Gajadhar Prasad & Ors. v. Babu Bhakta Ratan & Ors.

Judgment

The Judgment of the Court was delivered by- BEG, J.-This is a judgment debtors' appeal, by Certificate of fitness of the case for appeal to this Court granted by the High Court of Allahabad, arising out of an application filed under Order 21, Rule 90, Civil Procedure Code. The Respondent decree-holders had obtained a decree for about Rs. 76,000/- against the appellants in a mortgage suit. In execution of that decree sales of three items of property, shown as houses belonging to the Judgment debtors took place on 5-5-1955 and 7-5-1955. The items were described as follows in the sale proclama(.:m : ''Boundaries East West North South 1. puoca build h.,use b.!'lring pre- U1iv~rsity Lane and House of Colonel vious No. 8 and present No. 5 Road temple of Mari um Ganj situate in Colonefgunji city of KaJiji Bibi& Roud Allahabad, together · with site Mohd. aild building materials entfrc Ra1a. 16 anna share value at Rs.10,350/·. 2. BO.tire houSe b~aring previous House of J.,<Hic House of \Vay No. 805 situate in Mohal!a Gajadhar hereafter Gajadh;;.r Katra, plsiyana City of Prasad.

House of Prasad. Allahabad. valued at Rs. 5040/-. Maheshwary Prasad Vakil. Bungalows bearing Nos. S a~ld Lyal Road Bungalow Th01n- Club 10 situ~tc on Club Ro::id, Cit.\' 'lo. 12 Ml Rc,d. Rc<d of' Alh.h~bl'.ld with co1npcund riot No. 129 together with trees. four waUs and out house!. etc. ;i l! things rights ~nd interest.:;. SUPREME COUllT REPORTS app~rtaining to 'bungalows the site land whereof has been acquired on lease dated 20-11-1948 and which lies within the same boundary. BJngalow No. 8 valued at Rs. 24000/- Bungalow No. 10 valued at Rs. 31200/·. There is no encumbrance". [ 1974 J 1 s.c.tt. The main objection of the judgement-debtors-appellants to this· proclamation is that the execution Court had, in giving the valuation of the properties in the proclamatior1, practically accepted the statements made on behalf of the ·decree-holders, and, without assigning any reason, failed to mention the values put by the judgment-debtors on these properties.

The respective valuations of the properties by the two sides were : "

1No. 10 T. B. Sapru Road Valuation put by the Valuation put hy the D. H. Rs. 40,000/·. J, D. Rs. 100,000

2No. 8 T. B. Sapru Road

3No. 5 Colonelgunj Rs. 10,000;- Rs. 60,000/-

4No. 805 Katra. Rs. 1,000/- Rs. 25,000/-" On 18-5-1948, long before the proclamation of sale was drawn up on 31-3-1955, the judgment debtors had put in an objection to the execution Court's order of 14-2-1948 relating to the framing of the gale proclamation, particularly with regard to the two bungalows situated in the heart of the Civil Lines, the best residential area of Allahabad, They had stated that the area of land in the compound in which the two bungalows were situated was three acres and that the whole property was not worth less than Rupees one lac. They had objected to the sale of the two bungalows in one lot. They had also asserted that the latest municipal assessment of 1944 had displaced the municipal assessment of 1934 relied upon by the decree-holder. According to the judgment-debtors, the two bungalows Nos. 8 & 10 on Tej Bahadur Sapru Road were assessed at annual rents of Rs. 15001- and Rs. 1200/· per year.

In an affidavit of 19-4-1947 they had asserted that a bungalow situated nearby, assessed at an annual rent of Rs. 1500/-, was sold for Rs. 50,000/- on 23-4-45 when prices were lower. On 18-5-1948, the judgmentdebtors had also prayed for the issue of a commission, at their expense, presumably to view the property and give a report on relevant facts before actually framing a sale proclamation in accordance with the court's order of 14-2-1948 directing insertion of the value made by it. On 5-5-1955, the Court Amin had himself put up house No. 5 situated in Colonelgunj, Allahabad, separately for sale and sold it for Rs. 10,500/-. On the same date, the Amin sold house No. 5·A in Colonelgunj for Rs. 8500/- and also house No. 5-B separately for Rs, 7,000/-. Thus, a total amount of Rs. 26,000/- was realised from GAJADHAR PRASAD V. B. B. ltATAN (Beg,/.) :i1s the sale of the three houses in one. compound at Colonelgunj described as one item of property in the sale proclamation.

