, Civil P. C. to have the sale set aside. The second was to obtain a declaration on the basis of the principle embodied in Section 62, Trusts Act, that the property was held by the purchaser in trust for all the persons who had interests in it on the date of the Court sale."
9. We do not agree with this position. There are no two rights available to the judgment-debtors. When a property is purchased by a Receiver without the sanction of the Court, the rights of all the members are invaded to that extent. The right which the law gives to them is that they are entitled to elect to affirm or disaffirm the sale. They can elect to avoid the sale end if they do so elect, it will be avoided without proof of any loss or damage. The ground for such a relief being granted is that the Receiver is in a fiduciary capacity. There is only one right available to them viz., the right to avoid the sale and the ground on which this right is conferred on them is that the Receiver occupies a fiduciary relationship. These are not two independent rights. If in fact persons interested in the property elect to affirm the sale, then no further rights are available to them. Likewise if for any reason the persons interested in the property lose their right to have the sale set aside then the position is as if they have affirmed the sale and there are no further independent rights. In this case, the judgment-debtors had the option and could have elected to have the sale set aside and if they had so elected, they would have been entitled to have the property restored to them. But once that right was lost to them, there are no further rights available to them on the basis of the anterior fiduciary relationship. Thereafter it is not open to them to ask for any reliefs which will be available to them only when the sale is set aside. In our opinion the view taken by the learned subordinate Judge is not warranted by any principle, and under the circumstances, on the findings given by him the suit ought to have been dismissed. This appeal will accordingly be allowed and the suit will stand dismissed with costs of defendant 1 to be paid by the plaintiff both here and in the Court below. The plaintiff will pay the court-fee payable to the Government. The memorandum of cross-objections is dismissed but there will be no order as to costs.