JUDGMENT
V. C. Daga, J.
1. Heard the learned counsel for the parties. Rule returnable forthwith. By consent petition is taken up for final hearing and disposal.
INTRODUCTION
2. The Issue in the present case is one of potential significance in relation to the law of auction sale and in particular with regard to the auction sale by Court in exercise of powers conferred under Order 21 Rule 82 of the Civil Procedure Code (hereinafter referred to as ‘C.P.C.’).
BACK-DROP FACTS
3. The facts necessary to appreciate rival contentions may be briefly stated :
This petition, brought by the judgment-debtor, questions of the validity of the auction sale by Court, of the property owned by the petitioner judgment debtor, held on 12.10.1999. Respondent No. 1 herein is the decree holder: whereas respondent No. 2 is an auction purchaser.
4. The respondent No. 1-decree holder had filed Special Civil Suit No. 152 of 1998 for recovery of Rs. 86,250/-. The said suit was decreed for the sum of Rs. 86,250/- with further interest thereon at the rate of 18% p.a. with costs.
5. The respondent No. 1-decree holder upon Initiation of execution proceeding, on 15.4.1999 applied for attachment and, sale of the property in execution of the decree obtained by him. The attachment order was passed on 8.6.1999. The attached property belonging to the petitioner/ Judgment-debtor was put to auction sale through Court, on 12.10.1999. The attached property received highest bid, in the sum of Rs. 91.000/- in auction sale conducted by the Executing Court, though the same was valued at Rs. 3,82,000/- in the sale proclamation.
6. The auction purchaser was adjudged as the highest bidder but failed to deposit twenty five percent (25%) of the purchase price amounting to Rs. 22,750/- on the date of the auction sale i.e. on 12.10.1999, till 5.30 p.m. The extension of time sought for, by him was rejected by the Executing Court vide its order passed on the same day i.e. on 12.10.1999. However, on the next day, t.e. on 13.10.1999 the said auction purchaser deposited the entire amount of Rs. 91.000/- with the Executing Court.
7. The petitioner-judgment debtor on 29.10.1999 applied for cancellation of the sale for non-compliance of the provisions of Order 21 Rule 84(1) of the C.P.C. and prayed that the sale should not be confirmed and further contended that the value of the property, put to auction, was more than Rs. 7 lacs. On the same day, one Ramesh Choube, a third person, along with another third person, Ramesh Gawali, moved two separate applications contending therein that the above auction sale was without proper publicity and that too without notifying the same in the locality by beat of drum, as such, they could not take part in the auction sale conducted by the Executing Court. Both of them submitted their respective offers to the Executing Court. Mr. Ramesh Choube offered to purchase the property in question for Rs. 3,50,000/-, whereas Ramesh Gavall expressed his willingness to offer for Rs. 2,50,000/-. for the said property.
8. The Executing Court after receipt of the objection from the judgment-debtor and offers from the two intending purchasers and after hearing all the concerned parties, by an order dated 3.12.1998 allowed Ramesh Choube to deposit Rs. 3,50,000/-on or before 4.12.1999 byway of security. so as to enable him to establish his bona fides. The text of the order dated 3.12.1999 reads under :
“The J.D. has submitted vide Ex. 21, that if resale is kept the price of the property will come to Rs. 7,00,000/- the Court has to safeguard the interest of J.D. and considering difference in price this prayer of J.D. is accepted and property is kept for resale on 4.12.1999 at the cost of J.D. If no sale is taken place, offer of this applicant will be confirmed. On failure of deposit of money by this applicant the offer of first auction purchaser will be considered.”
In pursuance of the above order auction was to take place on 4.12.1999. Consequently, the petitioner-judgment debtor applied on 3.12.1999 requesting for publication of auction sale, scheduled to be held on 4.12.1999, through the Dalnik Lokmat, so as to get better bids and good price to the attached property. But no orders were passed by the Court and the said application was adjourned to 6.12.1999 for consideration. Shri Ramesh Choube was expected to deposit an amount of Rs. 3,50,000/- by 4.12.1999, but failed to deposit the same. With the result no auction sale could take place on 4.12.1999.