They had been valued at Rs. 10,000/- by .the decree-holder and Rs. 60,000/- by the judgment-debtor. The· court bad valued the whole ·property at Rs. 10,350/-, and thus practically assented to the decree-holder's valuation and rejected the judgment-debtor's ·without assigning any reason; beyond expressing the opinion that it was exaggerated. The property in Katra .was sold for Rs. 3,750/- on 5·5-1955. After the sale, ·the judgment-debtors applied to set aside the sales on the ground of fraud :and µiaterial irregularity in conducting the111 and complained of substantial injury.'. Tuey relied on uncontrovert~d . assertions made in their affidavit of 194·1974 as well as on the asser· lions made in an application dated 18-5-1948 wh.ere it was slated '~That the judgment de~tor is informed that the whole game of the decree holder is to undervalue the property get the 'auction for a song and purchase the property himself.

This underhand game may ,be stopped and justice be done"'. _ The l~d Counser for the. judgment-debtors submitted that, on tlie uncontroverted assertions of the judgment debtors, the conclusion is incsistible 'l!lat the decree-holder had deliberatt.y misled the Court and bad comJ:".itted •a fraud upon it. It was urged that the decree· bo.lders' game h~ succeeded because they bad themselve• bought the two bungalows on Tej B:ibadur Sapru Road for Rs. 56,000/-. Accord· ing to the judgment..(lcbtors, ·Bungalow No. 8, in. which they carried on the business of' cabinet making, could be let for Rs. 250/- per month and was itself 'worth that much. The Execlltion Court had relied upon the Amin's report for holding that the two bungalows could be properly sold as a single unit because the. servants' quarters for the two bungalows, . which were sifuated in one. compo\llld, were the same.

The judgment debtors' application bad been dismissed for absence of m;i.terial irregularity or fraud and want of proof of substantial injury as a· result of these auction sales. A Divisibn Bench of .the High Court had affirmed these findings, but had certified the case, under Art. 133 of the Constitution of India, as fit one. tor an appeal to. this Court. , T_.:o 'qi°iesti~ns arise before us for decision. They are : firstly, whether there was either fraud uoon the court or material irregularity ·in conducting the auction sales; and, s_econdly, whether substantial injury to the judgment-O•btor had been proved have resulted from the auction sales. It rr.ay be mentioned here that no one has put in appearance on behalf of the decree-holders respondents, Mr. J. N. Chatterjee, appearing on behalf of the judgment-debtors-appellants, stated that he did not want to press objection to sales of Colonelgunj and Katra properties. Indeed, their auction purchasers were not impleaded.

Therefore, we will refrain from decidii\g any question relating to Colonelgunj and K~tra. properties. [ 1974] 1 S.C.R. We will now consider the question of material irregularity in ordering and conducting the auction sale of the twp bungalows on Sir Tej Bahadur Sapru Road (formerly known as Club Road). The provision which was said to have been infringed is Order 21, Rule 66(2). 'Ihe whole of Rule 66 reads as follows :- "R. 66( 1) Where any property is ordered to be sold by public auction in execution of a decree, the court shall cause a proclamation of the intended sale to be made in tjie language of such Court. (2) Such proclamation shall be dn:wn up after notice to the decree-holder and the judgment-debtor and shall state the time and place of sale, and specify as fairly and accurately as possible- ( a) the property to be sold;

(b) the revenue assessed upon the estate or part of the estate, where the property to be sold is an interest in an estate or in part of an e~tate paying revenue to the Government; ( c) any incumbrance to which tbe property is liable; (d) tbe amount for-the recovery of which the sale is ordered; and .( e) every other thing which the C<:'urt considers material for a purchaser to know in order to judge of the nature and value of the property. (3) Every application for an order for sale under this rule shall be accompanied by a statement signed and verified in the manner hereinbefore prescribed for the signing and verification of pleadings and containing, so far as they are known to or can be ascertained by the person making the verification, the matters required by sub-1'Ule (2) tobe specified in the proclamation. ( 4)

For the purpose of ascertaining the matters to be specified in the proclamation, the Court may summon any person whom it thinks necessary to summon and may examine him in respect to any such matters and require him to produce any document in his possession or power relating thereto". It was submitted that the Court should not have put it.~ own valuation on the property, as suCh a procedure was certain to prejudice the minds pf prospective purchasers with regard to. the value. of the property to be auctioned. We find that there is some conflict of opinion in the High Courts on this Question:. The Madras High Court, in S. K. Veeraswami Pillai v. Kalyanasundaram MudaUar & Ors.,(') R. Srinivasan & Os. v. the Andhra Bank Ltd.,(>) V. A. S. Ye/lappa !"'(I) AIR 1927 Mad. 1009. (2) AIR 1949 Mad. 398. p 8 GAJADHAR PRASAD V. B, B. RATAN (Beg, /.) Naidu v. G. Venugopal Naidu,(') and the Allahabad High Court, in Md. Said Khan v. Md. Abdus Sami Kha11 & A11r., (') Dwarka Dass v. Bhawani Prasad & Ors.,(") have held that it is unnecessary for the Court to give its own estimate.

