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Execution First Appeal No. 27 of 1957, decided on 26th April 1960.
Order XXI, r. 90‑Sale, when can be set aside.
The rule gives a right to the decree‑holder or any person entitled to share in a rateable distribution of assets or whose interests are affected by the sale to apply to the Court for setting aside the sale on the ground of a material irregularity or fraud, but stipulates further that no sale shall be set aside on the ground of such irregularity or fraud unless the Court is satisfied that the applicant has sustained substantial injury by reason of such irregularity or fraud. The rule does not mention a judg ment‑debtor at all, and it is only by implication that the judgment‑debtor is allowed to apply under this rule as falling within the category of "any person entitled to share in a rateable distribution of assets, or whose interests are affected by the sale" whereas a decree‑holder is specifically mentioned as such, as a person who can apply to the Court for setting aside the sale. The proviso which stipulates the occurring of a substantial injury relates to the applicant, whoever he may be, in terms of the earlier part of the rule. If the applicant is a decree‑holder, then clearly the Court has to see whether the decree‑holder has suffered the necessary injury which would entitle him to the relief claimed. It is therefore erroneous to hold that if there is no injury to the judgment‑debtor, who is not at all mentioned as such in the rule itself, then the sale cannot be set aside.
There can be no doubt at all that the rule itself clearly speaks of substantial injury to the applicant and that term would obviously include a decree‑holder.
For an application to succeed under this rule the following three conditions must be satisfied, viz
(i) That there has been material irregularity or fraud in publishing or conducting the auction sale ;
(ii) that the applicant has sustained substantial injury and
(iii) that the injury is the direct result of the proved irregu larity or fraud.
Held a departure from the time mentioned in the proclamation of sale is a material irregularity, and would vitiate the sale if it is shown to have resulted in substantial loss to the applicant.
If the substantial injury cannot be connected with the material irregularity in question, then the sale cannot be set aside.
Hara Singh v. Labh Singh and others A I R 1935 Lah. 962 ; Lal Chand and another v. Central Bank of India, Ltd. Amritsar A I R 1935 Lah. 992 ; Pran Singh and others v. Janardan Singh 13 I C 337 ; Karam Chand Madan do Sons and others v. Peoples' Bank of Northern India, Ltd. A I R 1933 Pesh. 57 ; Arunachellam v. Arunachellam and another 12 Mad. 19 ; Rajendra Behari Lal v. B. Gulzari Lal and others A I R 1933 All. 747; Swaminatha Aiyar v. S. Sivagurunatha Chettlar A I R 1917 Mad. 967 (1) ; Indar Ram and another v. Lila Dhar A I R 1938 Lah. 152 and Hazari Lal Labh v. Abdus Samad and others A I R 1935 Pat. 242 ref.
Order XXI, r. 90 (Second Proviso inserted by Lahore High Court)‑Court should look to all circumstances of case while deciding question of alleged acquiescence on part of applicant.
While considering the question whether any alleged acquiescence on the part of the applicant should disentitle him to the relief claimed the Court is bound to look at all the circumstances of the case, and not merely at the solitary allegation that the applicant became aware of the irregularity at the time it was committed.
Swaminatha Aiyar v. S. Sivagurunatha Chettiar A I R 1917 Mad. 967 (1) ref.
Muhammad Akram Malik for Appellant.
Ghias Muhammad for Respondent No. 2.
Nemo for Respondent No. 1.
Date of hearing : 22nd February 1960.
