Analysis of Order 21 Rule 86 CPC

An Analysis of Order 21 Rule 86 of the Code of Civil Procedure, 1908: Procedure on Default of Payment in Court Auctions

Introduction

The execution of decrees is a cornerstone of the civil justice system, ensuring that judicial pronouncements translate into tangible relief for the decree-holder. Order 21 of the Code of Civil Procedure, 1908 (CPC) provides an elaborate framework for the execution of decrees and orders. Among the various modes of execution, the sale of immovable property is a significant and often complex process. Within this process, Rules 84, 85, and 86 of Order 21 play a critical role in governing the deposit of purchase money by the auction purchaser and the consequences of default. This article specifically analyzes Order 21 Rule 86, which dictates the procedure to be followed when an auction purchaser defaults in paying the full purchase money within the stipulated time. It examines the mandatory nature of resale, the discretionary aspect of forfeiture of the initial deposit, and the judicial interpretations that have shaped the application of this rule, drawing upon relevant case law.

The Supreme Court in M/S. AL-CAN EXPORT PVT. LTD. v. PRESTIGE H.M. POLYCONTAINERS LTD. AND ORS. (Supreme Court Of India, 2024) observed that Order 21 CPC deals with the elaborate procedure pertaining to the execution of orders and decrees, and sale is one of the methods employed for execution. The Privy Council, as noted in Bhandari Engineers & Builders Pvt. Ltd. Decree Holder v. Maharia Raj Joint Venture And Others Judgment Debtors. (Delhi High Court, 2019), had long ago observed in General Manager of the Raj Durbhunga v. Coomar Ramaput Sing, (1871-72) 14 MIA 605, that "the difficulties of a litigant in India begin when he has obtained a decree." This sentiment underscores the importance of clear and stringent rules governing the execution process to prevent its abuse and ensure timely justice.

The Legislative Scheme: Order 21 Rules 84, 85, and 86 CPC

To understand Order 21 Rule 86, it is essential to view it in conjunction with the preceding Rules 84 and 85, which establish a sequential process for payment by the auction purchaser.

Order 21 Rule 84: Initial Deposit

Order 21 Rule 84(1) mandates that on every sale of immovable property, the person declared to be the purchaser shall pay "immediately" after such declaration a deposit of twenty-five per cent on the amount of his purchase-money to the officer or other person conducting the sale. In default of such deposit, the property shall forthwith be re-sold. The interpretation of the term "immediately" was a subject of consideration in Rosali V. v. Taico Bank And Others (2009 SCC 17 690, Supreme Court Of India, 2007), where the Supreme Court held that "immediately" should be interpreted as "with reasonable speed," considering practical impediments like bank closures, rather than instantaneously.

Order 21 Rule 85: Time for Payment of Full Purchase Money

Order 21 Rule 85(1) stipulates: "The full amount of purchase-money payable shall be paid by the purchaser into Court before the Court closes on the fifteenth day from the sale of the property." This provision sets a clear and fixed timeline for the payment of the balance amount. The proviso allows for set-off if the purchaser is also the decree-holder and is entitled to it under Rule 72.

Order 21 Rule 86: Procedure on Default of Payment

Order 21 Rule 86 provides for the consequences if the auction purchaser fails to comply with Rule 85. It states: "In default of payment within the period mentioned in the last preceding rule [Rule 85], the deposit may, if the Court thinks fit, after defraying the expenses of the sale, be forfeited to the Government, and the property shall be re-sold, and the defaulting purchaser shall forfeit all claim to the property or to any part of the sum for which it may subsequently be sold."

This rule thus envisages two primary consequences: first, the potential forfeiture of the initial deposit (made under Rule 84), and second, the mandatory resale of the property.

Judicial Interpretation of Order 21 Rule 86 and Connected Provisions

Mandatory Nature of Timelines for Deposit (Rules 84 & 85)

The judiciary has consistently held that the provisions regarding the deposit of purchase money under Order 21 Rules 84 and 85 are mandatory. The Supreme Court in Manilal Mohanlal Shah v. Sardar Sayed Ahmed Sayed Mahmad (AIR 1954 SC 349), a landmark decision frequently cited (e.g., in Rosali V. v. Taico Bank and M/S JETHU RAM PREM CHAND & ANOTHER v. BHAGWAN DASS & ORS (Punjab & Haryana High Court, 2020)), established that these provisions are not mere irregularities but are mandatory, and non-compliance renders the sale a nullity or at least liable to be set aside.