9. The petitioner-judgment debtor was under fond hope that on 6.12.1999 fresh date of auction shall be fixed and fresh sale proclamation would be issued. He was also expecting wide publicity to the auction sale through news paper publication but to his surprise an order came to be passed on 13.12.1999 rejecting his application. The Executing Court by the same order confirmed the sale and made it absolute in favour of respondent No. 2 for a sum of Rs. 91,000/-. The decree holder was permitted to withdraw the amount of Rs. 91,000/- The directions were given to Issue sale certificate in favour of the said auction purchaser.
DEVELOPMENTS PENDING WRIT
10. The above order is the subject matter of challenge in this writ petition filed under Article 227 of the Constitution of India.
11. The learned Counsel for the judgment debtor submitted that the property in question was a valued property and the same was allowed to be sold at throw away price. He asserted before this Court that he has got a purchaser, who is prepared to purchase the property in question for a substantially high amount. In order to test his bona fides the following order was passed by this Court on 8.12.1999.
“After hearing the learned Counsel for the petitioner for some time, he made a statement that he has a purchaser who is prepared to purchase the property for substantially high amount than the amount for which the property was sold in Court auction. In order to test the bona fides of his proposal, the writ petition is adjourned to 15th December, 2000 with specific understanding that the petitioner will keep the prospective purchaser present in the Court on 15h December, 2000 with his proposal on affidavit along with Demand Draft in the name of the Registrar, High Court of Bombay.
Stand over to 15th December, 2000.”
12. In pursuance of the above order, one Shri Rahul Vishwanath Pethe appeared before this Court and expressed his readiness to purchase the property in question and also tendered an amount of Rs. 1,50,000/- to show his bona fides. He also filed his affidavit expressing his readiness and willingness to purchase the property for Rs. 3,50,000/-. He also made a further statement therein that in the absence of any bidder offering highest bid, his bid for Rs. 3,50,000/- be treated as a final bid. He assured this Court that he would deposit the balance amount, if his bid is finalised, and If he fails to deposit the balance amount the amount, tender by him may be forfeited.
In consonance with the above development the order was passed on 11.1.2001 reading as under :
“Heard Shri Kankaria, Advocate for the petitioner. Shri Ghavre holding for Shri Pawar, Advocate appearing for the respondents requests for grant of adjournment as Shri Pawar, Advocate is not keeping well. His request is opposed by the learned Counsel for the petitioner, in view of the peculiar fact that warrant of possession has already been issued by the Executing Court and the same is likely to be executed by tomorrow. He, therefore, prays for grant of ad interim relief.
The petitioner in pursuance of the order of this Court dated 8th December, 2000, has produced prospective purchaser one Shri Rahul Vishwanath Pethe, who is ready to purchase the house in question.
The prospective purchaser Shri Pethe has filed an affidavit stating therein that he is ready and willing to purchase the property for Rs. 3,50,000/- (three lacs fifty thousand) and has tendered a sum of Rs. 1,50,000/- (One lac fifty thousand) out of which Rs. 80,000/- are tendered by Demand Draft dated 11.1.2001, bearing No. 027410, drawn on the HDFC Bank, Mumbai, and Rs. 70,000/- in cash.
Shri Pethe also assured this Court through his statement on oath that in the event of finalisation of bid in his favour, he would deposit the balance amount of Rs. 2 lacs. He also stated on oath that in absence of fresh bidders, his bid for Rs. 3,50,000/- should be treated as final and that in the event of finalisation of bid in his favour if he fails to deposit the balance amount of Rs. 2 lacs then, the amount tendered by him in the sum of Rs. 1,50,000/- may be forfeited.
Considering the affidavit filed by the prospective purchaser Shri Pethe and his willingness to purchase the property for Rs. 3,50,000/- and the bona fides shown by him by depositing Rs. 1,50,000/- in this Court, I find that the petitioner is prima facie, entitled to ad interim relief of stay of possession at this stage in the facts and circumstances of the case.
