IN THE HIGH COURT OF KERALA AT ERNAKULAM
MFA.No. 212 of 2006()
1. MESSRS TVR FUND,
... Petitioner
2. T.VELAYUDHAN ACHARI, CHEKKALAVILAKATHU
3. RAJAGOPALAN ACHARI,
Vs
1. THE OFFICIAL RECEIVER,
... Respondent
2. SHRI.CHANDRASEKHARA PILLAI,
3. SHRI.G.D.PILLAI, REMA NIVAS,
4. SMT.J.HYMAVATHY THANKACHI,
5. SMT.R.G.SHEELA, W/O.SHRI GOPINATHAN,
6. SMT.B.JAGADAMMA THANKACHY,
7. SHRI.R.UNNIKRISHNAN,
8. SHRI.V.O.PRATAPACHANDRAN NAIR,
9. SMT.J.KANAKAMMA, GOPA NIVAS,
10. SHRI.P.PARAMESWARAN PILLAI,
For Petitioner :SRI.P.RAMESAN (KANIAPURAM)
For Respondent :SRI.EASOW MATHEW
The Hon'ble MR. Justice K.M.JOSEPH
The Hon'ble MR. Justice M.L.JOSEPH FRANCIS
Dated :22/06/2009
O R D E R
'C.R. '
K.M. JOSEPH & M.L. JOSEPH FRANCIS, JJ.
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M.F.A.(Insolvency Act) Nos. 212 and 213 of 2006
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Dated this the 22nd day of June, 2009
J U D G M E N T
Joseph, J.
These appeals are connected and therefore disposed of
by this common judgment. The appellants in both the appeals are the
same. In MFA.No.212/06, the appellants impugn the order of the Ist
Additional District Judge, Thiruvananthapuram by which he allowed
the application to execute the sale deed filed by the 1st respondent in
favour of the auction purchaser. In the other MFA, by the order
impugned, the Ist Additional District Judge, Thiruvananthapuram has
rejected the application filed by the appellants to set aside the sale
executed by respondent Receiver in favour of the auction purchaser.
2. It is by a common order that the orders were passed in
the I.As. as aforesaid. By order in I.A.No.2135/03, the court had
permitted the Official Receiver to dispose of 32 cents of property
comprising Survey Nos.1998, 2000 and 2014 of Thycaud village. The
Receiver conducted the sale of the property in favour of the 2nd
MFA.212 & 213/06
: 2 :
respondent in the appeals on 10.4.2006 in a sum of Rs.32,15,000/-.
It is thereupon that the appellants filed IA.1497/06 to set aside the
sale alleging irregularities. This application has been rejected as
already noticed. The court also granted permission to the Official
Receiver to execute the sale deed in favour of the 2nd respondent
auction purchaser.
3. We heard learned counsel for the appellants and learned
counsel appearing on behalf of the 1st and 2nd respondents.
4. Learned counsel for the appellants would submit that a
notice of sale was given on 30.3.2006 and the sale was held on
10.4.2006 and this conduct of the 1st respondent has occasioned a
breach of Order 21 Rule 68 C.P.C. The provision reads as follows:
” Time of sale – Save in the case of property of
the kind described in the proviso to Rule 43, no
sale hereunder shall, without the consent in
writing of the judgment-debtor, take place until
after the expiration of at least fifteen days in the
case of immovable property, and of at least
seven days in the case of movable property,
calculated from the date on which the copy of the
proclamation has been affixed on the Court-
house of the Judge ordering the sale.”
According to the learned counsel for the appellants, the gap of
MFA.212 & 213/06
: 3 :
15 days as mandated by the Rule has been observed in its breach
and therefore clearly the court below ought to have allowed the
application to set aside the sale and refused the application seeking
permission to execute the sale deed. Learned counsel for the
appellants points out that under section 5 of the Insolvency Act, the
court has the same powers and has to follow the same procedure it
has and follows in the exercise of original civil jurisdiction. The
appellants in this regard rely on section 5 of the Insolvency Act,
which reads as follows:
” 5. General powers of Courts –
(1) Subject to the provisions of this
Act, the Court, in regard to proceedings under
this Act, shall have the same powers and shall
follow the same procedure as it has and follows
in the exercise of original civil jurisdiction.