The Punjab & Haryana High Court in M/S JETHU RAM PREM CHAND & ANOTHER v. BHAGWAN DASS & ORS (Punjab & Haryana High Court, 2020) reiterated that Order 21 Rule 84 requires the auction purchaser to pay 25% of the sale price immediately, and Rule 85 mandates the deposit of the full amount on or before the 15th day. Failure to adhere to these timelines triggers Rule 86.

Furthermore, the Punjab & Haryana High Court in Arvinder Singh v. Union Of India Through Defence Estate Officer (Punjab & Haryana High Court, 2010), referencing Manilal Mohanlal Shah, held that the provisions of Order 21 Rules 84, 85, and 86 are mandatory in nature, and the period of 15 days prescribed in Rule 85 cannot be extended by the court. An application for permission to deposit the balance sale consideration beyond this period was, therefore, rightly declined.

However, a nuanced situation arises if the delay is attributable to the court's machinery rather than the purchaser's fault. In Bhairo Kumar Prasad Jain v. Jagal Dipendra Prasad (1965 SCC ONLINE PAT 79, Patna High Court, 1965), the auction purchaser tendered the balance purchase money with challans on the 15th day, but due to delay in processing by the court officer, the money could not be deposited in the treasury until the next open day. The Patna High Court held that the purchaser, having diligently taken the required steps, was deemed to have complied with Rule 85, thus preventing the automatic invocation of Rule 86. This highlights that while the timeline is mandatory, the courts may consider circumstances where the purchaser has done everything in their power to comply but is thwarted by administrative delays.

Consequences of Default under Order 21 Rule 86

Resale of Property: An Obligatory Step

One of the primary consequences of default under Rule 86 is the resale of the property. The language "the property shall be re-sold" indicates the mandatory nature of this step. The Karnataka High Court in Dharam Rao v. Shankarappa (1984 SCC ONLINE KAR 297, Karnataka High Court, 1984) provided a clear exposition on this aspect. The Court held that if the decree-holder auction purchaser fails to deposit the remaining amount within the statutory period of 15 days under Rule 85, the sale automatically stands cancelled, and the Court is bound to order resale as required by Order 21 Rule 86. The Court stated, "It is obligatory on the Court to order a re-sale and the Court has no jurisdiction to extend time for payment."

This view is reinforced by the phrasing of Rule 86 itself and the consistent judicial stance that the timelines are strict. As observed in M/S JETHU RAM PREM CHAND & ANOTHER v. BHAGWAN DASS & ORS (Punjab & Haryana High Court, 2020), "Order 21 Rule 86 CPC further provides that if the full money is not deposited as mentioned above then the property shall be resold..." The consequence of such non-compliance is that the sale is rendered illegal and the property becomes liable for resale.

Forfeiture of Deposit: A Discretionary Power

While the resale of the property is mandatory upon default, the forfeiture of the initial deposit made under Rule 84 is a discretionary power vested in the Court. Rule 86 states that the deposit "may, if the Court thinks fit... be forfeited to the Government." The use of the word "may" signifies this discretion.

The Himachal Pradesh High Court in Daljit Kumar v. H.P. State Financial Corporation (2016 SCC ONLINE HP 171, Himachal Pradesh High Court, 2016) extensively discussed this discretionary aspect. Citing Raghunath Lenka v. Karunakar Rout (AIR 1957 Orissa 257), the Court noted that in the old Code, the words "shall be forfeited" were used in Rule 86, but this was substituted by "may if the Court thinks fit." This amendment underscores the legislative intent to confer discretion upon the executing court. The Court further referred to its own decision in United Commercial Bank v. Mani Ram (AIR 2003 HP 63), holding that if there is a default in payment by the auction purchaser and the reason given by the purchaser is valid and credible, the courts are under a legal obligation to consider these factors before ordering forfeiture. The executing court must exercise judicial discretion in the matter of forfeiture, taking into account the circumstances of the case.

Therefore, while a default in payment under Rule 85 automatically leads to the necessity of resale under Rule 86, the Court must apply its mind to the facts and circumstances before deciding whether to forfeit the deposit, and if so, to what extent.

