JUDGMENT
1. This is a suit for a declaration that the sale of property described in Exh. A appended to the plaint in favour of defendant No. 2 brought about by defendant No. 1 is void and reliefs incidental to the declaration.
2. Plaintiff on 20-10-1961 acquired the suit land together with some structures thereon from one Krupal Khetsay. The price agreed to be paid to the vendor was Rupees 40,000/- and plaintiff raised a loan of Rupees 22,000/- from defendant No. 1 to make the purchase — the balance coming from his own sources. To ensure repayment of the sum borrowed from defendant No. 1 together with
interest agreed to be paid thereupon, plaintiff passed Exh. S-1 which is a registered mortgage deed. In the document, plaintiff undertook to repay the mortgage debt along with interest on or before 20th day of October, 1962. In the event of the mortgagor defaulting in the payment of the principal sum of interest amounting to at least Rs. 500/-, the mortgagee was authorised to bring the property to sale under Section 69 of the Transfer of Property Act (T.P. Act). A further sum of Rs. 18,000/- was required by the plaintiff in the year 1971. Defendant No. 1 provided the required sum and obtained from plaintiff on 5th April, 1971 the document at Exh. S-3. This document recited that the time for repayment of the mortgage debt of Rupees 22,000/- plus the advance secured under document at Exh. S-3 would be repaid by 5th April, 1972, the rate of interest being enhanced to 12% per annum. In the meantime the plaintiff had fallen in arrears in the payment of property taxes on the acquired property together with such additions as had been made by him. Defendant No. 1 on 7-4-1972 gave a notice to the plaintiff calling upon him to pay Rs. 40,000/- plus interest within 3 months, failing which she threatened to put the property to sale without the intervention of a Court as provided for by Exh. S-l. The Bombay Municipal Corporation had noticed defendant No. 1 about the property tax having run up to more than Rs. 7,000/- and their having been a statutory right of priority over the suit property for the realisation of the same. A copy of this notice was sent by defendant No. 1 to the plaintiff. A second notice threatening the sale by public auction was given by defendant No. 1 to plaintiff on 22nd November, 1972. The 1st defendant intimated the Bombay Municipal Corporation on the 3rd January, 1973 of her rights under Exhs. S-1 and S-3 and requested that the encumbrances in her favour be mentioned in the proclamation of sale which sale had been threatened by the BMC. The BMC gave an affirmative response to this communication of the 1st defendant. Pursuant to a request made by the plaintiff to postpone the intended sale, the BMC postponed the auction. On 11-4-1973, defendant No. 1 gave
one more notice to the plaintiff calling upon him to pay the mortgage debt together with interest within 3 months, failing which the property would be put to sale by public auction. On 11th March, 1974, one mure notice was given to the plaintiff intimating that the property would be put to sale by public auction on 11-4-1974. The intended public auction was advertised in various newspapers including the Free Press Journal and Mumbai Samachar. The sale kept on being postponed and in June, 1974, it was re-advertised as scheduled to take place later. Plaintiff then filed Suit No. 4643 of 1974 in the Bombay City Civil Court and an ad interim order restraining the auction was passed on condition that plaintiff deposited a sum of Rs. 10,000/- on or before 24-6-1974. The deposit not having been made the injunction stood vacated. Eventually the sale was postponed to 6-7-1974. Pursuant to an alleged auction which took place on 6-7-1974, defendant No. 1 has kept ready a draft of a conveyance dated 18-7-1974. This document at Exh. S-35 purports to show defendant No. 2 as having purchased the suit property on 6-7-1974 being the highest bidder at the auction, the sum agreed to be paid by him being Rs. 61,000/-. The document shows him to have paid Rs. 15,250/- by way of earnest money.
