Laxmansing Baliramsi... v. Laxminarayan Deostha...

1. In execution of a decree passed in C.S No. 31 of 1933 by the Additional District Judge, Wardha, the immovable property of the judgment-debtors consisting of village shares was attached and put to auction on 3-1-1946 and 4-1-1946. It was purchased by different persons who are impleaded in this appeal as respondents 2, 3, 4 and 5. The total amount for which the property was sold was Rs. 12,700 though the decretal amount due was Rs. 18,752-3-8.

2. On 1-2-1946, as per agreement between the decree-holder, who in this case is a deity represented by Mr. N.R Nagle, the President of the ‘Laxminarayan Deosthan Committee,’ and the judgment-debtors the decree was agreed to be satisfied by payment of Rs. 10,000 in cash and execution of a promissory note for Rs. 2000 which as a fact was executed by some of the judgment-debtors viz., Laxmansingh and Pratapsingh. On the same day Mr. Nagle, on receipt of the amount and the promissory note, passed a receipt of full satisfaction of the decree which runs as follows:

“I, the undersigned, Narayan Rao Rajaram Nagle, pleader, Hinganghat, president on behalf of the plaintiff Shree Laxminarayan Dewasthan, Kapsi, execute the receipt (this receipt) as follows:

In the said execution case the immovable property of the defendants was sold by auction on 3-1-1946 and 4-1-1946. The said execution having this day been privately compromised (i.e, a decision having this day been privately arrived at in respect of the said execution case), a sum of Rs. 12,000, twelve thousand rupees, has been agreed to be taken in full satisfaction of the decree. Out of the same, I have this day received Rs. 10,000, ten thousand rupees, in cash and for the balance of Rs. 2,000 two thousand rupees, the defendants have executed a promissory note.

In all I have taken and received Rs. 12,000 twelve thousand rupees as above. The remaining amount has been remitted. This execution case has been fully satisfied and nothing remains due from the defendants in respect of this execution case. Hence the auction sale may be set aside.”

3. On 1-2-1946, the judgment-debtor Pratapsingh deposited in Court the amount payable by way of commission to the auction-purchasers and applied under O. 21, R. 89 of the CPC, to set aside sales, producing therewith the decree-holder's receipt for full satisfaction of the decree. This application appeals to have been countersigned by Mr. N.R Nagle for the decree-holder obviously by way of his consent to the setting aside of the sales. The auction-purchasers, who were noticed, however opposed the application and the contentions raised on their behalf are mainly these: (a) That O. 21, R. 89 does not recognize payments made privately to the decree-holder. The failure of the judgment-debtor to deposit the decretal amount in cash is fatal to the application to set aside the sale, (b) That payment alleged to have been made was at best Rs. 12,000, i.e, for less than the decretal amount, (c) That a private compromise between the decree-holder and the judgment-debtors for satisfaction of the decree cannot affect the rights of the auction-purchasers. (d) That as there are various claims for rateable distribution the decree-holder is fraudulently trying to appropriate the bulk of the money to himself.

4. At a very late stage on 22-6-1946 i.e, nearly two months after the case was closed for arguments, a statement was put in on behalf of the decree-holder opposing the application to set aside sale on the ground that the promissory note for Rs. 2,000 was not executed by the judgment-debtor No. 3 and the judgment-debtors failed to pay Rs. 2,000 due on promissory note as orally undertaken by them to do.

5. Seth Gopaldas Mohta of Hinganghat, who is a recorded co-sharer in these villages, viz., Nandpur, Jejuri and Chicholi, the shares in which were put to auction, applied under Section 151 of the Land Revenue Act for preemption. He has in law no locus standi in proceedings under O. 21, R. 89, but he also put in a statement opposing the setting aside of the sale on grounds, similar to those raised by the auction-purchasers.

6. The executing Court did not frame issues, did not fix the case for evidence and disposed of the application for setting aside sale after hearing arguments. This is the order appealed against by the judgment-debtors.

7. In the order under appeal the learned Judge held that money paid privately is equivalent to a deposit under O. 21, R. 89 of the CPC and what is necessary is in fact only an unequivocal acknowledgment of the decree-holder that the decree was satisfied and it is immaterial whether the decree was satisfied by payment of full decretal amount or a part and whether the decree-holder received cash or anything which he treated equivalent thereto. The learned Judge, it must be said, most curiously accepted what was stated in the belated statement of the decree-holder dated 22-6-1946 as true and held that the decree-holder was not satisfied because in his view the agreement between the decree-holder and the judgment-debtors was in the nature of an executory contract and it failed as the amount due on promissory note was not paid within one month as orally agreed. In paras. 5 and 6 of the order, the learned Judge proceeded to deal with objections never raised by the parties and observed that the auction-purchasers were not impleaded in the application to set aside sales and that as only one of the judgment-debtors had applied to set aside sales it may, at the most, be that the sales could be set aside to the extent of his share. Finally the learned Judge took into consideration the fact that there were other creditors who were entitled to rateable distribution and held that the sales cannot be set aside and O. 21, R. 89 of the CPC cannot be read in derogation of Section 73 of the CPC.

