Mohammed, J.:— This appeal arises from an order passed by the Subordinate Judge's Court, Muvattupuzha on an application filed under Order 21, Rule 90 of the Code of Civil Procedure. The appellant before us is the auction-purchaser who was the third respondent in the above application.
2. The application, E.A No. 119 of 1995 was filed by a third party seeking to set aside the auction sale conducted on 7-6-1995 in execution of the decree in O.S No. 590 of 1986. The second respondent is the decree-holder and the third respondent is the judgment-debtor. The decree-holder filed E.P No. 173 of 1992 seeking to execute the decree for the realisation of Rs. 65,274/- with interest at 13%. In the execution immovable properties comprised in survey numbers 290/2B, 290/2B/3/10, 290/2B/4/11 and 293/7 having a total extent of 74 cents were attached. Those properties were put to auction sale as per the orders of the Court. In the auction the appellant offered Rs. 3,52,000/- and she was declared to be the purchaser. She deposited one-fourth of the bid amount on 7-6-1995 and the balance on 20-6-1995, within the time allowed by the Court. However, the first respondent alleged that there was fraud in publishing and conducting the sale. Ultimately, after the enquiry the said application was allowed by the Conn below and accordingly set aside the auction sale held on 7-6-1995.
3. The Court below found that the first respondent had obtained a decree against the judgment-debtor in O.S No. 180/91 and in execution in E.P No. 173/72 the very same property was attached and hence he was entitled to have rateable distribution of the sale proceeds of the property. It was further found that there was no proper publication of notice regarding auction and thus the sale was vitiated for material irregularity. The evidence would sufficiently reveal that the property would fetch not less than Rs. 7,00,000/- but it was sold for Rs. 3,52,000/-. The first respondent in the evidence tendered by him as P.W 1 expressed his readiness to purchase the auctioned property at a price above Rs. 6 lakhs.
4. On behalf of the appellant it was argued that the Court below had committed an error in setting aside the auction sale validly conducted by the Court below. In this context the counsel highlighted that the Court should have endeavoured to sustain the Court sale as laid down by the Supreme Court in Motors & Investments Ltd. v. New Bank of India, (1977) 2 SCC 271. On the other hand counsel for the first respondent submitted that the impugned order passed by the Court below is not liable to be interfered with. He further pointed out that the property had been sold in Court auction on a lesser rate than it would have fetched in the normal course. At any rate the impugned order shall not be disturbed for the reason that the execution Court failed to determine the question of ‘saleability’ of the property before ordering sale as required under Order 21, Rule 64 of the Code of Civil Procedure. In support of this plea the counsel has placed reliance on the decision of the Supreme Court in Ambati Narasayya v. N. Subba Rao, AIR 1990 SC 119.
5. Order 21, Rule 90(1) authorises the Court to set aside the sale of any immovable property sold in execution of the decree on the ground of material irregularity or fraud in publishing or conducting it on an application made to it by the decree-holder or the purchaser or any person entitled to share in a rateable distribution of assets or whose interests are affected by the same. However, sub-rule (2) thereof provides that no sale shall be set aside on the ground of irregularity or fraud in publishing the sale or conducting it unless the Court is satisfied that the applicant has sustained substantial injury by reason of such irregularity or fraud. Sub-rules (1) and (2) are not alternative but conjunctive. The requirements provided in sub-rules (1) and (2) are pre-requisites to be satisfied before setting aside a sale by the Court. Of course in Kayjay Industries v. Asnew Drums, AIR 1974 SC 1331, the Supreme Court emphasizes the need for sustaining the credibility of Court sale and observes:
“If Court sales are too frequently adjourned with a view to obtaining a still higher price it may prove a self-defeating exercise, for industrialists will lose faith in the actual sale taking place and may not care to travel up to the place of auction being uncertain that the sale would at all go through.”
