IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C) No. 31746 of 2004(D)
1. E.P.ABDUL LATHEEF, S/O.MUHAMMD,
... Petitioner
Vs
1. K.VINODAN, S/O.LATE APPU NAIR,
... Respondent
2. P.K.RAJAN, S/O.KRISHNAN,
For Petitioner :SRI.B.KRISHNAN
For Respondent :SRI.K.V.SOHAN
The Hon'ble MR. Justice M.SASIDHARAN NAMBIAR
Dated :08/01/2007
O R D E R
M.SASIDHARAN NAMBIAR,J.
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W.P.(C) NO.31746 OF 2004
===========================
Dated this the 8th day of January 2007
JUDGMENT
A decree holder was permitted to bid the
attached property in court auction sale and to set
off the purchase money towards the amount due under
the decree as provided under Rule 72 of Order XXI
of Code of Civil Procedure. Is the executing court
competent to pass order for rateable distribution
as provided under section 73 of the Code in an
application filed by another decree holder is the
question to be settled.
2. Petitioner is the decree holder in
O.S.164/01. First respondent is the decree holder
in O.S.258/01. Petitioner obtained an order of
attachment before judgment of the property sold in
E.P.363/01 as per order dated 14.8.01. Respondent
in his suit obtained an order of attachment before
judgment on 13.8.01. Respondent filed E.P.86/04,
for realisation of the decree debt in O.S.258/01.
W.P.(C)31746/04 2
Petitioner sought sale of the attached property in
that E.P.363/01. The property of judgment debtor
was sold in that E.P. Petitioner was permitted
to bid and set off as provided under Rule 72 of
Order XX1 by the executing court. The property was
purchased by petitioner as auction purchaser for
Rs.75,000/-. It was not sufficient to satisfy the
decree debt in O.S.164/01. Respondent filed
E.A.163/04 in E.P.363/01 for rateable distribution
of the assets realised by the sale of the attached
property in E.P.363/01. E.A.163/04 was allowed
overruling the objection raised by the petitioner.
Executing court directed petitioner to deposit
Rs.30,000/- out of purchase money for rateable
distribution to first respondent. This petition
is filed under Article 227 of Constitution of
India challenging that order.
3. Learned counsel appearing for petitioner and
first respondent were heard.
4. The arguments of learned counsel appearing
for petitioner relying on the decision of a learned
W.P.(C)31746/04 3
single Judge of High Court of Madras in Periaswami
Gounder v. Nachimuthu Mudaliar (AIR 1979 Madras 87)
was that executing court permitted petitioner to
bid and set off and the amount realised by sale of
the attached property has already been adjusted
towards the decree debt and so a portion of that
amount cannot be directed to be deposited for
rateable distribution to first respondent and
therefore Ext.P6 order is to be quashed. Learned
counsel vehemently argued that first respondent had
attached, apart from the property sold in
E.P.363/01, another item of property belonging to
the judgment debtor and he is entitled to realise
his decree debt by sale of that property and
only if by such sale the decree debt is not
satisfied, first respondent is entitled to claim
rateable distribution and therefore Ext.P6 order
is not sustainable. Finally it was argued that in
any case, without considering the actual
entitlement, executing court directed the
petitioner to deposit Rs.30,000/- and it is
W.P.(C)31746/04 4
illegal.
5. Learned counsel appearing for first
respondent argued that set off allowed in favour
of petitioner was subject to Section 73 of Code
of Civil Procedure providing rateable distribution
and this aspect was not taken note of in
Periaswami Gounder’s case. Relying on the Full
Bench decision of High Court of Bombay in
Ramachandra Yeshwant Shringarpure v. Digambar
Tejiram Pardeshi (AIR 1960 Bombay 230) it was
argued that the right of set off granted in favour
of petitioner was subject to the right of first
respondent for rateable distribution as provided
under section 73 of the Code and first respondent
had filed an execution petition before the sale and
also filed an application before the executing
court for rateable distribution and it was rightly
allowed and there is no reason to interfere with
that order. It was also pointed out that if the
amount directed to be deposited by the order was
W.P.(C)31746/04 5
without considering the guidelines provided under
section 73, executing court may be directed to
fix the actual amount, which petitioner is liable
to be deposited for rateable distribution, as
provided under section 73 of the Code.
6. The property sold in E.P.363/01 was
admittedly attached by first respondent in
O.S.258/01 before the petitioner got attached the
same in O.S.164/01. But the property was sold for
realisation of the decree debt in O.S.164/01 by the
petitioner. But before the sale, first respondent
had filed E.P.86/04. Therefore first respondent is
entitled to apply for rateable distribution of the
assets realised on court sale as provided under
section 73. The fact that petitioner was permitted
to bid and set off as provided under section 72, on
27.5.04 was not disputed. The crucial question is
whether by such permission petitioner is entitled
to contend that as he was permitted to set off the
purchase money towards the decree debt he is not
liable to deposit any portion of that purchase
W.P.(C)31746/04 6
money for rateable distribution.
7. Sub rule (1) of Rule 72 of Order XXI
provides that no holder of a decree in execution of
which property is sold shall, without the express
permission of the Court, bid for or purchase the
property. Sub rule (2) provides for set off.
It reads:-
“Where a decree-holder
purchases with such
permission, the purchase-
money and the amount due on
the decree may, subject to
the provisions of Section
73, be set-off against one
another, and the Court
executing the decree shall
enter up satisfaction of the
decree in whole or in part
accordingly.”
Sub rule (2) makes it absolutely clear that the
permission granted to the decree holder to purchase
W.P.(C)31746/04 7
the attached property sold in execution and set off
is subject to the provisions of Section 73.