Order 21 Rule 86 and its Interaction with Rule 90

Order 21 Rule 90 allows for an application to set aside a sale on the ground of material irregularity or fraud in publishing or conducting it. A question arises as to the interplay between a default leading to action under Rule 86 and an application under Rule 90.

The Karnataka High Court in Dharam Rao v. Shankarappa (1984 SCC ONLINE KAR 297) clarified that Order 21 Rule 90 CPC would come into play when the sale is vitiated by irregularity or fraud in publishing or conducting the sale. However, where there is a failure to deposit the purchase money as per Rule 85, leading to the mandatory resale under Rule 86, the sale already conducted is considered null and void due to this fundamental default, and it is not necessary to apply under Rule 90 to set it aside. The sale stands automatically cancelled.

Conversely, in M/S JETHU RAM PREM CHAND & ANOTHER v. BHAGWAN DASS & ORS (Punjab & Haryana High Court, 2020), the judgment debtors had filed objections under Order 21 Rule 90 CPC, contending, inter alia, that the auction purchaser had failed to deposit the amounts as required by Rules 84 and 85. The High Court, while addressing these objections, focused on the alleged default in depositing the full amount within 15 days (Rule 85) and remitted the matter to the Executing Court to determine this factual issue and its effect (implying the application of Rule 86). This suggests that Rule 90 can serve as a procedural mechanism through which a judgment-debtor can bring the auction purchaser's default under Rules 84/85 to the court's attention, thereby invoking the consequences outlined in Rule 86.

Upholding Procedural Integrity and Efficiency in Execution

The stringent provisions of Order 21 Rules 84, 85, and 86 are crucial for maintaining the integrity and efficiency of court auction processes. The Supreme Court in Desh Bandhu Gupta v. N.L Anand & Rajinder Singh (1994 SCC 1 131, Supreme Court Of India, 1993) emphasized the importance of strict adherence to procedural mandates under the CPC to protect the rights of judgment-debtors and ensure the legitimacy of execution sales. While this case dealt with other procedural lapses, its underlying principle of procedural sanctity is relevant.

The Delhi High Court in Bhandari Engineers & Builders Pvt. Ltd. Decree Holder v. Maharia Raj Joint Venture And Others Judgment Debtors. (Delhi High Court, 2019) (and its identical counterpart M/S Bhandari Engineers & Builders Pvt Ltd v. M/S Maharia Raj Joint Venture & Ors (Delhi High Court, 2019)) lamented the persistent difficulties faced by decree-holders in enjoying the fruits of their decrees, stating, "We strongly feel that there should not be unreasonable delay in execution of a decree because if the decree-holder is unable to enjoy the fruits of his success by setting the decree executed, the entire effort of successful litisant would be in vain." Rule 86, by ensuring prompt resale in case of default, acts as a deterrent against frivolous bidding and prevents defaulting purchasers from unduly delaying the execution process. This aligns with the broader judicial concern for expediting execution proceedings, as also reflected in general directions issued by courts, such as those mentioned in DHARMENDRA KUMAR JAIN v. HARPAL SINGH (Madhya Pradesh High Court, 2023), urging executing courts to dispose of proceedings within a time-bound manner.

Conclusion

Order 21 Rule 86 of the Code of Civil Procedure, 1908, serves as a critical enforcement mechanism within the framework of court-conducted sales of immovable property. Judicial pronouncements have consistently affirmed that the timelines for deposit of purchase money under Rules 84 and 85 are mandatory, and failure to comply with Rule 85 inexorably leads to the consequence of resale of the property as stipulated under Rule 86. The sale itself is considered to be nullified by such default.

While the resale of the property is an obligatory duty of the court upon such default, the forfeiture of the initial deposit is a discretionary power. Courts are expected to exercise this discretion judiciously, considering the specific facts and circumstances, including any valid reasons provided by the defaulting purchaser for non-payment. The evolution of the rule's language from "shall be forfeited" to "may, if the Court thinks fit" clearly indicates this shift towards judicial discretion in forfeiture.

Ultimately, Order 21 Rule 86, read with Rules 84 and 85, plays a vital role in ensuring the seriousness of bids in court auctions, protecting the interests of decree-holders by facilitating a swift alternative in case of default, and upholding the overall efficiency and sanctity of the execution process in Indian civil litigation.

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