Put up for further hearing on 18th January, 2001.
Parties to act on copy of this order duly authenticated by the Court Sheristedar.”
13. In compliance of the aforesaid order the prospective purchaser Shri Pethe deposited the amount of Rs. 1,50,000/- in this Court. The above petition in the above circumstances, was taken up for final hearing at the admission stage itself by consent of the parties.
RIVAL CONTENTIONS
Submissions of Petitioner :
14. The learned Counsel appearing for the petitioner urged that the auction sale conducted by the officer of the Executing Court stood vitiated as the auction purchaser failed to deposit 25% of the purchase money immediately. He further submitted that it was obligatory on the part of the officer conducting auction sale to put property forthwith for resale, the moment the auction purchaser failed to deposit 25% of the purchase amount with fall of hammer. According to the learned Counsel for the petitioner, (judgment debtor) the very fact that the auction purchaser desired to deposit Rs. 15,000/- only little short of the 1/6th of the purchase money, should have been treated as breach of mandatory requirement of Sub-rule (1) of Rule 84 of Order 21 of the C.P.C. He further submitted that the order of the Executing Court dated 12.10.1999 was clear enough to indicate necessity of a compliance of the requisite Sub-rule (1) of Rule 84 of Order 21 of the C.P.C. and the auction purchaser should have taken hint of necessity to deposit required 25% of the purchase money on 12.10.1999 itself. Thus, in his submission, the auction sale held on 12.10.1999 automatically stood cancelled no sooner the auction purchaser failed to discharge his obligation, contemplated under Rule 84(1), with the close hours of 12.10.1999. As such, the said auction sale could not have been taken into account by the Executing Court or any purpose much less for confirmation of sale.
15. The learned Counsel for the petitioner further urged that on the next day i.e. on 13.10.1999 the Executing Court should not have accepted the
deposit of full amount of auction money as the auction sale was no sale in the eye of law. He further urged that factum of deposit of full purchaser money should not be treated as a circumstance in favour of the auction purchaser ignoring of provisions of Order 21 Rule 84(1) of the C.P.C.
16. The learned Counsel for the petitioner urged that the mistake committed by the Executing Court in accepting amount of full purchase money cannot have the effect of prejudicing the right of the petitioner to treat the sale vitiated. He urged that the act of the Court shall prejudice no man and sought to place reliance on the judgment of the Apex Court in the case of W. B. Essential Commodities Supply Corporation v. Swadesh Agro Farming and Storage P. Ltd.,
17. He further contended that in pursuance of the order of the Executing Court dated 3.12.1999, it was obligatory on the part of the Executing Court to hold fresh auction sale on 4.12.1999. He further submitted that no steps were taken by the executing Court to hold auction on 4.12.1999. Neither fresh proclamation was drawn nor any steps were taken to give adequate publicity either through the news papers or by beat of drum in the nearby locality though the judgment debtor was ready and willing to bear the expenses therefor. He further submitted that order dated 3.12.1999 had substantially indicated that if auction does not take place for any reason; then the offer made by third person, namely. Ramesh Choube for purchase of the property for Rs. 3,50,000/- was to be considered and his failure to deposit Rs. 3,50,000/- was to result in fresh consideration of the offer made by the auction purchaser, the Respondent No. 2. But to his surprise, without there being any further hearing and/or consideration afresh, the Executing Court straightway proceeded to confirm the sale In favour of auction purchaser, Respondent No. 2, in pursuance of the auction sale held on 12.10.1999, which, in his submission was non-existent for want of compliance of Sub-rule (1) of Rule 84. He urged that non-existent and ab initio void auction sale could not have been confirmed by the Executing Court. The learned Counsel for the petitioner further urged that the Executing Court has acted in exercise of its jurisdiction illegally and with material irregularity and travelled beyond the jurisdiction vested in it by law. He, therefore, urged that the impugned order of confirmation of sale in favour of auction purchaser, Respondent No. 2, being in breach of principles of natural justice, equity and fair play is liable to be set aside.