(2) Subject as aforesaid, the High
Court and the District Courts, in regard to
proceedings under this Act in Courts
subordinate to them, shall have the same powers
and shall follow the same procedure as they
respectively have and follow in regard to civil
suits.”
5. Learned counsel for the first respondent would contend
that the application filed for setting aside the sale itself is barred by
limitation. She points out that the application is maintainable under
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: 4 :
section 72 of the Insolvency Act. It reads as follows:
“72. Appeal to Court against Receiver –
If the insolvent or any of the creditors or any
other person is aggrieved by any act or decision
of the receiver, he may apply to the Court, and
the Court may confirm, reverse or modify the act
or decision complained of, and make such order
as it thinks just:
Provided that no application under this
section shall be entertained after the expiration
of twenty-one days from the date of the act or
decision complained of.”
According to her, the sale was held on 10.4.2006. The
application was filed only on 30.5.2006. Though the vacation may
have intervened the application should have been filed, according to
her, on the re-opening day to render it within time. Learned counsel
appearing on behalf of the 2nd respondent would contend that Order
21 is not as such applicable to the sale conducted by the Receiver.
6. As far as the second question, namely whether the sale
conducted by the Receiver on 10.4.2006 is in contravention of Order
21 Rule 68, is concerned, it is clear that if Order 21 Rule 68 is
applicable, there is violation of Order 21 Rule 68. But, the question
is as to whether Order 21 Rule 68 is applicable to sale by a Receiver
MFA.212 & 213/06
: 5 :
acting under the Insolvency Act. The Receiver under the Act cannot
equated with the court. Order 21 Rule 68 speaks about the sale held
by the court. In this connection, we may advert to certain decisions.
In Cheda Lal Vs. Lachman Parshad and others [AIR 1917
Allahabad page 74], the Division Bench of the Allahabad High Court
had occasion to take the view that the sale by the Receiver is an act
of the Receiver and not a proceeding. That was a case where the
highest bidder of the auction of the property sold by the Receiver
failed to deposit 1/4th of the purchase money and property has been
sold on loss. The court proceeded to hold as follows:
” I think that the powers conferred upon a
Court and the duties imposed upon a Court by
O.21, Civil P.C., have o do with the execution of
Civil Court decree, the foundation of which is a
decree for sale or an attachment duly effected in
accordance with the provisions of the Order
itself. The position of the Receiver is that of a
man in whom certain property has become
vested. It has no doubt vested in him as a
trustee for other persons; but for all that he is in
law the owner of the property. He has authority
under the Provincial Insolvency Act, S.20, to sell
the same, and his power of sale cannot be
limited by the provisions of O.21, Civil P.C., as it
would have to be if the contention for the
MFA.212 & 213/06
: 6 :respondents now before us were correct.
Except that the Receiver is bound to act under
the directions given him by the Court and that
any person aggrieved by any act or decision of
the Receiver has a right of appeal to the Court
under S.22, Provincial Insolvency Act, the
position of the Receiver is simple that of a
private person owning certain property who is
under the necessity to covert the same into
cash as readily as possible.
I think the consequences which would
follow from fettering the Receiver by all the
details of procedure which O.21, Act V of 1908
provides for execution of Civil Court decrees
would be undesirable, and that there is nothing
in S.47, Provincial Insolvency Act, which
compels us to take such a view.”
On the same lines is the judgment of a learned Single Judge of
the Nagpur High Court reported in Kesheo Krishnaji Vs. Baliram
Bakaramji and another [AIR (38) 1951 Nagpur 388] and therein
also the court took the following view, inter alia:
” The sale by the receiver is not a court-
sale but a private sale. There is no provision
requiring a receiver to conduct such a sale in
accordance with the provisions of O.21 CPC.”