The Calcutta High Court in Rajah Ramessur Proshad11arai11 Singh v. Rai Sham Krissen Ors.,(') Saurendra Mohan Tagore v. Rurruk Chand & Ors.,(') Bejoy Singh Dadhulla v. Ashutosh-Gossami & Ors.,( 6 ) Lachira v. Ra111es/1war Singh & Ors.,( 7) Pashupati Nath Maliah & Anr., Bank of Behar,( 8) New Birbhum Coal Co. Ltd. v. Surendra Nath Laik Ors.,(') the Patna High Court, in Raghunath Singh v. Hazari Sahu & Ors.,(1°) and Mt. Golab Kuer A11r. v. Mt. Bibi Saira & Ors.,( 11 ) and the Rangoon High Court, in A.M.K.M. Firm Baishmaw,( 12 ) have expressed opinions favouring giving of the Court's own estirilate of the value of the property to be sold. But, a mere acceptance of the valuation given by the decree-holder has been he!<! to be material irregularity in A.M.K.M. Firm v. Baishmaw (Supra). Th~ High Court of Bombay, in Charandas Vasanji & Anr. v. Dossabhoy Maganlal & Ors.,(1 3) Premaraj Panna/al Shop v. Sadabaz & Ors., ( ") has held that, although, it is not necessary for the exe~ution Court to value the property to be sold, yet, it may do so if it thinks fit.

In Sitabai Rambhau Marathe v. Gangadhar Dhanram Marwadi Anr.,(1') however, the Bombay High Court held that the Court is bound to hold an enquiry as to the value of the property and to state it in the sale proclamation. _ Although the Madras High Court had held that it is not necessary for the Court to give its own valuation, it expressed the opinion that it is desirable, where there is a wide divergence between the valuation of the decree-holder and of the judgment debtor, to have property valued through an Amin and to state it in the proclamation. The Calcutta view, in some of the cases mentioned above, was tltl!f, although the Court need not give its own valuation of the ptopeity in the sale proclamation, it would be justified in stating tl)e valuation given by the parties. It may be noticed here that there have been amendments of Order 21, Rule 66 by different High Courts from 1929 onwards dealing with the question of valuation.

The Calcutta a,1d the Punjab High Courts have made it clear that "it shall not _be necessary for the Court itself to give its own estimate of the value of the property but the proclamation shall in~lude the estimate, if any, given by either or both the parties". Jn Andhra Ptadesh, Order 21, Rule 66(2\(e) has been amended to make it obligator;y to give the value of the property as stated : (i) by the decree-holder; (ii) by the judgment-debtor. The (I) AIR 1958 Mad. 423. (2) AIR 1932 All 664. (3) AIR 1960 All. 510. (4) VIII Calcutta Weekly Notes 257. (5) XII Calcutta Weekly Notes 542. (6) AIR 1924 Cal. 589. (7) AIR 1930 Cal. 781. (8) AIR 1932 Cal. 141. (9) AIR 1934 Cal. 205. (10) AIR 1917 Pat. 381. (11) AIR 1919 Pat. 372. (12) AIR 1937 Rangoon 137. (13) AIR 1939 Born. 182. (14) AIR 1956 Born. 248. (15) AIR 1935 Born. 331. [ 1974] 1 s.c.&. Madras and Kerala High Courts have also adopted the rule as amendtd by the Andhra Pradesh High Court.

The Madhya Pradesh High Court amendment only mentions that the particulars to be pro· vided may include the decree-holder's estimate of the approximate market pric.e. The Patna High Court amendment provides :- "that no estimate of the value of the property, other than those, if any, made by the decree-holder and judgment- Jebtor resjlcctively together with a statement that the Court does not vouch for the accuracy of either, shall 'be inserted in the sale proclamation". A review of the authorities as well as the amendments to rule 66 (2) (e) makes it ·abundantly clear that the Court, when stating the estimated value of the property to be sold, must not accept merely the ipse dixzt of one side. It is certainly n6t necessary for it to state its own estimate. If this were required, it may, to be fair, necessitate insertion of something .like a summary of a judicially considered order, giving its grounds, in the sale proclamation, which may confuse bidders.

It may also be quite misleading if the Court's estimate is erroneous. Mon:over, Rule 66(2)(e) reqnires the Court to state only the facts it considers material for a purchaser to judge the value and 1rntu:·e of the property himself. Hence, the purchaser should be left to judge the value for himself. But, essential facts which have a bearing on the very material question of value of the _property and which would assist the purchaser in forming his own opinion must be stated That is, after all, the whole object of Order 21, Rule 66(2)(e), Civil Procedure Code. The Court has only to decide what all these material particulars are in each case. We think that this is an obligation imposed by Rule 66(2)(e). In discharging it, the Court should norrnaily state the valuation given by both the decree-bolder as well as the judgllleGt debbor where they have both valued the property, and these do not appear fantastic.