18. The learned Counsel for the petitioner placed reliance on the Judgment of the Apex Court in the matter of Manilal Mohanlal v. Sayed Ahmed, wherein the Apex Court held that failure to deposit of 25 per cent of the purchase money immediately on the person being declared as purchaser renders the sale, confirmation thereof and issuance of sale certificate a complete nullity. Petitioner, therefore, prayed for setting aside the impugned order dated 13.12.1999 passed by the Executing Court.
Submissions of respondents :
19. The respondent No. 1-decree holder remained absent though served. The learned Counsel appearing for respondent No. 2, in reply, contended that on proper reading of Rule 84(1) of Order 21 of the C.P.C.,
contemplates deposit of 25 per cent of the amount of purchase money within reasonable time. In his submission, no sooner the respondent No. 2 was found to be the highest bidder, he immediately offered to deposit Rs. 15,000/- and immediately on the next day i.e. 13.12.1999, he deposited the entire amount of Rs. 91,000/-. In his submission the Executing Court erroneously directed him to deposit total amount on the date of auction sale which was not at all legal, especially when it was open for him to deposit the said amount within 15 days in pursuance of Rule 85 of Order 21 of the C.P.C. He further submitted that the Executing Court confirmed the sale and directed issuance of sale certificate in favour of respondent No. 2 by the impugned order. Accordingly, sale certificate was also issued in favour of respondent No. 2 and on the top of it decree holder was allowed to withdraw Rs. 91,000/- which he has withdrawn. He, therefore, urged that considering all the facts and circumstances this Court should not Interfere with the impugned order and prayed for dismissal of the writ petition with costs.
20. The learned Counsel for the petitioner in reply contended that auction sale conducted on 12.10.1999 being null and void, the confirmation thereof and consequent issuance of sale certificate has no effect in the eye of law and no legal rights were created in favour of the auction purchaser.
POINTS FOR DETERMINATION
21. In the light of the above rival contentions, the following questions arise for my consideration :
(1) Whether the auction sale conducted by the officer of the Court on 12.10.1999 was legal and valid?
(2) Whether Executing Court was justified in confirming sale in favour of the respondent No. 2, auction purchaser?
THE STATUTORY PROVISIONS
22. Before proceeding further with dissection of the issues involved, it will be profitable to take survey of the relevant provisions of law in this regard.
23. The modes of execution and procedure are provided under Order 21 of the C.P.C. Rules 82 to 94 of the Order 21 are relevant for the purposes of the present petition. The texts thereof are as under :
SALE OF IMMOVABLE PROPERTY
82. What Courts may order sales – Sale of Immovable property in execution of decree may be ordered by any Court other than a Court of Small Causes.
83. Postponement of sale to enable judgment debtor to raise amount of decree (1) ... ... (2) ... ... (3) ... ...
84. Deposit by purchaser and resale on default. – (1) On every sale of immovable property the person declared to be the purchaser shall pay immediately after such declaration a deposit of twenty-five percent on the amount of his purchase money to the officer or other person conducting the sale, and in default of such deposit, the property shall forthwith be resold.
(2) Where the decree-holder is the purchaser and is entitled to set off the purchase money under Rule 72, the Court may dispense with the requirement of this rule.
85. Time for payment in full purchase money. – The full amount of purchase money payable shall be paid by the purchaser into Court before the Court closes on the fifteenth day from the sale of the property :
Provided that, in calculating the amount to be so paid in to Court, the purchaser shall have advantage of any set off to which he may be entitled under Rule 72.
86. Procedure in default of payment-in default of payment within the period mentioned in the last preceding rule, the deposit may, if the Court thinks fit. after defraying the expenses of the sale, be forfeited to the Government, and the property shall be resold, and the defaulting purchaser shall forfeit all claims to the property or any part of the sum for which it may subsequently be sold.
87. Notification on resale – Every resale of immovable property, in default of payment of the purchase money within the period for such payment, shall be made after the issue of fresh proclamation in the manner and for the period herein before prescribed for the sale.