8. The auction-purchasers (respondents) have not appeared in this Court to oppose the appeal. The only person who was represented and who opposed the appeal was Seth Gopaldas Mohta who was a preemptor and also one of the creditors applying for rateable distribution. The question which at the outset arises for determination is if a creditor applying for rateable distribution has any locus standi in proceedings for setting aside sale or in appeal therefrom. It is clear from O. 21, R. 89, that the only persons concerned in these proceedings are the person applying, the decree-holder and the auction-purchaser. The question of rateable distribution is one between the decree-holders inter se in which neither the judgment-debtor nor the auction-purchaser has any concern. The creditor applying for rateable distribution is entitled to a share in the sale proceeds if and when the amount becomes distributable. The amount deposited in Court by auction-purchaser does not become distributable until the sale is confirmed. The learned counsel for the respondent referred me to Section 64 and to O. 21, R. 72 but these provisions established that wherever it was thought necessary or proper to safeguard the position of a person applying for rateable distribution a specific reference to S. 73 was made. There is no reference to Section 73 in O. 21, R. 89 of the CPC. In my view Seth Gopaldas Mohta has no locus standi in this appeal. The appeal has, however, been argued very fully and very vehemently on either side and I propose to decide it in the light of the arguments advanced.

9. As held in A.I.R 1948 Bom. 3361 the Court has no option but to set aside auction sale if the applicant complies with the provisions of O. 21, R. 89 of the CPC and the executing Court dealing with an application under this provision has to concentrate its attention on its requirements. The first requirement is that the person applying must be the person owning such property or holding an interest therein by virtue of a title acquired before such sale; second is that the applicant should deposit in Court for payment to the purchaser and for payment to the decree-holder as required by cls. (a) and (b).

10. There is no dispute in this case that the person applying is a person owning such property and that he deposited the sum necessary for payment to the purchaser and applied within 80 days of the date of sale for setting aside sale. The learned lower Court's view that the sales could at best be set aside to the extent of the share of the applicant judgment-debtor is something extremely novel. A moment's reflection should have convinced the learned Judge that O. 21, R. 89 does not contemplate of a sale being set aside in part; it is either set aside or not. Nor is it necessary that all the persons owning property should be the applicants. It is always dangerous, the learned Judge should have realized, to deal with imaginary objections. Evidently no such objection was taken because it was obviously untenable, specially when the judgment-debtors are members of a joint Hindu family as the judgment-debtors Nos. 1 to 3, most probably, are.

11. What is required by Article 166, Limitation Act, is that an application should be filed within 30 days of sale and it is cleat from O. 21, R. 89 that the deposit should also be within the time that the application could be filed. This was obviously done. Notices were issued to the auction-purchasers and they not only appeared but opposed the application without ever suggesting that they were not impleaded in the application. What the learned Judge evidently means is that the names of the auction-purchasers are not mentioned in the application under O. 21, R. 89 of the CPC. This is not necessary as the names of the auction-purchasers are in the execution record. The auction-purchasers are no doubt necessary parties to the proceedings for setting aside sales and the order setting aside sales passed without notice to them would be bad. That position did not arise in the present case as notices were issued and served and the auction-purchasers took part in the proceedings.

12. The only point contested by the auction-purchasers in the lower Court was the due compliance with cl. (2) of O. 21, R. 89(1). According to them it could be complied only by depositing in Court full amount due on the decree and it was further suggested very vaguely that there were claims for rateable distribution.

13. The learned Judge of the lower Court held and in my view quite correctly that clause ‘B’ is satisfied by an unequivocal admission of the decree-holder that his decree was satisfied within 80 days of the date of sale. Neither the auction-purchaser nor even the Court can ignore that admission. It was held in A.I.R 1938 Cal. 2522 that when the sale was set aside on the admission of the decree-holder that the decree was satisfied out of Court the auction-purchaser cannot have it restored on the ground that the alleged satisfaction was untrue. The receipt dated 1-2-1946 passed by Mr. Nagle contains an unequivocal and unconditional admission of the fact of full satisfaction of the decree. The last words of the receipt are:

“This execution case has been fully satisfied and nothing remains due from the defendants.”

14. This is further corroborated by the fact that Mr. Nagle countersigned the application filed on the same day for setting aside the sale. The promissory note dated 1-2-1946 appears to have been intended to be executed by three persons but it was actually executed only by two. It was not executed by Govindsingh, the younger brother of Pratapsingh. It is, however, immaterial as the promissory note executed only by Laxmansingh and Pratapsingh was accepted by the decree-holder and he passed a receipt for satisfaction of the decree. On the matters as they stood on 1-2-1946 there was no dispute between the applicant (judgment-debtor) and the decree-holder.