The respondent Kh. Feroze Din Butt obtained an industrial loan of Rs. 30,000 from the Provincial Government of the former Punjab Province on 2‑6‑1951 under the Aid to Industries Act. As the loan was not repaid according to its terms, the Director of Industries made a declaration under sections 23 and 24 of the said Act to the effect that the debtor Feroze Din was liable to pay Rs. 30,642‑15‑0 with interest at the rate of 4 % per annum, and that this amount be realised by the sale of the property of the debtor, as mentioned in the Schedule attached to the declaration. On the basis of this declaration an application in execution was made before the Senior Civil Judge, Sialkot, where the debtor Feroze Din Butt resided, and in consequence the property was ordered to be auctioned on 25‑7‑1956. The highest bid in the sum of Rs. 11,800 was that of the second respondent Muhammad Sharif. The decree‑holder i.e. the Provincial Govern ment, being dissatisfied with the auction, preferred objections to the effect that the auction was not conducted properly and there fore it had resulted in substantial loss to the decree‑holder. The objections were heard by the learned Senior Civil Judge who dismissed the same and confirmed the sale. The Provincial Government has now come up in appeal against this order of the learned Senior Civil Judge, Sialkot.
2. Rule 90 of Order XXI of the Civil Procedure Code, under which the objections were preferred, runs as follows:--
"Where any immovable property has been sold in execution of a decree, the decree‑holder, or any person entitled to share in a rateable distribution of assets, or whose interests are affected by the sale, may apply to the Court to set aside the sale on the ground of a material irregularity or fraud in publishing or conducting it Provided that no sale shall be set aside on the ground of irregularity or fraud unless upon the facts proved the Court is satisfied that the applicant has sustained substantial injury by reason of such irregularity or fraud."
3. It will be seen that for an application to succeed under this rule the following three conditions must be satisfied, viz :
(i) That there has been material irregularity or fraud in publishing or conducting the auction sale ;
(ii) that the applicant has sustained substantial injury ; and
(iii) that the injury is the direct result of the proved irregularity or fraud.
4. In the present case the allegations of the applicant/decree holder regarding the conduct of the auction sale were two‑fold
(a) That the time of the auction advertised was from 9 a.m. to 4 p.m. while the auction was actually held from 7‑30 a.m. to 1‑30 p.m.; and
(b) that due to collusion between the judgment‑debtor and his friends several bidders were prevented from participating in the auction, which was held in a closed room.
5. I may say at once that as far as the allegation of collusion between the judgment‑debtor and his friends is concerned, it is not proved on the record. There is no doubt that the officers of the Department of Industries have deposed in their evidence that one unnamed bidder was led out of the auction room by some persons after he had raised the bid by Rs. 1,000 at one stroke, but this particular bidder has not been produced, and, as just mentioned, he has not even been named by these officers. There is no evidence produced to show that any body was prevented from entering the room which, according to the Court auctioneer Malik Sardar Khan, who has appeared as witness No. I for the auction‑purchaser, was a room of the property put to auction and was open so as to allow access to anybody during the auction proceedings. One person, Muhammad Masih by name, appearing as witness No. 4 for the decree‑holder, has stated that when he arrived at the spot he was told by certain persons not to bid at the auction. He has further stated that he might have offered Rs. 25,030. This evidence seems rather unconvincing as the witness does not state that he was in fact physically or morally coerced into turning away from the spot and accordingly there is no reasonable explanation for his not going in to bid at the auction. Two applications were also placed on the record to show that some persons were willing to offer anything between Rs. 15,000 and Rs. 20,003 but the applicants themselves were not produced as witnesses and there fore no conclusion can be drawn as to whether these applicants were present at the auction but were prevented from bidding due to collusion between the judgment‑debtor and the other persons present or due to any other interference by them. I, therefore, agree with the learned Senior Civil Judge that the allegation of collusion or fraud etc. is not proved.
6. As regards the timing of the auction, it is admitted on behalf of the respondents that the time mentioned in the proclama tion of sale was 9 a.m. to 4 p.m. but the auction was actually conducted from 7‑30 a.m. to 1‑30 p.m. This is also clear from the evidence of the Court auctioneer himself. The question is whether this departure from the time entered in the proclamation constitutes a material irregularity.