88. Bid of co-sharer to have preference. –
89. Application to set aside sale on deposit, –
(1) ... ... (2) ... ... (3) ... ... 90. Application to set aside sale on ground of irregularity or fraud. - (1) ... ... (2) ... ... (3) ... ... 91. Application by purchaser to set aside sale on ground of judgment-debtor having no saleable interest. - 92. Sale when to become absolute or be set aside, - (1) ... ... (2) ... .. 93. Return of purchaser money in certain cases. - 94. Certificate to purchase. -
24. The auction sale of immovable property in execution of decree is required to be ordered by the Executing Court under Order 21 Rule 82 of the C.P.C. Such sale is expected to be in conformity with the provisions extracted hereinabove. Sub-rule (1) of Rule 84 makes it obligatory on the part of the person declared to be the purchaser, to pay immediately after such declaration, the deposit of twenty five percent of the amount of purchase money, to the officer conducting the sale, and in default of such deposit, the property is required to be resold forthwith. Rule 84(1) contemplates a declaration of the name of the person to be the purchaser, upon such declaration, immediate deposit of twenty-five per cent if the amount of purchase money is mandatory. The right to get declared as a highest
bidder, contemplates an obligation to deposit 25% of the amount of purchase money. Failure to deposit 25% of the purchase money, renders the sale a complete nullity and confirmation thereof and issuance of sale certificate has no effect. Rule 84(1) further provides that on failure of the of the purchaser to deposit 25% of the purchase money immediately, the property shall be resold forthwith. Non-compliance of the rule renders the sale invalid.
If the auction purchaser fails to deposit 25% of the purchase money as required, the officer conducting sale has no authority to extend time for such deposit and in default of such deposit the officer or the person conducting the sale has to put the property to resale and has to continue with the auction sale. There is a reason behind such deposit. Failure to deposit 25% of the purchase money results in automatic cancellation of sale of the property and the same is required to be put to resale forthwith so as to avoid further loss of time and expenses Involved for re-proclamation and republication of such auction sale. The purpose is not only to save money and time but to realise the sale proceeds of the property as expeditiously as possible so as to realise the fruits of the decree. In this behalf, observations of the Apex Court in Manilal’s case (supra) needs to be noticed:
“The provision regarding deposit of 25 per cent by purchaser other than the decree holder is mandatory as the language of the rule suggests. The full amount of the purchase money must be paid within fifteen days from the date of the suit but the decree holder is entitled to the advantage of a set-of. The provision for payment is however, mandatory (Rule 85). If the payment is not made within the period of fifteen days, the Court has the discretion to forfeit the deposit and there the discretion ends but the obligation of the Court to re-sell the property is imperative. A further consequence of non-payment is that the defaulting purchaser forfeits all claim to the property.”
“Having examined the language of the relevant rules and the judicial decisions bearing upon the subject we are of the opinion that the provisions of the rules requiring deposit of 25 per cent of the purchase money immediately on the person being declared as a purchaser and the payment of the balance within 15 days of the sale are mandatory and non-compliance with these provisions there is no sale at all. The rules do not contemplate that there can be any sale in favour of a purchaser without depositing 25 per cent of the purchase money in the first Instance and the balance within 15 days. When there is no sale within the contemplation of these rules, there can be no question of material irregularity in the conduct of the sale. Non-payment of the price on the part of the defaulting purchaser/vendor the sale proceedings as a complete nullity. The fact that the Court is bound to re-sell the property in the event of a default shows that the pervious proceedings for sale are completely wiped out as if they do not exist in the eye of law. We hold, therefore, that in the circumstances of the present case, there was no sale and the purchasers acquire no rights at all.”