Therefore by the permission granted to bid and set
off under sub rule (2) of Rule 72, a decree holder
is not entitled to contend that he is not liable to
deposit any part of the purchase money because of
the permission granted under Rule 72. Permission
granted under sub rule (2) of Rule 72 is subject to
the provision for rateable distribution under
section 73.
8. Learned single Judge of High Court of
Madras in Periaswami Gounder’s case (supra) did not
consider the effect of sub rule (2) of Rule 72 of
the Code and without taking note of the fact that
permission granted was subject to the right of
rateable distribution available to other decree
holders under section 73, held that by the
permission granted to bid and set off the purchase
money shall be deemed to have been received and
realised eo instanti of the sale made and therefore
the sale proceeds is not available for rateable
W.P.(C)31746/04 8
distribution. The learned single Judge relied on
an earlier decision of Division Bench of the Madras
High Court in Punnamchand Chatraban v. Vijjapu
Satyanandam (AIR 1933 Madras 804) but did not take
notice that another Division Bench of the Madras
High Court had considered this question in Megraj
Iswardas v. Corporation of Madras (AIR 1936 Madras
797). The latter Division Bench took the view that,
the fact that decree holder purchased the property
with the leave of the court and was allowed to set
off the purchase price against the decree debt ,
does not oust the power conferred by S.63 on the
Court of the higher grade, to call for the proceeds
and rateably distribute the sale proceeds. It was
held that the purchase by the decree holder does
not confer upon him an unqualified right, but it is
subject to the terms of Section 63.
9. The Full Bench of the High Court of Bombay in
Ramachandra Yeshwant Shringarpure’s case (supra),
considered the question whether the order granting
W.P.(C)31746/04 9
permission to set off under Rule 72 is a
proceeding within the meaning of Section 63(2) of
Code of Civil Procedure. Agreeing with the view
taken by the Madras High Court in Megraj Iswardas
case(supra) and holding that the permission granted
under sub rule (2) of Rule 72 is subject to the
provisions of Section 73, Full Bench held that by
the permission granted to the decree holder to bid
and set off he is not entitled to contend that any
part of the sale proceeds is not liable to be
deposited by him for rateable distribution. The
Full Bench also held:-
“In our judgment, sub-s.(2)of S.63
does not in any way affect the
liability cast upon the decree-
holder who is allowed a set off
under sub rule (2) of Rule 72, to
refund or pay back the amount, if
it is required for rateable
W.P.(C)31746/04 10
distribution, under S.73 of the
Code. The object of S.63 clearly
is to avoid multiplicity of
proceedings and to ensure
equitable distribution of the
assets of a judgment-debtor which
have been realised, amongst all
his creditors. It does not lay
down any principle of exclusion.”
As pointed out by the learned counsel appearing for
respondents, in view of the divergent views
expressed by High Court of Calcutta, explanation
was added to Section 63. The explanation reads:-
“Explanation- For the purposes
of sub-section (2), proceeding
taken by a Court does not
include an order allowing, to
a decree holder, who has
purchased property at a sale
held in execution of a decree,
set off to the extent of the
W.P.(C)31746/04 11
purchase price payable by
him.”
Because of the said explanation, it is clear that
an order granted under Rule 72 is taken out of the
purview of Section 63 of the Code. Even
otherwise, when Rule 72 (2) of Order XXI
specifically provide that permission granted
under the section is subject to the provisions
of Section 73, it is not possible to take a view
that because of the permission so granted the
auction purchaser decree holder is not liable to
deposit any part of the sale proceeds for rateable
distribution to the other decree holders, if
another decree holder is entitled to rateable
distribution as provided under section 73.
Therefore I find no reason to interfere with the
finding of the executing court that petitioner is
liable to deposit part of the sale proceeds for
rateable distribution to first respondent.
10. There is force in the argument of the
learned counsel appearing for petitioner that
W.P.(C)31746/04 12
while directing to deposit Rs.30,000/- executing
court did not consider the guidelines provided
under section 73 and without considering that
question and without giving any reason
Rs.30,000/- was directed to be deposited. Finding
of the executing court to that extent is set
aside. Executing court is directed to fix the
amount to be deposited by petitioner for rateable
distribution after hearing both the parties. It
was also argued by learned counsel appearing for
petitioner that first respondent had attached
one more item of properties in addition to the
property sold in execution by the petitioner and
first respondent can proceed against that property
and so he is not entitled to seek rateable
distribution. Learned counsel appearing for the
first respondent submitted that the said property
is not sufficient to satisfy the decree debts and
Section 73 does not provide that if any other
property is available for the decree holder, who
attached the property which was sold in execution
W.P.(C)31746/04 13
petition, then he is not entitled to apply for
rateable distribution. Section 73 does not also
provide that a decree holder is entitled to apply
for rateable distribution only if the judgment
debtor is not left with any other property,
except the property sold. So long as first
respondent is a decree holder, whose decree
remains unsatisfied and he had filed an execution
petition for realisation of the decree debt
before sale of the property, and applies for
rateable distribution, he is entitled to rateable
distribution. Therefore on that ground also, the
order cannot be interfered.
Writ Petition is disposed of directing
Munsiff, Thalassery to fix the amount to be
deposited by the decree holder, for rateable
distribution after hearing both the parties. It
is made clear that both the decree holders are
entitled to proceed against any other property of
the judgment debtor, if available for realisation
of the balance decree debt. Naturally decree
W.P.(C)31746/04 14
holders are entitled to rateable distribution in
respect of that sale also, if other conditions are
satisfied.
M.SASIDHARAN NAMBIAR
JUDGE
tpl/-
M.SASIDHARAN NAMBIAR, J.
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W.P.(C).NO. /06
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JUDGMENT
SEPTEMBER,2006