7. On behalf of the respondents it is argued that the office timings in those days were the morning hours i.e. from 7‑30 a.m. to 1‑30 p.m. and therefore, irrespective of the timings mentioned in the proclamation of sale, everybody understood the time to be the same as the office hours and accordingly there can be no question of any irregularity in this behalf. A further point made is that the Department of Industries itself had advertised the sale and the two representatives of the Department viz: the Assistant Director of Industries and the Superintendent of Industries, turned up at the place of auction according to the morning hours. I find that Mr. Muhammad Aslam, Superintendent of Industries, appearing as witness No. 1 for the decree‑holder, has specifically denied that the proclamation put out by him mentioned the morning hours. He asserts that only the date of the auction was advertised by him. In view of this assertion, and in the absence of any evidence to the contrary, I cannot hold that the Department of Industries advertised the time as 7‑30 a.m. to 1‑30 p.m. In respect of this auction sale, in contradiction to the time originally entered in the official proclamation of sale published under the orders of the Civil Court. The fact that the ‑office hours in those days were from 7‑30 a.m. to 1‑30 p.m. is no doubt a relevant consideration for determining the effect of the alleged irregularity, but, to my mind, it does not affect the question which I am now considering viz. whether a departure from the proclaimed time is a material irregularity or not.
8. Mr. Ghias Muhammad, the learned counsel appearing for the respondents, has referred me to Hara Singh v. Labh Singh and others (A I R 1935 Lah. 962) and Lal Chand and another v. Central Bank of India, Ltd. Amritsar (A I R 1935 Lah. 992) in support of his contention that mention of time and date in the proclamation of sale is not a material factor. I find. however, that on the contrary the case reported as Lal Chand and an ether v. Central Bank of India Ltd., Amritsar really supports the view put forward on behalf of the appellant before me. It was observed by Rangi Lal, J. who decided that case, that the omission to fix the time for sale is an irregularity, but of course the sale cannot be set aside in the absence of evidence to show that the irregularity resulted in substantial loss to the judgment‑debtor.
In Hara Singh v. Labh Singh and others the question of time as regards the conduct of the auction sale was not directly in issue, and therefore that case is not helpful in the present context.
9. On the other band, there is clear authority for the view that such a departure does constitute a material irregularity. Mention may be made of Pran Singh and others v. Janardan Singh (XIII I C 337) wherein it was observed, although as an obiter dictum, that when a sale is adjourned under section 291, C. P. C. of 1882, it is necessary to mention the hour of sale and the omission to do so is a material irregularity. A similar view was expressed in Karam Chand Madan & Sons and others v. Peoples' Bank of Northern India Ltd. (A I R 1933 Pesh. 57) where, following the settled view of the Lahore High Court, it was stated that when the sale was held at 7 a.m. instead of 12 noon, that is the time fixed in the proclamation of sale, this variation was a material irregularity which, where substantial injury was proved, vitiated the sale.
10. I am in respectful agreement with this view and hold that a departure from the time mentioned in the proclamation of sale is a material irregularity, and would vitiate the sale if it isle shown to have resulted in substantial loss to the applicant.
11. I now take up the question whether the applicant has sustained substantial injury. The case put forward on behalf of the applicant is that at the time of obtaining the loan of Rs. 30,000 the judgment debtor Feroze Din Butt declared the value of the property to be Rs. 89,000 in his affidavit Ex. DH/5, and that the value estimated by the Public Works Department, at the request of the Department of Industries, was Rs. 65,907 (vide Ex. DH/6). while the price fetched at the auction sale is only Rs. 11,800. The decretal amount is, as already stated, Rs. 30,642‑15‑0 with interest at the rate of 41% per annum. It is thus clear that the applicant/decree‑holder has sustained a substantial injury in this case by the non‑realization of a major portion of the decretal amount.
12. The learned Judge of the Court below has not accepted the evidence of the decree‑holder regarding the valuation of the property. He has observed that the P. W D. estimate Ex. DH/6 is not properly proved by the relevant witness Raja Akhtar Ullah, who was then Sub‑Divisional Officer of the Public Works Depart ment at Sialkot, for the main reason that this estimate was subjected to several corrections by the superior officers of this witness, and accordingly the estimate prepared by him is no longer authentic. As regards the declaration of the judgment‑debtor himself in the affidavit just mentioned, the learned Judge has stated that it can easily be assumed that the judgment‑debtor might have given an exaggerated value in order to get as much loan on the security of this property as he could. It seems to me that the reasons which have found favour with the learned Judge below are not sound. In the first place, the valuation of the property given by the judgment‑tdebtor himself cannot be lightly brushed aside. He estimated the value to be Rs. 89,000 as follows:--
Rs. a. p.