7. No doubt, learned counsel for the appellants referred us
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: 7 :
the decision of the apex court reported in P.Srinivasa Naicker Vs.
Engammal [AIR 1962 SC 1141]. Therein, the court was dealing with
a case under the Provincial Insolvency Act, 1920 and the court was
dealing with the sale by a Receiver and the power of the court to set
aside such sale. The apex court held as follows, inter alia :-
” 8. It may be accepted that the power of
the court under S.68 is not hedged in by those
considerations which apply in cases of auction sales
in execution proceedings. Even so, the power under
S.68 is a judicial power and must be exercised on
well recognised principles, justifying interference
with an act of the receiver which he is empowered to
do under S.59(a) of the Act. The fact that the act of
the receiver in selling properties under S.59(a) is
subject to the control of the court under S.68 does
not mean that the court can arbitrarily set aside a
sale decided upon by the official receiver. It is true
that the court has to look in insolvency proceedings
to the interest in the first place of the general body
of creditors; in the second place to the interest of the
insolvent, and lastly, where a sale has been decided
upon by the official receiver to the interest of the
intending purchaser in that order. Even so, the
decision of the official receiver in favour of a sale
should not be set aside unless there are good
grounds for interfering with the discretion exercised
by the official receiver. These grounds may be wider
than the grounds envisaged in auction sales in
MFA.212 & 213/06
: 8 :execution proceedings. Even so, there must be
judicial grounds on which the court will act in setting
aside the sale decided upon by the official receiver.
These grounds may be, for example, that there was
fraud or collusion between the receiver and the
insolvent or the intending purchaser; the court may
also interfere if it is of opinion that there were
irregularities in the conduct of the sale which might
have affected the price fetched at the sale; again,
even though there may be no collusion, fraud or
irregularity, the price fetched may still be so low as
to justify the court to hold that the property should
not be sold at that price. These grounds and similar
other grounds depending upon particular
circumstances of each case may justify a court in
interfering with the act of the official receiver in the
case of a sale by him under S.59(a) of the Act.”
8. In our view, the decision of the apex court would not
appear to advance the case of the appellants that when a
Receiver sells property acting under the Act, it is bound to comply
with the mandate of Order 21 Rule 68. No doubt, in the decision
of a learned single Judge in Balaji and others Vs. Gopal Mali
[AIR 1927 Nagpur 262], the court took the view that the provisions
of Order 21 are applicable to insolvency proceedings. The
question was as to the period of limitation applicable to a petition
to set aside a sale under the Insolvency Act. The sale was
MFA.212 & 213/06
: 9 :
pending confirmation. The sale apparently was a court sale.
9. The upshot of this discussion would lead us to the
conclusion that the sale effected by the Receiver acting under the
Insolvency Act and after seeking permission from the court to
effect the sale cannot be set aside for the sole reason that there is
a transgression of the mandate of Order 21 Rule 68. In this case,
it has been pointed out to us that the sale was effected after
issuing notice on 30.3.2006 which purported to give ten days
notice. The sale was held after giving ten days notice. There
were 14 bidders. It is also pointed out that the appellants were
given individual notice. The creditors’ association was also given
notice. The price fetched is Rs.32,15,000/-. It is worthwhile to
note as pointed out by the learned counsel for the respondent that
this contention was not raised in the court below. In the light of
the facts, the court below has correctly found that the sale is
proper.
10. No doubt, 1st respondent has not raised in the court
below the plea of limitation, which is raised before us. But it is a
question of law on the admitted facts. As already noticed, the
application was filed after the period of 21 days against what is
MFA.212 & 213/06
: 10 :
provided under section 72 of the Act and it was barred. On the
whole, we feel that the appeals do not show any merit.
Accordingly, the appeals fail and they are dismissed. We do not
express any view as to whether there is power under section 5 of
the Limitation Act for condoning the delay in filing the application
under section 72.
Sd/-
(K.M.JOSEPH, JUDGE)
Sd/-
(M.L. JOSEPH FRANCIS, JUDGE)
aks
// True Copy //
P.A. to Judge