What this decision materially said is that the provisions of Section 32(8) of the State Financial Corporations Act attract the Code of Civil Procedure, as far as practicable in the realisation of the dues of the Corporation and so it may be right to apply the provisions of Order 21, Rule 90. Then the Court said: “In short, was there any material irregularity in the conduct of the sale and did it cause substantial injury to the debtor?” That means these requirements cannot be dispensed even if there is a need for the sustenance of credibility as regards the Court sales.
6. The counsel for the first respondent submitted that the requirements provided under sub-rules (1) and (2) of Rule 90 have been satisfied in this case. The evidence tendered by P.Ws 3 and 4 would sufficiently establish that there was no proper publication regarding the auction and hence there was material irregularity in publishing and conducting the sale as observed by the Court below. It is further said that the first respondent was the person who had obtained a decree in O.S No. 180/91 against the third respondent for realisation of Rs. 1,54,178/- plus 6% interest and attached the very same property. However, that attachment was not mentioned in the sale proclamation. He was a person entitled to have rateable distribution of the sale proceeds. Therefore, it cannot be said that the first respondent had not sustained substantial injury by reason of the Court sale conducted in execution of the decree in O.S 590 of 1986 of the Court where also his petition for execution of the decree, E.P 171/92 was pending. In this context the counsel for the first respondent dispelled the plea that the requirements laid down by the Division Bench of this Court in Iyyunni v. Anto, 1994 (1) KLT 583, have not been complied with.
7. On behalf of the appellant it was pointed out that since sale has already been confirmed it is not proper for the Court below to set aside the sale. While augmenting this plea, the decision of the Supreme Court in Navalkha & Sons v. Ramanya Das, AIR 1970 SC 2037, was cited. The Supreme Court was dealing with a sale coming within the purview of Rule 273 of the Companies (Court) Rules, 1959. The Supreme Court while laying down the principles which should govern the confirmation of sale observed:
“The condition of confirmation by the Court operate as a safeguard against the property being sold at inadequate price whether or not it is a consequence of any irregularity or fraud in the conduct of the sale.”
Therefore the Apex Court further said:
“In every case it is the duty of the Court to satisfy itself that having regard to the market value of the property the price offered is reasonable. Unless the Court is satisfied about the adequacy of the price the act of confirmation of the sale would not be a proper exercise of judicial discretion.”
That does not mean when the sale has been confirmed by the Court it is immune from challenge.
8. The counsel for the appellant also relied on the decision in Motors & Investments Ltd.'s case, (1997) 1 SCC 271, in support of his contention that when the Court was inclined to bring the property to sale the endeavour of the Court should be to sustain the Court sale. What actually the Supreme Court said is this:
“It is now a well-settled legal position that when the Court was inclined to bring the property to sale, the endeavour of the Court should be to sustain the Court sale. Equally, though Court sale is compulsive sale, equal endeavour should be made to fetch adequate price for the property sold so that the decree would get satisfied and surplus, if any, could be paid over to the judgment-debtor.”
When the Supreme Court mandates that equal endeavour should be made to fetch adequate price it is imperative on the part of the Court below to probe into the question whether the fraud or irregularity alleged has resulted in obtaining inadequate price. Division Bench of the Madras High Court (Leach, C.J and Kunhiraman, J.) in Soundararajan v. Khaka Mohamed Ismail, AIR 1940 Mad 42, observed:
“The fact that the sale is subject to the confirmation of the Court does not mean that the Court shall refuse to accept the highest bid because at a later stage some one on second thought says that he is willing to pay more.”
The above condition is only to safeguard against the irregularity or fraud in connection with the sale and against the property being sold at an inadequate price. Therefore, throughout the entire process of sale it shall be the endeavour of the Court to obtain the adequate price for the property put in for sale. That the obtaining of inadequate price in auction sale no doubt amounts to ‘substantial injury’ contemplated under sub-rule (2) of Rule 90. The onus of proving the substantial injury is on the applicant who seeks to set aside the sale.