(a) One residential house newly constructed 45,000 0 0
(b) Five shops adjoining to the nearby house 30,000 0 0
(c) One house, one shop and open plot in the
same locality worth ... ... 14,000 0 0
Total 89,000 0 0
Besides this property the judgment‑debtor also included goodwill of his business valued at Rs. 17,000 but we are not dealing with this item in the present case. Now the difference between the auction price viz. Rs. 11,800 and the judgment debtor's own estimate of the value of the property namely Rs. 89,000 is much too large to be merely attributed to the natural tendency on the part of a loan‑seeker to exaggerate the value of his property which he was offering as security for the loan. Another factor, which is not to be lost sight of, is that the affidavit estimating the value at Rs. 89,000 was made on the 10th of May 1949 and since that date the value of immovable property has certainly appreciated and this is a matter of which judicial notice can safely be taken. It appears to me therefore that, even allowing for the natural tendency to exag gerate in such cases, the affidavit of the judgment‑debtor does furnish valuable evidence which points to the conclusion that the real value of the property sold at the auction was far more than the auction price.
13. As regards the evidence of the Public Works Department official Raja Akhtar Ullah, there is no doubt that the original estimate prepared by him was subjected to several corrections by his superior officer in the Circle Office at Rawalpindi, but this witness has clearly stated that Ex. DH/6 is the original estimate which he prepared, and that all the entries in black ink were made by him. Now, a look at the relevant document Ex. DH/6 clearly shows that it bears the signature of Mr. Akhtar Ullah dated 21‑4‑1951 and the estimate of the value of the property given by him was Rs. 61,521 only. 'his was scored out by some official in the higher office, and the final estimate raised to Rs. 65,907. This higher figure is not proved by the evidence of the official who recorded it, but it is quite clear from this document that the value of the property in question cannot be regarded as being lower than Rs. 61,521. This is the value which is proved by the Sub‑Divisional Officer who prepared the estimate, and I cannot appreciate the reasoning of the Senior Civil Judge that the docu ment has no value as an authenticated document. The original document was prepared by Raja Akhtar Ullah and he has appeared as a witness to support the entries made by him and has further stated that he visited the spot and made the necessary calculations. His calculations are clearly discernible from the document even though they have been scored out in red ink and the final total has been raised. If the final total had been reduced, one might have considered that the estimate of Raja Akhtar Ullah could not be used to support the contentions of the decree‑holder. As it is, the estimate prepared by Mr. Akhtar Ullah is somewhat lower than the figure adopted by the Circle Office of the Public Works Department, and therefore I see no reason to discard the figures arrived at by Mr. Akhtar Ullah, for the purpose of suppor ting the decree‑holder's contention that the value of the property was a little more than Rs. 60,000 according to the Public Works Department's estimate. I consider, therefore, that the estimate Ex. DH/6 is proved to the extent indicated in the evidence of Mr. Akhtar Ullah and shows that the value of the property was over Rs. 60,000. The mere fact that the plan of the property is no longer attached to the estimate does not, in my view, detract from the acceptability of the estimate which is supported by the person who prepared it.
14. Mention may here be made of the evidence of Khawaja Hakimdin, a local industrialist, who appeared as witness No. 4 for the respondents, and stated that the property in question is not very well situated and has probably lost in value due to the availability of evacuee property. It seems to me that compared to the judgment‑debtor's own earlier declaration and the estimate prepared by the P. W. D. official, the evidence of Khawaja Hakimdin is much too vague to constitute a rebuttal of the evidence relied upon by the decree‑holder. For all these reasons I have no hesitation in holding that in the present case the property was worth anything over Rs. 60,000 and that by virtue of its having been sold at the auction for Rs. 11,800, they applicant decree holder has sustained a substantial injury due to the non‑realization of a substantial part of the decretal amount.
