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State Bank Of India v. Ajit Jain And Others
Factual and Procedural Background
The appellant, a statutory Bank, obtained a money decree for Rs 5,22,585.37 with future interest against Respondent 2 in April 1976. In August 1976 the Bank sought execution by sale of the judgment-debtor’s industrial property located at Plots 360-61, Chandigarh. The Executing Court attached the property and, on 15 June 1979, auctioned it for Rs 1,90,000—well below the Bank’s asserted reserve price of Rs 6 lakh.
Both the Bank and the judgment-debtor filed objections alleging procedural irregularities and inadequacy of price. The Executing Court dismissed the objections and confirmed the sale in favour of five auction-purchasers (led by Shri Ajit Jain). On appeal, the High Court initially remitted the matter for evidence; after trial the objections were again dismissed and a sale certificate ordered. A Single Judge later indicated willingness to set aside the sale when four purchasers conceded its invalidity, but a Division Bench reversed and directed the Single Judge to decide the case on merits because one purchaser (Ajit Jain) did not consent.
The Bank appealed to the Supreme Court. During the hearing the Court explored an amicable settlement, noting the prolonged litigation, the Bank’s mounting dues (≈Rs 15 lakh), and the auction-price disparity. Four purchasers withdrew their claims, leaving Ajit Jain in possession of the property.
Legal Issues Presented
- Whether the auction sale dated 15-6-1979 should be confirmed or set aside due to alleged violations of statutory procedure and gross inadequacy of price.
- Whether the Supreme Court should exercise its power under Article 142 of the Constitution to craft an equitable solution balancing the interests of the decree-holder Bank, the judgment-debtor, and the sole remaining auction-purchaser.
Arguments of the Parties
Appellant Bank
- The property was sold in contravention of the declared reserve price of Rs 6 lakh and required statutory procedure.
- The auction-purchaser allegedly prevented genuine bidders, depressing the sale price.
- Confirmation of the sale would unjustly leave the Bank with only Rs 1,90,000 against an outstanding liability that has grown to about Rs 15 lakh.
Judgment-Debtor
- Supported the Bank’s objection, asserting procedural irregularities and inadequacy of consideration.
Auction-Purchasers
- Four of the five purchasers acknowledged that the sale was void and consented to its being set aside.
- Shri Ajit Jain, the sole non-consenting purchaser in possession, opposed setting aside the sale but offered to pay a higher sum to settle the Bank’s and judgment-debtor’s claims if his exclusive title were recognised.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Supreme Court emphasised three considerations:
- Protracted litigation and inequity: Nearly two decades had passed without satisfaction of the decree. Upholding the sale at Rs 1,90,000 would be manifestly unfair to the Bank, whose dues had risen to approximately Rs 15 lakh.
- Inadequacy of price coupled with purchaser conduct: The rent alone between 1979 and 1984 amounted to Rs 7,35,000, indicating that the auction price was grossly inadequate. Combined with allegations that bidders were discouraged and the formal admission by four purchasers that the sale was void, the Court found significant credibility in the Bank’s objections.
- Equitable settlement under Article 142: To achieve “complete justice,” the Court fashioned a conditional arrangement: Ajit Jain could retain the property provided he satisfied the Bank’s and judgment-debtor’s claims within a specified period; failing that, every prior judicial order and the auction sale itself would stand set aside.
Holding and Implications
The appeals are disposed of under Article 142 with the following operative directions:
- Ajit Jain must pay Rs 15 lakh to the Bank and Rs 5 lakh to the judgment-debtor (exclusive of certain deposits) within three months.
- Any amounts already deposited in court (auction price and rent accruals) are to be applied toward these payments.
- If Ajit Jain fails to deposit the balance within the deadline, the auction sale of 15-6-1979 and all confirming judgments shall stand set aside.
- Four withdrawing purchasers have no further claim to the property but may seek reimbursement from Ajit Jain for their contribution to the auction price.
- No order as to costs.
Implications are confined to resolving the long-running dispute among the parties; the Court expressly relied on Article 142 rather than laying down any general legal precedent.
R.M Sahai, J.— These appeals are by the decree-holder. The appellant, a statutory Bank, filed a suit for recovery of Rs 5,22,585.37 with cost and future interest against Respondent 2 sometime in 1975. The suit was decreed with costs and future interest at 6% per annum on 7-4-1976. On 12-8-1976 the appellant filed an execution application for sale of suit property of Respondent 2. On this application the Executing Court issued the warrants of attachment on 25-8-1976. The property was auctioned on 15-6-1979 for a sum of Rs 1,90,000. The appellant filed an objection against the sale and claimed that the reserved price of the property being Rs 6,00,000 the sale was vitiated as the property was sold in violation of not only the reserved price fixed by the appellant but was contrary to the procedure required to be followed. Objection was filed by the judgment-debtor too. The property was purchased by Shri Ajit Jain and four others. The objections were contested by the auction-purchasers. The Executing Court dismissed both the objections filed by the appellant and the judgment-debtor. The appellant, however, filed an appeal against dismissal of the objection and confirmation of the sale in favour of the auction-purchaser. The order was set aside by the High Court as the objections had been dismissed without affording any opportunity to the objectors to lead evidence. In pursuance of the order passed by the High Court the trial court framed issues both in the objection filed by the judgment-debtor and the appellant and permitted the parties to lead evidence as well. The trial court dismissed both the objections and directed a sale certificate under Order 21, Rule 19 (sic) of the Code of Civil Procedure, to be issued in respect of the property in dispute in favour of auction-purchasers. This order was challenged in first appeal before the High Court. Four of the auction-purchasers stated before the Court that the auction sale may be set aside. The learned Single Judge was of the opinion that since four of the auction-purchasers stated “that the sale in the present case is void being in violation of mandatory provisions of law, hence the present application is maintainable and the sale was liable to be set aside without entering into another controversy”. This order was set aside by the Division Bench.
