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Attorney(S)
  • Mr. K. Kuppuswamy for the Petitioner.
  • Mr. K. Umamaheswaran for the Respondents.
Judges
  • Sir Owen Beasley Kt., C.J
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Citation Codes
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Attorney(S)
  • Mr. K. Kuppuswamy for the Petitioner.
  • Mr. K. Umamaheswaran for the Respondents.
Judges
  • Sir Owen Beasley Kt., C.J
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Smart Summary

Opinion Summary — Civil Revision Petition under Order 21, Rule 89, Civil Procedure Code

Factual and Procedural Background

This Civil Revision Petition arises from an application filed by a judgment-debtor under Order 21, Rule 89 of the Civil Procedure Code (CPC) seeking setting aside of a sale. In the lower courts the petitioner in the revision (the 2nd respondent in the lower courts) was the auction-purchaser of one item of property sold pursuant to a decree; the decree-holder (the 1st respondent in the lower courts) purchased another item. The judgment-debtor (applicant under O.21, R.89) deposited the five per cent purchase-money required to secure payment to the auction-purchaser but did not deposit the amount specified in the sale proclamation for payment to the decree-holder. The reason given was an arrangement between the judgment-debtor and the decree-holder: the decree-holder agreed to accept a mortgage for Rs. 600 from the judgment-debtor in satisfaction of the decree amount stated in the proclamation.

The auction-purchaser objected on the ground that the conditions of O.21, R.89 had not been complied with because the judgment-debtor had not deposited the amount specified in the proclamation. The District Munsif relied on the Privy Council decision in Seth Nanhelal v. Umrao Singh to the effect that, after a sale and after the rights of the auction-purchaser had intervened, an adjustment or satisfaction of a decree could not be set up. The court below (District Judge on appeal) held that the requirements of R.89 were satisfied. The present opinion considers whether a decree-holder's acceptance of a non-cash equivalent (in this case a mortgage) or waiver satisfies the statutory condition that the judgment-debtor deposit “the amount specified in the proclamation of sale less any amount which may ... have been received by the decree-holder.”

Legal Issues Presented

  1. What is the proper construction of the phrase in O.21, R.89 CPC: “any amount which may, since the date of such proclamation of sale, have been received by the decree-holder”?
  2. Does the word “received” in that phrase require actual receipt in cash, or can it include receipt of an equivalent (for example, a mortgage, waiver or goods such as jewels) that reduces the amount owing to the decree-holder?
  3. Where a sale has taken place and a third party (auction-purchaser) has obtained rights, can the judgment-debtor set up an arrangement with the decree-holder (such as acceptance of a mortgage or waiver) as a ground for setting aside the sale under O.21, R.89?
  4. Does a payment made by a co-judgment-debtor satisfy the requirements of O.21, R.89?
  5. Does the acceptance by a decree-holder of a part-payment or equivalent by the judgment-debtor defeat the auction-purchaser's claim to rateable distribution?

Arguments of the Parties

Petitioner's (Auction-purchaser's) Arguments

  • The petitioner contended for a strict construction of O.21, R.89 and argued that the rule permits no receipt by the decree-holder other than an amount in cash—i.e., the statutory deduction must be actual cash received by the decree-holder.
  • The petitioner relied upon an Allahabad High Court decision (Janki Pershad v. Lekhraj) in support of a stricter view; that authority was urged to show that non-cash arrangements should not be treated as “receipt” under the rule.
  • Attempts were made in the lower courts and on appeal to show that the arrangement between the judgment-debtor and the decree-holder would defeat the petitioner's rights to rateable distribution from sale proceeds.