9. It has come out in evidence that the appellant had purchased the property having an extent of 74 cents in Court auction held on 7-6-1995 for an amount of Rs. 3,52,000/-. Is this amount an adequate price for 74 cents of land? This question has no doubt to be answered on evaluating the evidence. The Court below observed that the upset price shown in the relevant proclamation was only Rs. 1 lakh. The first respondent when examined before the Court below as P.W 1 offered that he would take the property for an amount of Rs. 6 lakhs and he had deposited Rs. 1,50,000/- to show his readiness to purchase the property. The aforesaid amount was deposited on 3-11-1995 at State Bank of Travancore, Muvattupuzha. The case of the first respondent is that he was seriously affected by the sale inasmuch as it was auction at a very low price due to fraud played by the appellant. His case is that if there was no fraud the property would have fetched not less than Rs. 7 lakhs. It is pointed out that though notice regarding the auction was affixed in the Panchayat office and the property, they were removed by the appellant with a view to suppress the auction. The first respondent failed to know about the auction in time because of the fraud played by the appellant and others. The evidence of P.W 1 would establish that during the auction period he was hospitalised and as there was no proper publication he was unaware of the auction. P.W 3 is a person residing in the neighbourhood of the property. He deposed that the person who had affixed the notice came there along with George, the husband of the auction-purchaser in a bike and immediately after the affixture, that notice was removed by him. Since it was removed by the person who affixed the notice he could not know the contents of the notice. P.W 2 is a person who has participated in the auction on behalf of his friend Soman who is having property near to the present property. According to him he was authorised to bid the property for Rs. 5 lakhs but he was prevented by George, husband of the auction-purchaser from offering higher amount and, therefore, he had withdrawn from the auction. The Court below relied on the evidence tendered by P.Ws 2 and 3 and came to the conclusion that there was no proper publication regarding the auction and the husband of the auction-purchaser, George was interested to see that the property was bid at a lower price without proper publication. Therefore, it cannot be said that the purchase price obtained for the property sold in auction sale represents adequate consideration. So the act of confirmation of the sale would not be a proper exercise of judicial discretion as observed by the Supreme Court in Kayjay Industries' case, AIR 1974 SC 1331 (supra). The conclusion is that the impugned order setting aside the sale held on 7-6-1995 is in no way illegal or improper. It is upheld accordingly.
10. Once it is established that the property has been sold for inadequate price, it shall be the endeavour of the executing Court to find out whether the provision regarding the sale has been scrupulously complied with. In this context it must be known that as against the judgment-debtor there are other existing decrees to be satisfied by him. In such situation it is essential to pave the way to obtain the maximum sale price in order to have a rateable distribution of the same among the decree-holders. The executing Court never thought of the provisions contained in Order 21, Rule 64 as applicable to the present case. The Supreme Court time and again deprecated such tendency of blind fold sale. Let us see Rule 64 of Order 21, which is relevant for the present purpose.
“64. Power to order property attached to be sold and proceeds to be paid to person entitled.
Any 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 the proceeds of such sale, or a sufficient portion thereof, shall be paid to the party entitled under the decree to receive the same.”
As per the above provision any Court executing the decree has power to enquire whether any property attached by it and liable to sale or a portion thereof, as may seem necessary to satisfy the decree, shall be sold. The sale proceeds of such sale or a sufficient portion thereof shall be paid to the party entitled under the decree to receive the same. The Court has no jurisdiction under this rule to order a sale unless the property is ‘liable to sale’ and, therefore, the objections to the saleability shall be heard by the executing Court before it orders its sale. The Supreme Court in AIR 1990 SC 119, Ambati Narasayya v. N. Subba Rao, held that all sale without examining this aspect and not in conformity with the requirements would be illegal and without jurisdiction. In this context the Apex Court observed thus:
“It is of importance to note from this provision that in all execution proceedings, the Court has to first decide whether it is necessary to bring the entire attached property to sale or such portion thereof as may seem necessary to satisfy the decree. If the property is large and the decree to be satisfied is small, the Court must bring only such portion of the property, the proceeds of which would be sufficient to satisfy the claim of the decree-holder. It is immaterial whether the property is one or several. Even if the property one, if a separate portion could be sold without violating any provision of law only such portion of the property should be sold. This, in our opinion, is not just a direction, but an obligation imposed on the Court.”