3. Shortly stated, plaintiff’s case is that no auction took place on 6-7-1974. What was done on that day was a stage-managed farce to enable defendant No. 2 to grab plaintiffs valuable property for a pittance. Defendant No. 2 was inducted into a part of the suit property as a tenant by the plaintiff. He had defaulted in the payment of rent and the arrears payable by him came to more than Rs.40,000/-. Plaintiff had filed a suit in the Court of a Small Causes against defendant No. 2 for recovery of unpaid rent and ejectment. Defendant No. 1 was aware of the suit instituted in, the Small Causes Court by the plaintiff against the 2nd defendant. Defendant No. 2 was also aware of steps being taken by defendant No. 1 to realise her dues under Exhs. S-1 and S-3. The two defendants had joined hands and on 6-7-1974 indulged in the show of an auction. No person other than
defendant No. 1’s husband, the auctioneer, and the representative of defendant No. 1’s Solicitor was present when defendant No. 2 was said to have offered the higest bid. The process was objected to by the plaintiff’s representative who had gone to the spot at the behest of the plaintiff. No bids were invited and no one was allowed to enter the room where the document purporting to show defendant No. 2’s success in the auction was drawn up. In addition to the total absence of inviting bids at the site, so-called public auction was vitiated by material irregularities and illegalities which has affected the rights of the plaintiff. No proclamation or the terms and conditions of sale were pasted on the premises of the property or the vicinity thereof. Plaintiff was not given notice of the auction intended to be held on 6-7-1974. The sale proclamation did not mention the estimated value of the property, the rent which it was fetching, and particulars in regard to the built-up area etc. etc. Portions of the structures constructed subsequent to the mortgage and charge were included in the mortgaged property as being proclaimed for sale. The rateable value of the property tax assessed on the said property by the BMC was not mentioned in the sale proclamation. As said earlier, plaintiff’s representative was prevented from coming into the room where the papers showing the auction having taken place were drawn up. As a consequence of the acts and omissions of the defendants, property which was worth nearly Rs. 2 lakhs had been sold at a price of Rs. 61,000/-. Such a sale was a fraud upon the powers conferred by the statute upon the mortgagee. The auction was void and not binding on the plaintiff. Defendant No. 2 could not take the benefit of the sale being in his favour as he was a party to the fraud. The sale proclamation falsely described the rear parts most building consisted of ground and two upper floors as an “additional incomplete structure”. This was patently a false statement and was incorporated dishonestly with intent to mislead intending purchaser and occasion wrongful loss to the plaintiff. Plaintiff was therefore entitled to the relief of a declaration about the sale in favour of defendant No. 2 being void
and incapable of affecting his title to the
property.
4. Defendants Nos. 1 and 2 in their separate written statements took the stand that the plaintiff had been trying to put off the payment of the mortgage debt on one or the other ground. His financial condition had deteriorated and to such an extent that he was not even in a position to pay the property tax. Defendant No. 1 had given the plaintiff umpteen chances to repay his dues under Exhs. S-1 and S-3. Eventually she was left with no alternative but to bring the property to sale in exercise of her rights under Section
69 of the T.P. Act. The sale was duly advertised and publicised. In fact the plaintiff had been invited to come and scrutinise the proclamation for himself, so as to be satisfied that all relevant factors were brought to the notice of the intending purchasers. This offer was not availed of by the plaintiff and he should not now be heard to complain of the proclamation being defective in this or that respect. It was not true to say that a mere show of a public auction was made at the site on 6-7-1974. The notice given attracted a fairly sizeable number of bidders at the site and defendant No. 2 succeeded against a fairly strenuous contest by other bidders. The sale proclamation did not omit the material particulars and did not recite anything contrary to the factual position. It was not true to say that the proclamation was so worked as to depress the price and keep off from the auction those who would be normally interested in the purchase of the suit property. Neither defendant was guilty of fraud nor collusion. Defendant No. 2’s title was not impeachable for the lapses, if any, attributable
to defendant No. 1 and plaintiff’s only remedy would be an action for damages against defendant No. 1.
5. Pleadings aforestated gave rise to the following issues. These are given below with my findings recorded against each of them :
Issues
Findings
(1)
Does the plaintiff prove that the defendants -committed a fraud in the conduct of the auction as averred in para 11 of the plaint?
Yes.
