(Delivered by Horwill, J.)
This is an appeal against the order of the District Judge of South Arcot setting aside a sale by the Official Receiver of items 1 to 10 of an insolvent's property on 6th May 1938.
The Official Receiver in due course of his administration of the assets of the insolvent held a sale on 30th August 1937 which was duly advertised. The highest bidder was the appellant; and the sale was knocked down in his favour for Rs. 113 of which he deposited Rs. 32 at once and a further Rs. 81 on 13th September 1937. In accordance with the practice of the Official Receiver, he said that the sale in the appellant's favour would be subject to such further bids as might be offered by creditors. He appears to have sent notices to the other creditors telling them that if they did not make any higher bids, the sale would be confirmed in the appellant's favour. On 4th September 1937 the respondent sent an offer to the Official Receiver which reached him on 6th September 1937. The money should have been deposited within seven days of 6th September i.e, on or before 13th September 1937. The money was not however paid, and the Official Receiver, apparently not fully aware of the various bids that had been made and of the circulars he had issued, confirmed the sale in the appellant's favour on 30th November 1937. On 16th February 1938, the respondent deposited the Rs. 120 which was the amount of the offer that he had made. The Official Receiver on 24th March 1938 noted in Ex. A that Vasudeva Reddiar (respondent) had offered Rs. 120 and he added that notice should go to all creditors and bidders for them to show cause why the higher offer should not be accepted. He later made a note to the effect that Vasudeva Reddiar's offer was made for items 1 to 8, which had already been sold, that items 16 and 17 were not included in the list of assets disclosed by the insolvent, and that he would therefore take no further steps to call for higher bids. On 6th May 1938 he executed a sale deed in favour of the appellant. The respondent carried the matter to the District Court under S. 68 of the Provincial Insolvency Act and asked the Judge to set aside the sale to the appellant on the ground that there had been no confirmation of the sale, that the Official Receiver had called for offers, and that in accordance with the memo of the Official Receiver he had deposited Rs. 120. He asked that the sale should be confirmed in his favour. The learned District Judge, while concluding that the sale was really confirmed in the appellant's favour on 30th November 1937, held that sale was irregular, in that the Official Receiver had made it clear that he had no intention to confirm the sale in the appellant's favour if there were higher bidders among the creditors. The appellant has therefore brought the present appeal against this order of the District Judge.
We find it difficult to understand how the confirmation of the sale in the appellant's favour can be said to be irregular. The Official Receiver was under no contractual obligation either to the respondent or to any other person to accept their offers; and he might well have refused to confirm the sale in some other person's favour unless his bid was substantially higher than that of the appellant. Actually, it would appear from the note to Ex. A, that the Official Receiver was ignorant of the fact that he had already sold the items to the appellant; but whether he was aware of it or not, he was justified in confirming the sale in favour of the appellant—especially as the bid of the respondent was only Rs. 7 higher than that of the appellant. Although the District Judge had power to set aside the sale and to pass an order in favour of the respondent, yet he should not have done so lightly after there had been a legal conveyance of the property in favour of the appellant. We are of opinion that there was no sufficient ground for setting aside the sale in favour of the appellant.
It is unnecessary to discuss in detail the contention of the learned Counsel for the appellant that the application of the respondent was time-barred. The petition, the order on which is appealed against, was filed on 2nd July 1938, which was the re-opening date after the summer vacation. The sale was on 30th August 1937, the confirmation on 30th November 1937, and the execution of the sale deed on 6th May 1938. All of these acts by the Official Receiver could be the subject of an application under S. 68; for they were the acts of the Receiver against which the respondent was aggrieved. He had a cause of action not only on 30th November 1937, therefore, but on 6th May 1938 also 21 days after 6th May 1938 terminated during the summer vacation, and his petition was presented on the re-opening day. It was therefore in time.
Both the appellant and the respondent are innocent victims of a system which we do not consider to be in the best interests of the creditors. The auction held by the Official Receiver should be final, but it would appear that after an auction is held, the Official Receiver circularises the other creditors, and if he then receives a higher bid, the creditors and the bidders are informed of that bid also. This process apparently continues until no higher bid is received. We consider this system to be objectionable. Clearly, persons will not come forward and bid for the property at a public auction if the highest bid is not to be accepted. This practice has led to the confusion which has resulted in injustice to both the parties in the present case.
The appeal is allowed with costs in both the Courts.
Appeal allowed.
N.R.R