Therefore the Court mandated that care must be taken to put only such portion of the property to sale the consideration of which is sufficient to meet the claim in execution petition.
11. The above decision was followed by one of us (Mohammed, J.) in Parvathy Antherjanam v. Indian Bank, 1996 (1) KLT 319. There the counsel for the appellants argued that a portion of the attached property alone be sold in realisation of the decree amount. Their case is that Item No. 1 is a property having an extent of 60 cents. Apart from that there are seven other items of properties lying under attachment. In this context the Court said:
“This is not worrisome argument. On the other hand it deserves countenance because in all execution proceedings the Court has to first decide whether it is necessary to bring the entire attached property to sale or such portion thereof as may seem necessary to satisfy the decree. If the property is large and the decree to be satisfied is small the Court must bring only such portion of the property the proceeds of which would be sufficient to satisfy the claim of the decree-holder.”
Therefore the Court said:
“But no sale has been taken place so far. Therefore, the right available to the appellants under Order 21, Rule 64 is not foreclosed. It can be crystallized at this stage. It is for the appellants to move the executing Court seeking to exercise the power in their favour under Order 21, Rule 64.”
Thus the Court allowed the appellants to move the executing Court to determine the question of ‘saleability’ of the properties attached.
12. Rule 64 may be read with Rule 66(2)(a). We have hereinbefore noticed that Rule 64 authorises the executing Court to sell the property attached or such portion thereof. Rule 66(2)(a) prescribes that proclamation of the intended sale shall be drawn up specifying as fairly and accurately as possible the property to be sold or where a part of the property would be sufficient to satisfy the decree, such part. The Court is under a duty to ascertain definitely the property or a portion thereof, as the case may be, to be sold before entering it in the sale proclamation. The description should be sufficient to identify the property or where a part of the property would be sufficient to satisfy the decree, such part. By failure to apply its mind to this aspect, the conduct of the sale may amount to material irregularity.
13. A question may normally arise as to whether a judgment-debtor who failed to object the sale proclamation on the grounds available under Rule 64 or 66 is entitled to question the sale. We do not propose to decide this point at present inasmuch as the sale in this case was set aside at the instance of a third party who had earlier obtained attachment of the property in execution of the decree against the same judgment-debtor. Further, we have already found that the Court below has correctly set aside the sale held on 7-6-1995.
14. Now what remains to be done is to call upon the executing Court to decide the question of sale of the property in dispute afresh in view of what is said above, after affording reasonable opportunity to all the interested parties concerned. The Court below, after setting aside the sale of petition-schedule property, allowed the auction-purchaser to withdraw the amount deposited by him. As pointed out above the appellant had deposited a sum of Rs. 3,52,000/- as early as in June, 1995. The said money was kept idle all along and hence the appellant is entitled to compensation by way of interest or otherwise. In this context the following observation of the Supreme Court in Motor and Investments Ltd.'s case, (1997) 2 SCC 271 (supra) is relevant as it involve some guidance on the question.
“In case the amount was not kept in any deposit and was used to discharge outstanding debt due by respondents 2 and 3, the appellant is entitled to get interest at 18% per annum on the amount deposited by the appellant and the sale should be so conducted keeping in view the interest liability. From the amount secured by sale, apart from discharging the liabilities fastened on the lands, the interest also should be repaid to the appellant from the date of the deposit till date of repayment to the appellant.”
Therefore, we direct the Court below to decide the question of compensation, by way of interest on the deposited amount or otherwise as it deem fit and proper in the circumstances of the case.
The appeal is disposed of as above. No order as to costs.
Order accordingly.