15. The last question which needs to be considered is whether this substantial injury is by reason of the material irregularity which I have found proved in this case. This is an important consideration, for if' the substantial injury cannot be connected with the material irregularity in question, then the sale cannot be set aside. This principle has been repeatedly armed in various authorities, e. g., Arunachellam v. Aruna chellam and another (XII Mad. 19) ; Rajendra Behari Lal v. B. Gulzari Lal and others (A I R 1933 All. 747) ; Swaminatha Aiyar v. S. Sivagurunatha Chettiar (A I R 1917 Mad. 967 (1)) and Karam Chand Madan & Sons and others v. Peoples, Bank of Northern India, Ltd. (A I R 1933 Pesh. 57).
16. At this stage it may perhaps be useful to dispel a misconception which seems to have arisen in the mind of the lower Court, while considering the question of substantial injury or loss. By reference to one or two authorities and particu larly to A I R 1933 Pesh. 57, the learned Civil Judge arrived at the conclusion that it is only the loss caused to the judgment debtor which is to be considered for the purposes of Order XXI rule 90. His conclusion may be reproduced in his own words:
" I, therefore, hold that the mere fact that the sale was held only upto 1‑30 when it was proclaimed that it would be upto 4 p.m. does not render the sale void unless it is found that it has affected, the interest of the judgment‑debtor. The judgment debtor is not an objector in this case and he has raised no objection that his property has been sold at a lesser price on account of this irregularity. Therefore this irregularity alone cannot be considered as a material irregularity in the publication and conduct of sale nor it can be held that the judgment‑debtor has suffered any loss on account of this."
17. A reference to the words of the rule itself would shows that such a conclusion is unsustainable and unwarranted by the language used therein. The rule gives a right to the decree holder or any person entitled to share in a rateable distribution of assets or whose interests are affected by the sale to apply to the Court for setting aside the sale on the ground of a material irregularity or fraud, but stipulates further that no sale shall be set aside on the ground of such irregularity or fraud unless the Court is satisfied that the applicant has sustained substantial injury by reason of such irregularity or fraud. It will be seen that the rule does not mention a judgment‑debtor at all, and it is only by implication that the judgment‑debtor is allowed to apply under this rule as falling within the category of "any person entitled to share in a rateable distribution of assets, or whose interests are affected by the sale" whereas a decree‑H holder is specifically mentioned as such, as a person who can apply to the Court for setting aside of the sale. The proviso which stipulates the occurring of a substantial injury relates to the applicant, whoever he may be, in terms of the earlier part of the rule. If the applicant is a decree‑holder, then clearly the Court has to see whether the decree‑holder has suffered the necessary injury which would entitle him to the relief claimed. It is therefore erroneous to hold that if there is no injury to the judgment‑debtor, who is not at all mentioned as such in the rule itself, then the sale cannot be set aside. I am quite clear that this is not the intention of the authorities relied upon by the learned Civil Judge. It only happens that those authorities were dealing with cases where the judgment‑debtor was the applicant before the Court, and for that reasons the rule was enunciated with reference to the judgment‑debtor, but there can be no doubt at all that the rule itself clearly speaks of substantial injury to the appli cant and that term would obviously include a decree‑holder.