(2)
Does Plff- prove that Defts. committed illegality and material irregularity in the holding of the auction as averred in paras 12 and 12(a) of the plaint? Yes. (3) Whether the present suit is barred because of the Plff. having instituted suit No, 4643 of 1974 which is still pending? No. (4) Whether the property was sold at a grossly inadequate price and, if so, does that invalidate the sale? Yes. (A-4) If yes, whether Plaintiffs only remedy is against Deft. 1 is No. an action as provided for by Section 69(3) of the T.P. Act? No. (5) Reliefs and costs? See order. REASONS 6. The third issue relates to the defence contention about the present suit being barred because of the plaintiff having instituted Suit No. 4643 of 1974 in the City Civil
Court at Bombay. As worded, the defence contention gives the impression of the said suit being still pending. It is conceded that the suit initiated by the plaintiff in the City Civil Court was filed before the taking place of the auction on 6-7-1974 and that the said suit was not pursued after the failure of the plaintiff to comply with the condition imposed upon him for the continuance of an ad interim injunction. Plaintiff was required to make a deposit of Rs. 10,000/- by a stipulated date
and as he could not comply with this condition, the ad interim injunction stood automatically vacated. Thereafter the suit was not pursued and it must have been dismissed. The cause of action in that suit was a challenge to defendant No. 1’s right to auction the property and before the auction took place. As against that, the cause of action in the present suit is to get declared void the result of the auction allegedly held on 6-7-1974. The material difference in the causes of action for the two suits is enough to negative the defence contention about the non-maintainability of the present suit because of what took place in Suit No. 4643 of 1974.
7. Turning now to the remaining issues, it will be appropriate to consider them together. This is because of the inseparability of the factual material relating to the different issues. Parties have examined a number of witnesses and each witness has gone into great details. What is not disputed is that in July, 1974 a sum of Rs. 40,000/- plus interest was owing from the plaintiff to defendant No. 1; that plaintiff was in severe financial difficulties; that apart from being indebted to defendant No. 1, plaintiff was in arrears of property tax; that the non-payment of property tax had led to a threat by the BMC to put the suit property to auction and that added to the severe financial crash faced by plaintiff was the commencement of a feud between plaintiff and defendant No. 1. Plaintiff first attempts to show that no auction had actually taken place on 6-7-1974. Plaintiff has examined his brother-in-law in support of this plea. The said brother-in-law P.W. 2 Ashutosh Arora testifies that following a request made by plaintiff and the said person’s wife –the lady being the sister of the witness — he had been to the site when the auction was scheduled to take place. He came to the spot at about 3.30 to 3.45 p.m. Standing at the site were some 7-8 persons who included defendant No. 1’s husband and defendant No. 2. After sometime the assembled persons moved into the passage. Here, Arora picked up the courage to approach defendant No. 1 ‘s husband with a request that he postpone the auction as the plaintiff was trying to raise money to pay off the mortgage debt. Defendant No. 1’s husband expressed his inability to do anything as his Solicitors and Auctioneer had come to the spot. While Arora was so engaged in a conversation with defendant No. 1’s husband Bandukwalla, defendant No. 2 came to him and asked him to leave the place as he was not concerned with the matter. Defendant No. 2 is said to have invited Bandukwalla to follow him. The party moved to the rear-most building’s second floor. Arora followed behind, keeping a safe distance between him and those ahead. Defendant No. 2, Bandukwala and certain others entered into a room, the door whereof was shut. Arora tried to eaves drop from
where the could hear sounds but was unable to make out the exact words. Half an hour later when he came down in front of the site of the property, defendant No. 2 proclaimed that he had purchased the property for Rs. 61,000/-. Throughout the duration of his stay at the spot he heard nothing to indicate an auction or bids being invited and offered for the property. This information was passed on by him to his sister and the plaintiff. The estimate of time given by the witness depends upon a hazy memory. Witness was referred to an affidavit sworn by him on 7-8-1975 and filed in the suit. In the affidavit the intent to hold an auction on 6-7-1974 has been described as “sudden”. Arora seems to have used this word on the mere say so of plaintiff, and this, despite the knowledge that the auction of 6-7-1974 had been advertised much in advance in the newspapers. Arora says that he was sent to the spot and one of the purposes for which he was so sent, was to intimate Bandukwalla that the auction could not take place because of a stay order issued by a Court. There was no such stay order and in case there was one, Arora would riot have been required to be sent to intimate Bandukwalla about the said stay order. Witness admits that his affidavit of 7-8-1975 makes no reference to the stay order. Another reason behind his trip, according to the witness, was to make a request to Bandukwala to put off the auction as the plaintiff was ready to make a part payment. Nothing of this nature is mentioned in affidavit of 7-8-1975. In fact what Arora says is impossible to believe for on 6-7-1974, plaintiff had not the wherewithal to pay any substantial sum towards the debt outstanding. In an unguarded moment Arora comes out with the admission that the persons assembled in front of the property had so assembled for the auction. Witness was asked by defendant No. 2 to leave the place and not to interfere in matters which did not concern him. Yet he would have us believe that he followed defendant No. 2 and Bandukwalla to the second floor of the rear-most building. From the evidence on record, it does not appear that defendant No. 2 is the sort of person who could be trifled with. He is running what are plain and simple gambling