2. The Bank has now filed an appeal in this Court. We have heard the learned counsel for parties at length. When this appeal came up for hearing on 11-5-1994 we were of opinion that due to protracted litigation a decree obtained by the appellant as far back as 1976 has not been executed. Further Shri Ajit Jain who is the auction-purchaser, has entered into possession and is continuing as such since past many years. In view of this we had passed following order:
“In execution of decree for Rs 5,22,585.37, Plots Nos. 360-61 in Industrial Area, Chandigarh along with building constructed thereon and machinery installed was sold on 15-6-1979 for a consideration of Rs 1 lakh and 90 thousand. The Bank decree-holder filed an objection under Order 21 Rule 19 of the CPC claiming various irregularities in auction proceedings. Objections were filed by judgment-debtor as well. Since then the litigation has been going on between the parties and this appeal has been filed by the decree-holder against remand order passed by the Division Bench of the High Court directing the Single Judge to decide the dispute on merits as out of five auction-purchasers one had not consented for setting aside the sale.
Having heard learned counsel for parties and considering the long delay which has taken place we are of the opinion that it would be in the interest of justice and all the parties if the matter is amicably settled as four out of five auction-purchasers have given in writing that the sale be set aside. In our opinion, the decree-holder and auction-purchasers should be adequately compensated. But what should be the compensation to be agreed between the parties?
We, therefore, direct this appeal to come up for further orders in the 3rd week of July, 1994 in Chambers if the Bench is not sitting. We hope that the parties in the meantime shall negotiate and work out the solution and report the compromise to this Court when the appeal is taken up on the next date.”
This order was passed by us as we were of the opinion that if the sale were to be set aside it would work hardship against Shri Ajit Jain who is one of the auction-purchasers and is in exclusive possession of the property. Whereas if it is upheld then it would be extremely unjust to the appellant. As stated earlier the decree was for Rs 5,22,585.37 in 1976. It has swelled to nearly Rs 15,00,000 and the Bank would be getting only Rs 1,90,000. That the property is valuable, cannot be disputed, as even according to auction-purchaser the rent which accrued from the premises in dispute between 17-3-1979 to 19-9-1984 came to Rs 7,35,000. This itself shows that the sale of the property for a sum of Rs 1,90,000 was inadequate. In this context it is necessary to mention that one of the pleas raised by the appellant and the judgment-debtor was that the auction-purchaser prevented any bidder from entering the plea of auction. We consider it unnecessary to record any finding on it. But the inadequacies of the amount for which the property was sold coupled with the statement of four of the auction-purchasers that the sale was vitiated gives credence to the plea raised on behalf of the appellant. Nothing further need be said.
3. In the circumstances we dispose of these appeals under Article 142 of the Constitution of India to do substantial and complete justice between the parties. Shri Ajit Jain during course of arguments had agreed that he would not stick to the price of Rs 1,90,000 and was willing to pay substantial amount both to the Bank and to the decree-holder so that the future litigation may be avoided provided his claim alone to the property was accepted. That in our opinion does not present any difficulty. Since four of the auction-purchasers have voluntarily withdrawn from the auction they cannot have any right or claim over the property in dispute. In case they have contributed any amount towards payment of the auction amount they shall be entitled to claim refund from Shri Ajit Jain.
4. Shri Ajit Jain shall pay a sum of Rs 15 lakhs to the Bank even though if the dues are taken as on today they are more than Rs 15 lakhs. This payment would be in full and final settlement of the dues outstanding against the judgment-debtor and it would result in discharging him of all the claims of the appellant-Bank against him. Shri Ajit Jain shall further pay a sum of Rs 5,00,000 to the judgment-debtor. The amount of Rs 3,00,000 withdrawn by the judgment-debtor from the rent deposited shall not be adjusted towards this payment. Remaining amount in deposit shall be paid to the judgment-debtor. Shri Jain shall deposit balance amount, that is, Rs 15 lakhs minus the amount which is lying in deposit towards rent and Rs 15 lakhs minus Rs One lakh ninety thousand, the auction amount as we are informed this amount is lying in deposit with the Court. All these amounts shall be deposited within three months from today. The Bank and the judgment-debtor shall be entitled to withdraw the same.
5. In case of failure to deposit the judgment and order of all the courts including auction sale held on 15-6-1979 shall stand set aside.
6. The appeals are disposed of accordingly. Parties shall bear their own costs.
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