Judgment-debtor / Decree-holder Position

  • The judgment-debtor arranged with the decree-holder for the decree-holder to accept a mortgage of Rs. 600 in satisfaction of the decree amount specified in the proclamation; on that basis the judgment-debtor did not deposit the proclamation amount into Court.
  • The implied position of the decree-holder (accepted by the court as relevant) was that the mortgage was a reasonable equivalent for the amount owing and thereby reduced or extinguished the amount stated in the proclamation such that the judgment-debtor need only deposit the net balance, if any, into Court when applying to set the sale aside under O.21, R.89.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Seth Nanhelal v. Umrao Singh (Privy Council) Authority relied on below for the proposition that, after sale and after a third party (auction-purchaser) has intervened, no adjustment or satisfaction of the decree can be set up. The court accepted the case decides that adjustments cannot be set up once sale and third-party rights have intervened, but distinguished it on the basis that the Privy Council was not dealing with an application under O.21, R.89 to set the sale aside; the court therefore returned to the precise wording of R.89 to decide the present statutory question.
Janki Pershad v. Lekhraj and others (Allahabad High Court) Suggested support for the petitioner's strict-cash interpretation (as cited by petitioner). The court held that this decision was not authoritative on the point because in that case the full amount had in fact been deposited in Court; the observations on non-cash receipt were therefore obiter and not applicable as binding authority.
Vedala Lakshminarasimha Charyulu v. Pacha Lakshmiamma (Madras High Court) Held that an agreement with the decree-holder's widow treating a portion of the decree-debt as discharged in consideration of services rendered by the judgment-debtor is a valid discharge; actual receipt of cash is not necessary. The court treated this decision as directly supporting the proposition that non-cash or constructive satisfaction can satisfy the requirements of R.89 and relied upon it as binding Madras (Bench) authority under similar wording in the old Code.
Lakshmi Ammal v. Sankaran Nair (Madras High Court) Followed Vedala Lakshminarasimha and held that payment to the decree-holder need not be in cash; waiver of a portion of the amount was sufficient to justify an application under O.21, R.89. The court regarded this as supporting the conclusion that non-cash equivalents or waivers reduce the amount “received” by the decree-holder for purposes of R.89.
Karunakara v. Krishna (Madras High Court) Distinguished Vedala and Lakshmi Ammal: where a co-judgment-debtor paid an amount to the decree-holder that payment by a co-judgment-debtor does not satisfy R.89; accepted that there can be a constructive receipt by the decree-holder. The court treated this decision as consistent with the view that not all payments are acceptable under R.89 (e.g., payments by co-judgment-debtors) but that constructive receipt or other non-cash equivalents can count where appropriate.
Sorimuthu Pillai v. Muthukrishna Pillai (Madhavan Nair, J.) Discusses a number of authorities relating to the same topic (receipt under R.89) on different facts. The court observed that Sorimuthu Pillai dealt with different facts and did not dissent from the Bench decisions of the Madras High Court; it therefore did not undermine those precedents relied upon by the court.

Court's Reasoning and Analysis

The court proceeded from the text of Order 21, Rule 89, which requires that, for setting aside a sale, the judgment-debtor must deposit “the amount specified in the proclamation of sale less any amount which may, since the date of such proclamation of sale, have been received by the decree-holder.” The core interpretive question was whether “received” must mean actual cash or may include equivalents (such as waivers, mortgages, jewels, or other constructive receipts) which reduce the amount owing to the decree-holder.

The court rejected a literalist, strictly cash-only construction urged by the petitioner. The principal reasons given were:

  • The rule is an exceptional indulgence to judgment-debtors: where the statutory conditions are satisfied the Court is bound to set aside the sale. Interpreting “received” to require payment in cash would impose an unnecessary and unfair burden on the judgment-debtor, who would otherwise be obliged to pay the full proclamation amount into Court and then seek to recover any sums already received by the decree-holder in the intervening period.
  • Practical fairness and convenience counsel permitting deduction of amounts which the decree-holder has honestly received or accepted as reasonable equivalents (including waiver or acceptance of a mortgage) between the proclamation date and the application to set aside the sale.
  • The auction-purchaser already receives a five per cent allowance under clause (a) of R.89 as compensation; the court could not see a valid grievance by the auction-purchaser where the decree-holder chooses to accept a non-cash equivalent or to waive the claim.
  • Precedent from this High Court (Vedala Lakshminarasimha; Lakshmi Ammal; Karunakara) supports the view that actual receipt of cash is not strictly necessary and that constructive receipt or other equivalents can satisfy the requirements of R.89, subject to the distinctions noted (e.g., payment by a co-judgment-debtor may not qualify).
  • Decisions cited by the petitioner (notably the Allahabad case) were found to be inapposite or merely obiter; a recent single-judge decision cited (Sorimuthu Pillai) did not dissent from the Madras Bench decisions and dealt with different facts.
  • The court also rejected the contention that acceptance of such an arrangement would improperly defeat any right of the auction-purchaser to rateable distribution: when a judgment-debtor deposits under O.21, R.89 an amount sufficient to satisfy the claim of the decree-holder whose decree led to sale, the money satisfies that particular decree-holder's claim and does not go into rateable distribution for other decree-holders.

Applying these principles to the facts, the court accepted that the decree-holder's acceptance of a mortgage for Rs. 600 could be treated as a reasonable equivalent that reduced or extinguished the decree amount for purposes of R.89, so that the judgment-debtor need only deposit the net balance (if any) into Court when seeking to set aside the sale.

Holding and Implications

Holding: The Civil Revision Petition was dismissed. The court ordered the petition dismissed with costs to the 1st respondent.

Implications:

  • Direct effect on the parties: the petition (by the auction-purchaser challenging the application under O.21, R.89) was unsuccessful; the arrangement between the judgment-debtor and the decree-holder (acceptance of a mortgage in satisfaction of the decree) was treated as a valid reduction/extinguishment of the amount specified in the proclamation for the purposes of the rule, and the judgment-debtor was not required to pay the full proclamation amount into Court where the decree-holder had accepted an equivalent.
  • Legal consequences identified by the court (as applied to these facts): a decree-holder may accept non-cash equivalents (including waiver or other reasonable equivalents) which operate as “receipt” for the purpose of reducing the proclamation amount under O.21, R.89; a payment by a co-judgment-debtor remains distinguishable and may not satisfy R.89; and an auction-purchaser's remedy is limited to the statutory compensation (five per cent) and he has no right to rateable distribution from amounts deposited to satisfy another decree-holder's claim.
  • The opinion did not purport to create a new general precedent beyond its application of existing Madras Bench authority; it relied upon and followed earlier High Court decisions on the construction of the same or similar statutory wording.
N. R. R. — Petition dismissed.

This summary is restricted to the matters and reasoning expressly contained in the provided opinion and does not add or infer facts or legal propositions not stated in that opinion.

Show full summary ...