15. It was argued by the learned counsel for the respondent that any compromise between the decree-holder and the judgment-debtor regarding satisfaction of the decree after the date of auction was bad and could not affect the interest of a third person i.e, the auction-purchaser and the decisions which uphold such a satisfaction are opposed to what their Lordships of the Privy Council held in 27 N.L.R 95.3 The learned counsel failed to distinguish between an adjustment of a decree and a satisfaction of the decree. Their Lordships were dealing with a case of mere adjustment and not of satisfaction and it is on this ground that the Privy Council case has been distinguished in 81 N.L.R 67,4 and in other cases, including the Full Bench decision of the Madras High Court reported in I.L.R (1940) Mad. 699.5 In I.L.R (1937) 2 Cal. 606,6 it was held that an agreement between the judgment-debtor and the decree-holder outside Court whereby the decree was satisfied was sufficient compliance with O. 21, R. 89 of the CPC.

16. On the view taken by the learned Judge of the lower Court and, with which I agree, on the record as it stood on 2-1-1946 all the requirements of O. 21, R. 89 appear to have been complied with. The application for setting aside sale has, however, been disallowed by the lower Court on two grounds and I now deal with these grounds.

17. In Para. 4 of the order the learned Judge remarked:

“In view of this the alleged satisfaction of the decree would have concluded the matter but for the fact that the amount has not been paid in full. I would pertinently point out that the judgment-debtors have not replied to the allegation of the decree-holder that the amount of Rs. 2000 was agreed to be paid in full within one month…… The other two judgment-debtors have not come up before me and have not yet cared to execute the promissory note upto now. It will thus be seen that the alleged agreement of 1-2-1946 was only executory.

18. I feel obliged to observe that this part of the order of the learned Judge is not satisfactory. In the first place the learned Judge was in my view not right in allowing the decree-holder as a matter of course and to permit him to resile from the original position taken by countersigning the application for setting aside sale and to forward a case wholly contradictory thereto by filing a statement on 22-6-1946 when the case was already closed for argument on 27-4-1946. The lower Court not only allowed that statement to be placed on record but treated the allegations therein as true because they were not denied by the judgment-debtors. The judgment-debtors had no opportunity to deny the allegations made at the stage of argument and they were not called upon to do so Moreover, O. 8, R. 5 of the CPC cannot apply to the allegations made by the non-applicants who are, at best, in the position of defendants and the allegations cannot be deemed to have been admitted because they are not expressly denied. The questions which arose and which required determination were:

(a) Whether the statement dated 22-6-1946 should be admitted on record and taken into consideration?

(b) Whether in view of the unequivocal receipt of satisfaction of the decree, it is open to the decree-holder to plead and prove non-satisfaction?

(c) Having accepted the promissory note executed by two judgment-debtors, is it open to the decree-holder to plead and prove that the promissory note was incomplete because it was not executed by the third judgment-debtor?

(d) Is it open for the decree-holder to prove that the amount due on promissory-note was payable within one month and not on demand as recited therein, and is oral evidence admissible on that point?

19. If the Court finds all the above points int decree-holder's favour, then the parties should have an opportunity for adducing evidence and the final decision should be in the light of that evidence. There was no plea that the agreement dated 1-2-1946 was executory 1 entirely disagree with the observations and the conclusion of the learned Judge in Para 4 of the order.

20. At the conclusion of para. 7 of the order the learned Judge opined that O. 21, R. 89 cannot be read in derogation of Section 73 of the CPC. What this exactly means is difficult to understand. Does this mean that sales cannot be set aside under O. 21, R. 89 if other creditors of the judgment-debtor have applied for rateable distribution or does it mean that the judgment-debtor should in that case deposit in Court not only the amount payable under the decree in execution but also under decrees in favour of creditors who applied for rateable distribution and does it mean that O. 21, R. 89 should be interpreted differently when there are applications for rateable distribution and when there are no applications? Order 21, R. 89 does not at all refer to Section 73 of the CPC and it is difficult to see its relevancy in deciding an application under O. 21, R. 89 of the CPC. The two provisions are entirely different dealing with different subjects and there is no occasion for reading one in derogation of the other. The Courts cannot be permitted to read into O. 21, R. 89 something which it does not contain. As already observed above the creditors claiming rateable distribution have no locus standi in dealing with an application under O. 21, R. 89 of the CPC and that O. 21, R. 92 of the Code being imperative the sales have to be set aside if the provisions of O. 21, R. 89 as they stand in the Code of Civil Procedure are complied with. The conclusion of the learned Judge in Para. 7 of the order is wrong. The result is that the order of the lower Court rejecting the judgment-debtors' application for setting aside sales and consequently confirming the sales is set aside. The case is remanded to the lower Court for fresh decision with advertence to what is observed in Para. 18 above. The appeal is allowed with costs.

21. Appeal allowed.