Application of principles to this case
25. Turning to the facts of the present case, the auction purchaser instead of depositing 25% of the purchase money i.e. an amount of Rs. 22,750/- offered to deposit only Rs. 15,000/- and prayed for acceptance thereof. The Executing Court vide its order dated 12.12.1999 refused to accept Rs. 15,000/- but directed him to deposit entire amount as contemplated under Sub-rule (1) of Rule 84, on the same day till 5.30 p.m. The auction purchaser failed to deposit. He did not comply with the said order. Since there was failure on the part of the auction purchaser to deposit 25% of the purchase money Immediately as mandatorily required under Rule 84(1) the alleged auction was no auction in the eye of law. The same cannot be said to be legal and valid on the touchstone of Rule 84(1) of Order 21 of the C.P.C.
26. Having found that the auction sale dated 12.12.1999 was null and void, acceptance of the entire amount of Rs. 91,000/- on the next day by the Executing Court, by no stretch of imagination, can be said to be legal and valid, as the respondent No. 2 auction purchaser was never declared to be the successful purchaser as contemplated under Rule 84(10.
27. Apart from the above, failure to deposit Rs. 3,50,000/- by Ramesh Chaube could not have ipso facto resulted in confirmation of sale in favour of respondent No. 2, without there being any further opportunity or notice to the judgment debtor to address the Court on the question of confirmation of sale. As a matter of fact, as per order dated 3.12.1999, the Court was expected to hold resale of the property on 4.12.1999, but if for any reason, resale could not be proceeded with, then, it was obligatory on the part of the Executing Court to fix another date for such auction sale. At any rate, it was obligatory on the part of the Executing Court at least to hear the judgment debtor, so as to give him an opportunity to make his submissions relating to legality and validity of the auction sale held on 12.10.1999. It is needless to mention that the valuable property of the judgment debtor was at stake. The endeavour of the Court ought to have been to get maximum price of the property so as to protect the interest of the Judgment-debtor. Thus, the Executing Court was not justified in confirming the sale in favour of respondent No. 2. The confirmation of sale cannot be said to be legal and valid.
28. At this juncture, the peculiar circumstances existing in this case cannot be ignored i.e. concrete better offer, made by one Shri Rahul Vishwanath Pethe, in pursuance of the order of this Court dated 8th December, 2000. He has not only tendered his better offer but filed an affidavit stating therein that he is ready and willing to pay price of Rs. 3,50,000/- for the attached property. He deposited sum of Rs. 1,50,000/ to show his bona fides. He assured this Court through his affidavit that In the event of finalisation of bid in his favour, he would deposit balance amount of Rs. 2,00,000/-. He has also stated on oath that in the absence of fresh higher bid, his bid may be accepted as final, and in the event of acceptance of his bid as final, if he fails to deposit the balance amount, the sum of Rs. 1,50,000/- deposited by him may be forfeited.
29. Thus, considering the material irregularity committed by the Executing Court and the concrete better offer furnished by the prospective purchaser Shri Pethe, I am of the opinion that the impugned order cannot stand to the scrutiny of law and needs to be quashed and set aside. Accordingly, the auction sale dated 12.10.1999, confirmation thereof by the impugned order dated 13.12.1999 and issuance of sale certificate are quashed and set aside. The sale, if any, is declared null and void.
30. In view of the aforesaid order and declaration of nullity on the ground of material Irregularity and considering the better offer furnished
by the prospective purchaser Shri Pethe, respondent No. 2 the auction purchaser shall be entitled to claim refund with interest under Rule 92 of Order 21 of the C.P.C. Accordingly, the amount deposited by him in the sum of Rs. 91,0000/- be refunded to him with interest thereon at the rate of 18% p.a. from the date of deposit till refund to him.
31. The Executing Court is further directed to hold fresh auction sale in accordance with law within a period of two months from the date of receipt of writ from this Court, fixing upset price of the attached property in the sum of Rs. 3,50,000/-. The bid already tendered by Shri Pethe be treated as one of the bids at the auction sale and deposit of Rs. 1,50,000/ may be treated as deposit under Rule 84(1). In absence of any other higher bid from any person, he may be called upon to deposit the balance amount within a period specified under Rule 85 of Order 21 of the C.P.C. and all further proceedings may be proceeded with in accordance with law.
32. In the result, writ petition is allowed. Rule is made absolute in terms of the above order with no order as to costs.