    Chathurvedula Subbayya Petitioner. v. Simha Venkata Subba Redi And Another

    This Civil Revision Petition arises out of an application put in by a judgment-debtor under O. 21, R. 89, Civil Procedure Code. The petitioner here was the 2nd respondent in the lower Courts and was the auction-purchaser of one of the items of property brought to sale in pursuance of a decree. The decree-holder, the 1st respondent in the lower Courts, purchased another item of property. The applicant under O. 21, R. 89, Civil Procedure Code, was the judgment-debtor. He deposited the required five percent of the purchase-money for payment to the petitioner here (the 2nd respondent). He, however, made no deposit under R. 89 (1) (b), namely, “for payment to the decree-holder the amount specified in the proclamation of sale” for the reason that he came forward with an arrangement whereby the decree-holder, who was the 1st respondent in the application, agreed to accept a mortgage for Rs. 600 from the applicant, the judgment-debtor, in satisfaction of the amount owing to him under the decree. The petitioner here, the 2nd respondent, objected, raising the point that the conditions laid down in O. 21, R.89, Civil Procedure Code, had not been complied with by reason of the fact that the judgment-debtor had not deposited in Court the amount specified in the sale proclamation. The District Munsif held following the decision of the Privy Council in Seth Nanhelal v. Umrao Singh that, after the sale had taken place and the right of a third party, namely, the auction-purchaser, had intervened, no adjustment or satisfaction of a decree could be set up. That decision certainly does decide that that cannot be done. But it is perfectly clear that their Lordships were not dealing with the position which is arrived at after an application has been put in by a judgment-debtor for the setting aside of the sale under O. 21, R. 89, Civil Procedure Code. In fact they say that that is the only remedy to be pursued where a sale has taken place if the judgment-debtor seeks to set it aside. Hence we are driven back to the words of O. 21, R. 89. The amount that has to be deposited in Court for payment to the decree-holder is the amount specified in the proclamation of sale “less any amount which may, since the date of such proclamation of sale, have been received by the decree-holder.” The question is, what is the construction to be placed upon “any amount which may have been received by the decree-holder.” Is it necessary that the decree-holder must receive the amount in cash or can he receive the equivalent of cash? It was contended very strenuously here that the words of the rule must be strictly read and that the rule permits of no receipt by the decree-holder other than of an amount in cash. I am entirely unable to see any reason for such a construction being placed upon these words. It is a rule which gives a very special indulgence to judgment-debtors or persons interested in the property sold to satisfy the decree amount as stated in the proclamation which is owing to the decree-holder so that he can go away with that amount; and the sale is set aside. The Court is bound, upon the conditions laid down in R. 89 being satisfied, to set aside the sale. The Court has no option but to do that. It is only fair, therefore, that, when the decree-holder has, since the date of the proclamation and before the application is made to set aside the sale, received something which reduces the amount which is owing to him, the judgment-debtor should not have to pay the full amount into Court and then withdraw the amount which the decree-holder has received in between those two dates. Obviously the convenient thing is for the judgment-debtor to deduct what the decree-holder has received since the date of the proclamation up to the time of the filing of the application and to pay the net amount which is owing to the decree-holder into Court. I am quite unable to follow the reason for the argument addressed to me upon this point, namely, that there must be an actual receipt of cash and none other. If there has been a receipt of cash which reduces the amount set out in the sale proclamation the auction-purchaser has no cause to complain. He receives five per cent of the purchase money as compensation under Cl. (a) of R. 89. I fail to see what his complaint can be, having received that five per cent, if the decree-holder chooses to take some jewels in part satisfaction of the decree, those jewels being an equivalent to a certain sum of money. I am unable, to see that the auction-purchaser has any grievance if the decree-holder chooses to forego the whole of the amount owing to him under the decree. In answer to a question put by me to the learned Counsel for the petitioner whether he contested the position that it was open to a decree-holder to waive the whole of the decree-amount and whether under these circumstances the judgment-debtor would still have to deposit the full amount stated in the sale proclamation in Court, I understood his answer to be that it would be unnecessary, and that he would then not have to deposit any amount in Court. The position, therefore, is that the decree-holder can waive the whole of the amount in which case the judgment-debtor need pay nothing into Court in respect of the claim. The decree-holder can, if he likes, accept a lesser amount in which case the judgment-debtor need only pay the difference into Court. The decree-holder can agree to receive a part of that which is owing to him in which case the judgment-debtor has to deposit the balance into Court. I am quite unable to see why a decree-holder cannot be permitted to receive anything which to him is an adequate equivalent of the amount which is owing to him under the decree by the judgment-debtor. The petitioner's contention with regard to this is sought to be supported by the authority of a decision of the Allahabad High Court which upon examination does not turn out to be any authority at all. That is Janki Pershad v. Lekhraj and others , a decision of Sulaiman, C. J. In that case the full amount set out in the sale proclamation had been deposited in Court and it was, therefore, quite unnecessary to consider what the result of some other receipt by the decree-holder than an actual amount in cash would have been and therefore, the observations of the learned Chief Justice upon that question are merely obiter. On the other hand, there are three cases of this High Court which are directly contrary to the argument advanced here. The first of these is Vedala Lakshminarasimha Charyulu v. Pacha Lakshmiamma , a decision of Abdur Rahim and Sundara Ayyar, JJ., under the old Code of 1882, the wording of the old section being exactly similar to the words found in O. 21, R. 89. There it was held that an agreement with the decree-holder's widow to treat a portion of the decree-debt as discharged in consideration of services rendered by the judgment-debtor to her husband is a valid discharge and actual receipt of cash is not necessary. This decision was followed by Benson and Sundara Ayyar, JJ. in Lakshmi Animal v. Sankaran Nair . In that case the decree-holders waived a portion of the decree amount and, following the decision in Vedala Lakshminarasimha Charyulu v. Pacha Lakshmiamma , it was held that the requirements of the rule were satisfied. The position is stated as follows on page 206:

    “The whole amount due to the decree-holder was no doubt not paid in cash to the decree-holders. They waived a portion of the amount due to them and put in an application to the Court requesting that satisfaction might be entered of the whole amount due to them under the decree……………..It was held by this Court in Vedala Lakshminarasimha charyulu v. Pacha Lakshmiamma that the payment to the decree-holder need not be in cash and that it is enough if the decree-holder is satisfied with regard to the whole of the amount due to him to justify an application under O. 21, R. 89”.

    In another case, viz., Karunakara v. Krishna (4), Spencer and Seshagiri Ayyar, JJ, referred to Lakshmi Ammal v. Sankaran Nair and Vedala Lakshminarasimha Charyulu v. Pacha Lakshmiamma and distinguished those cases from the case before them which was a case where a co-judgment-debtor had paid an amount to the decree-holder and they held that a payment by a co-judgment-debtor does not satisfy the requirements of R. 89. At the same time they accepted the position that there can be a constructive receipt of the money by the decree-holder. It was seriously argued that a recent decision of Madhavan Nair, J., in Sorimuthu Pillai v. Muthukrishna Pillai in which a number of authorities are discussed has cast doubts upon the views expressed in the three Madras cases to which I have referred. That decision does nothing of the kind. It deals with a totally different state of facts and moreover reference is made to the three Madras cases and no dissent from what is laid down there is expressed by Madhavan Nair, J. Indeed he could not do so since those decisions are Bench decisions which are therefore binding upon him. I am quite unable to see how the petitioner's argument can succeed. Some attempt was apparently made in the District Munsif's Court and before the learned District Judge before whom the matter came on appeal and who has, in my view, quite rightly held that the requirements of R. 89 were satisfied, to show that, by reason of this arrangement between the decree-holder and the judgment-debtor, the rights of the petitioner here to have rateable distribution would be defeated. The answer to that is that the petitioner has no right to rateable distribution, that is to say, when a judgment-debtor deposits in Court under O. 21, R. 89, Civil Procedure Code, an amount sufficient to satisfy the claim of a person for the satisfaction of whose decree the property is ordered to be sold, the money goes to the satisfaction of that decree-holder's decree and nobody else's and the other decree-holders have no right to claim rateable distribution in that amount. This point is dealt with in the Notes to O. 21 R. 89 in Sir Dinshaw Mulla's Code of Civil Procedure (10th Edition) page 816. With regard to the mortgage which was accepted by the decree-holder in satisfaction of his decree, in my opinion, that can be taken as something which the decree-helder regarded as a reasonable equivalent for the amount owing to him by the judgment-debtor under the decree. If that is so, he has received a sum towards his decree or in this case in total extinction of his decree. For these reasons, in my view, this Civil Revision Petition must be dismissed with costs of the 1st respondent.

    N. R. R.Petition dismissed.

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    Comments

    Chathurvedula Subbayya Petitioner. v. Simha Venkata Subba Redi And Another
    (Apr 3, 1935)