done and making a good living out of this nefarious trade. Plaintiff of course is not innocent for he appears to have been trafficking
in drugs. But nothing is to the discredit ofArora and it is not possible to believe that he would be allowed to follow the party which included defendant No, 2 to the said defendant’s lair. An attempt was made to show that the auction could not have taken place because of the heavy rains on 6-7-1974. The depositions of Bandukwalla, Solicitor Dadla and the auctioneer’s representative Sanghavi do not invite accepticism on this point. It was raining because the month was July and the rain interfered to some extent with the auction, is possible. But from this, it cannot be inferred that the rain was so heavy as to prevent even the holding of an auction. In the face of the positive testimony of Bandukwalla, Solicitor Dadla and Sanghavi, one cannot go by the interested testimony of Arora on the factum of the auction. Whatever other deficiencies the auction may suffer from, it is not possible to hold that no auction in fact had taken place and that the papers indicating otherwise are a concoction to cover up a farce. The auction had been duly advertised in the newspapers. Defendant No. 1’s Solicitors had engaged a firm working an public auctioneers. This firm had the requisite staff and the expertise to conduct auction. Having regard to these circumstances, it will not be possible to go by the interested word of Arora.
8. Butthefactoftheholdingofauctionis by itself not proof that everything was above board. Plaintiff contends that the sale proclamation suffered from certain material irregularities and illegalities. These had an effect upon the number and class of persons attending the auction and offering bids. The sale proclamation or the terms and conditions governing the sale are on record. There is no mention therein of the estimated value of the property and the reserve price. Next, the property proposed to be sold is described as having ah “additional incomplete structure.” The sale proclamation makes a reference to the notice received from the BMC intimating that it had to recover property taxes imposed on the property. But the exact sum in rupees owed by way of property tax has not been
specified. A large portion of the property was in the occupation of the tenants but the rental income was not set out whether accurately or even approximately in the proclamation. The parties are at issue in regard to the description of some part of the property being an incomplete additional structure. Plaintiff’s version is that there was nothing incomplete is supported by P.W. 3 Architect Wadke. The additional work was first entrusted to an Architect named Sodawala. The said Sodawala expired and Wadke was retained by the plaintiff to complete the minor works left unfinished and also to obtain a completion certificate from the BMC. The assignment undertaken by Wadke was carried out. The completion certificate is at Exh. S-3. A pump room and an underground auction tank had been put up under the supervision of Wadke on behalf of the plaintiff. The said work was sanctioned under Ex. S-144. Pursuant to take sanctioned plan, details as regards R.C.C. and structural designs were submitted by Wadke vide Exh. S-45. Whether work was done or not in consonance with Ex. S-45, is not known to the witness. The witness has been cross-examined at great length but without in any way shaking his credibility or the stand taken by him vis-a-vis the completion of the work left unfinished by Sodawala. What he concedes is that at the stage of his leaving plaintiff’s work, what only remained in regard to the additional structure was the obtaining of a water and electric connection, a bit of tiling, plastering work and fixing of shutters to doors and windows to the said additional structure. It is not as if we are restricted to what Wadke has to say on the subject. Defendant No. 2 in his testimony starts with a denial about getting possession of the first and second floors though he had paid an advance of Rs. 85,000/- to the plaintiff. He would have us believe that he came into possession of the property after 6-7-1974. At that time the structure did not have electric and water connections, had not been plastered and door frames and shutters were lacking. Apart from the sum of Rs. 85,000/-paid, as what he describes as pagdi (premium), defendant No. 2 claims to have enabled the plaintiff to raise a further sum of
Rs. 30,000/- from Ajanta Bankers, a firm in which defendant No. 2 was a partner. This