It may usefully state other material facts, such as the area of land, nature of rights in it, municipal assess· ment, actual rents realised, which could reasonably be expected to affect valuation. What could be reasonably and usefully stated succinctly in a sale proclamation has to be determined on the facts of each particular case. Inflexible rules are not desirable on such a question. In the case before us, the execution Court had practically accepted, as its own valuation, without indicating reasonable gronnds for this preference, whatever the decree holders had asserted about the value of the property. It did not bother to seriously even conside1' the objec" tions.. of the judgment·debtors. We think that the duty to consider what particulars should be inserted in the sale proclamation and how the sale ought to be conducted should be performed judicially and rea· sonably.

If the execution <;:ourt does not, as it did not in the case before us, apply its mind or give any consideration whatsoever to the objections of the judglllent-debtor, we think a material irregularity would be committed by the execution Court. It is not necessazy for the execution Court to order the insertion of a judicially passed order in the sale proclamation itself, but, it should pass an GAJADHAR PRASAD V. B. B. RATAN (Beg, J.) order showing that it applied its mind to the need for determining all the essential particulars, which would reasonably be looked for by a purchaser, and which should be inserted in the sale proclamation. The order should show that it considered the objections, if any, of the decree-holders or the judgment debtors, as the case may be. It should not merely accept unhesitatingly the ipse dixil of one side.

We think that the execution Court had not performed its duty fairly and reasonably in this case, After embarking on the difficult task of valuation, it rejected the judgment debtors' figures by merely observing that they are exaggerated and practically accepted without hesitation whatever the decreeholders submitted, but this valuation was proved to be incorrect judged by the results of auction sales taken as a whole. Mr. J. N. Chatterji relied upon the following passage in Mamdanayagam Pillai v_ Manickavasakam Chettiar('') :

"If t!J.e respondent knew the true facts, if he purchased at what he knew was too low a figure based on an upset price accepted by the Court owing to his own initial misrepresentation and subsequent suppression of material facts, his conduct would amount to fraud on the Court as the learned subordinate ju~ge points oµt" lt is not necessary for us to decide whether the decree-holders' conduct in the case before us would amount to actual fraud practised on the Court with regard to the valuation. The judgment-debtors were there. with their own valuation and had even applied for the appointment of a Commissioner at t!J.eir expense to report about matters affectmg the value of the proper!~'· They had asserted that the two bungalows at Tej Bahadnr Sapru Road would fetch a much higher value if sold separately. The execution court should have at least performed the duty of considering whether these objections were wellfounded.

We find from a perusal of the sale proclamation in this case that even the area of the compound in which the two bungalows were situated was not there. The land in the compound is evidently nuzool leasehold land but the unexpired period of the lease or rent payable on it are not mentioned. It was not stated whether the bungalows, which were valued separately, would be sold as one or two items of property. Probably, it was left to the Amin to exercise his own discretion in this matter, as he had exercised it in the case of Colonelgunj property. The cumulative effect of all the katures of the case mentioned above is that we think that there was material irregularity here in the conduct of the execution sale of the two bungalows. We now turn to the question of substantial injury.

The result of the separate sales of the houses in Colonelgunj was that, when sale prices were added up, they fetched a considerably higher pdce than that put upon these properties, lumped together in one lot, by the decree-holders. The High Court had also found that sales of the two bungalows on the Tej Bahadur Sapru Road separately would probabli (I) AIR 1945 PC. 67 @ 70. [ 1974 j 1 S.C.R. similarly have fetched a higher price. The affidavit dated 19-7-1947 filed by the judgment-debtors, as stated above, had not been controverted by any material put forward by the decree-holders. We, therefore, think that there is enough evidence to indicate that the judgment-debtors had suffered substantial injury so far as the sale of the two bungalows numbers 8 & 10 on Tej Bahadur Sapru Road, Allahabad, is concerned. The result is that we allow this appeal to the extent that we set aside the judgments and orders of the High Court and of the execution Court with regard to the sale of bungalows Nos. 8 & 10, together with their compound, and dismiss it as regards the other properties.

We also set aside the execution sale of 7-5-1955 of these two bungalows with all the land in their compound. We order that these two bungalows will be sold afresh after judicially consideriiJ.g and deciding the question whether they can be sold separately and what partiC\llars should be inserted in the sale proclamation. The parties will bear their own costs. V.P.S. Appeal partly allowed I