18. Mr. Ghias Muhammad, the learned counsel for the respondent, has contended that in the present case there is no evidence to show that there were any bidders present at the auction, who were prevented from entering their bids by reason of the early closure of the auction. This is correct, but can it be said that no other bidders would have come to the spot if the auction had continued or remained open, until 4 p.m. as indicated in the proclamation of sale
19. Mr. Muhammad Akram, the learned counsel for the appellant has argued that where an irregularity has been proved, and there is also evidence of substantial injury then the Court can presume that the substantial injury has occurred by reason of the material irregularity. He strongly relies on the following observations of a Division Bench of the Lahore High Court in Indar Ram and another v. Lila Dhar (A I R 1938 Lah. 152) : "Where there has been material irregularity in publishing and conducting a sale, and the price fetched by the auction is proved to be grossly inadequate, the Court may presume that substantial loss has been suffered by reason of the irregularity". Mr. Ghias Muhammad, on the other hand, has urged that the mere fact that the purchaser purchased the property ‑ at something under its value is not by any means evidence ‑of the irregularity and would not justify the setting aside of the sale. He has sought support from Hazari Lal Labh v. Abdus Samad and others (A I R 1935 Pat. 242). In that case the applicant had alleged fraud on the part of the pur chaser, but there was no evidence in the case land the lower Court merely suspected some sort of fraud. Sitting in revision, Wort, J. observed that‑
"A mere suspicion of any particular kind of fraud will not justify the Judge's action. The mere fact that the purchaser purchased the property at something under its value is not by any means evidence 4 fraud and would not justify the setting aside the sale."
20. It is clear that the facts of that case are distinguishable from those before me. In that case the fraud itself was not proved and it was sought to prove the fraud merely by reference to the low price fetched at the auction sale. In the present case a material irregularity stands proved, and so does a substantial injury and the only question is whether the relationship of cause and effect between these two can be presumed. I am in respectful agreement with the observations of the learned Judges of the Division Bench who decided the case reported as Indar Ram and another v. Lila Dhar (A I R 1938 Lah.152) and would hold that in the circum stances of the case it can safely be presumed that the substantial injury has occurred by reason of the material irregularity. 21. I find, therefore, that in this case all the three conditions essential for the grant of relief under Order XXI, rule 90 exist, namely, there has been a material irregularity in the conduct of the auction sale by virtue of the departure from the pro‑claimed time a substantial injury has resulted to the applicant by virtue of the extremely low price fetched at the auction sale and finally that the substantial injury can be presumed to be by reason of the material irregularity. It is, therefore, a fit case where the sale should be set aside and fresh auction ordered.
22. Before I close, I may briefly mention one last point urged by Mr. Ghias Muhammad in favour of maintaining sale. He drew my attention to the second proviso to Order XXI, rule 90, which has been inserted by the Lahore High Court, to the following effect:
"Provided further that no such sale shall be set aside on any ground which the applicant could have put forward before the sale was conducted."
Mr. Ghias Muhammad argued that as the representatives of the Department of Industries were present at the auction sale and they did not object to the auction being held from 7‑30 a.m. to 1‑30 p.m. the decree‑holder should now be precluded from putting forward this departure in timing as an irregularity. He relied on Swaminatha Aiyar v. S. Sivagurunatha Chettiar (A I R 1917 Mad. 967 (1)), wherein it was held that a judgment‑debtor who stands by when an irregularity is committed within his knowledge and in his presence cannot afterwards take advantage of that irregularity in support of his application to set aside a Court auction sale.
23. It seems to me that, in the first place, the situation is not covered by the second proviso inserted by the Lahore High Court, in as much as the irregularity in question was not committed before the sale was conducted, but rather during the proceedings. Secondly, in the case relied upon by Mr. Ghias Muhammad the sale was rightly conducted after the necessary correction had been made, at the instance of the applicant himself, in the list of property to be auctioned. It was later contended that strictly speaking there should have been a fresh proclamation, but the irregularity was found to be only of a technical nature and was not shown to be the cause of the loss to the applicant. In those circumstances the applicant was not held to be entitled to ask for the setting aside of the sale. But in the present case there has been a material irregularity which has clearly resulted in substantial loss to the applicant. While considering the question whether any alleged acquiescence on the part of the applicant should disentitle him to the relief claimed the Court is bound to look at all the circumstances of the case, and not merely at the solitary allegation that the applicant became aware of the irregu larity at the time it was committed. Viewed thus, it seems to me that the alleged acquiescence on the part of the departmental representatives cannot be used in this case to deny the relief to which the applicant has otherwise been found to be entitled.
24. For all these reasons I would accept this appeal with costs, set aside the order of the lower Court and direct that the property be put to sale at a fresh auction according to law.
K.M.A. Appeal accepted.
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