sum was to be utilised by the plaintiff to carry out the unfinished work. But the said work remained unfinished. Having said all this in examination-in-chief, defendant No. 2 finds some difficulty in cross-examination. He has to admit that he had obtained possession of the 1st and 2nd floors by the end of June, 1972. Even this answer was hedged in with the qualification that the plaintiff moved out of these two floors idling him to take possession thereof and do what he wanted there. Defendant No. 2 was more daring in the plaint of the suit filed in 1985 against Redkar and certain others. In that plaint, defendant No. 2 had averred that he had taken forcible possession of the 1st and 2nd floors from the plaintiff. In fact the 1st and 2nd floors of the said building had been connected with rooms Nos. 67 and 68 of Cross Building by a bridge. The bridge could have only been put up by a person having a toe-hold over the Cross Building as also the suit building. Defendant No. 2 wants us to believe that the bridge was put up by the plaintiff. It is not possible to believe this for plaintiff had no right over the Cross Building and the only person who could have benefited from the bridge was defendant No. 2 himself. Defendant No. 2 admits that at the time Exh. S-2 came to be drawn up the additional structure was almost complete except for the lack of door frames and shutters at some piaces. These frames and shutters were available as was the material to be used for plastering. All this had been left at the spot by the plaintiff himself. What defendant No. 2 did — if he is to be believed — was that he made use of the material to complete the small task left unfinished by the plaintiff. If plaintiff had brought the required material and if the unfinished work was as little as defendant No. 2 concedes it to be, the better probability is that the plaintiff himself completed the work rather than leave it unfinished. Had there been any incompleteness in the additional structure which was taken on lease by defendant No. 2, the lease agreement at Exh. G-2 would have made a reference thereto. By now defendant No. 2 was prepared to concede that Exh. S-2 made no
reference to the unfinished work because it was so minor as not to warrant a reference in the lease agreement. According to defendant No. 2, plaintiff did not carry out the undertaking to complete the work. Had this really been true, defendant No. 2 would have brought it to the notice of the plaintiff by means of a notice. Defendant No. 2 had parted with good money when Exh. S-2 was executed. Having regard to defendant No. 2’s native shrewdness it is not conceivable that he would enter into the agreement at Exh. S-2 without eg. assuring himself that the plaintiff had obtained a completion certificate. That defendant No. 2 had been kept out of possession till as late as June, 1972 was not mentioned by him in his written statement filed in the Small Cause Court suit. For this defendant No. 2, throws the blame upon his Advocate representing him in that suit. A lodge was functioning in the 1st and 2nd floors of the additional structure. In fact a sign-board for that purpose had been put up as is admitted by defendant No. 2. He now wants to cast the blame for this on his erstwhile partner and wants it to be accepted that no lodging business was being done, the sign-board being a mere announcement and nothing more. Yet the souveniors brought out by some Ganesh Mandal had advertisements inserted by defendant No. 2 showing that the existence of a lodge doing business in the name and style of ‘Ajanta Lodge’. The many contradictions are proof of defendant No. 2’s unwillingness to face the truth, viz. that he received possession of the so-called additional structure as soon as Exh. S-2 was accepted and that barring a few items here or there, the said structure was complete and fit for occupation. In fact defendant No. 2 occupied the same and used it for running various business like a gambling den, lodge etc. etc. This additional structure could not have cost less than Rs. 1,15,000/- which sum was advanced by defendant No. 2 to the plaintiff as a consideration for being inducted into some portion of the structure. Some doubt may be raised as to defendant No. 1’s state of knowledge vis-a-vis the additional structure. She — it may be said — was taken in by what appeared to be an incomplete structure and
therefore was not to blame for so reciting in the sale proclamation. Now defendant No. 1 cannot pretend to be all that uninformed and ignorant. She had advanced a sum of Rs. 40,000/- on the security of the property. She knew that the sum of Rs. 22,000/- was borrowed for the purpose of paying of Krupal Khetsey, the original owner of the property. The further advance of Rs. 18,000/- must have been made after some questioning of plaintiff as to the purpose for which the amount was required. Defendant No. 1 had a Solicitor to help her in the transaction recorded in Exh. S-3. The borrower-cum-mortgagor was a Hindu and a Solicitor must be deemed to have been aware of the need to be satisfied that the money was required for some legitimate purpose. Of course it may be said that the plaintiff was dealing with his self-acquired property and there was no reason for defendant No. Ps Solicitor to assume differently. But the normal precaution which those advising their clients in dealing with Hindus, must have been taken in this case also. The major part of the structure had been acquired by the plaintiff fora sum of Rs. 40,000/-. Even if it is assumed that defendant No. I was not informed of the further advance of Rs. 18,000/- being required for making additions to the structure, one cannot lose sight of the factthatdefendantNo. 1 was aware of an addition having been made. There is no evidence to show that an Architect had been commissioned to verify the condition and value of the additional structure put up by the plaintiff subsequent to the purchase made in 1961. Regard being had to the admissions wrenched out of defendant No. 2, it would follow that the plaintiff had added near about 3 times the sums spent in acquiring the property, in putting up an additional structure. The inference is that at about the time of the auction a sum of about Rs. 1,60,000/- had been invested in the property.
9. Plaintiff takes exception to the sale proclamation for not giving the estate of the value of the property as also the reserve price fixed therefor. The estimated value of the property is not given in the sale proclamation and no reserve price has been set up therein.
One of the conditions of the auction recites that the reserve price would be specified at the commencement of the auction by the auctioneers. It is said that such a reserve price was fixed at Rs. 25,000/- by the auctioneers. The evidence in this behalf may be taken to be true. The question is as to whether the omission to set out the reserve price in the advertisement published would constitute a material irregularity. Mr. Shetty seeking an affirmative answer to this question relies upon XXV Indian Appeals, 146. The ratio of that decision is expressed in these words:–
“Whatever material fact is stated in the proclamation (and the value of the property is a very material fact) must be considered as one of those things ‘which the Court considers material for the purchasers to know'”.
Here the sale proclamation gave no intimation of the estimated value and the reserve price. These omissions would certainly affect the class of persons seeking to acquire valuable properties. If particulars of these two essential counts were missing, the likely buyers would get the impression of some cheap property being auctioned. It is contended that the advertisement gave out the name of the Solicitors of defendant No. I under whose instructions the sale was to take place and that the particulars about the property could be had by any one desirous of acquiring the same. This may be an answer good enough for those conversant with the property as also plaintiff’s financial position. But the advertisement was meant for much a large class. DefendantNo. 1 was exercising an unusual albiet a statutorily recognised power vested in the mortgagee to bring the mortgaged property into sale without the information of the Court. She and her advisers were therefore under an obligation to be scrupulously fair. In omitting to give the estimated value and the reserve price in the sale proclamation itself, the first defendant defaulted in discharging basic obligations owed to the mortgagor.
10. Plaintiffs third grievance is in relation to the proclamation not specifying the exact amount of property tax due on the property. The recital in the sale proclamation
in this subject reads as follows:
“In this connection the purchaser shall be deemed to have notice of letter dated 20-6-1974 addressed by the Senior Legal Assistant to the Bombay Municipal Corporation to the Vendor’s Attorneys which was open for inspection by the purchaser.”
Mr. Shetty is right in submitting that far from revealing anything, these words conceal the true state of affairs and give the impression of the tax in arrears running up to a frightful sum. It was not enough to offer to the intending bidders an inspection of the notice received from the Bombay Municipal Corporation. The least that was expected of the mortgagee was to specify in the sale proclamation the amount demanded in the notice referred to in the sale proclamation. Of course the intending purchasers could have applied to the Vendor’s Attorneys for an inspection of the notice sent by the BMC. But this would be the position in respect of only such persons as had set their hearts upon purchasing the said property. It was not only this class but a wider one had to be attracted to the auction site. The purpose behind the advertisement was or should have been to attract to the site as many persons as possible so that the bidding would lead to the property being sold for the best possible price. The manner in which the sale proclamation referred to a notice of the BMC gave the impression of the property being seriously encumbered.
11. Plaintiff’s last grievance is in regard to the sale proclamation saying nothing about the rental income that the property was fetching. On this subject an attempt has been: made by defendants to show as if the intending bidders had queried the auctioneer on the subject and that they were told of the rental income not being in excess of Rs. 1000/- per month. But this would be to those who had raised such queries before or during the actual auction. It was necessary for the sale proclamation to take a reference to the rental income the property was fetching. If defendantNo. 1 did not havethe exact information on this subject she could have had a survey made through an independent agency to find out from the occupants the rent or occupation
charges they were paying or were liable to pay. The greater part of the property was in the occupation of the tenants and information as to the monthly income from the property was a vital statistic vis-a-vis the likely buyers.
12. The reply given by the defendants to the aforementioned omissions and errors is that the plaintiff had been invited by defendant No. 1’s notice to come to her Attorney’s office and inspect the terms and conditions for the holding of the auction. The notice given to the plaintiff did so recite. Plaintiff wilfully absented himself from responding to this offer. Would that mean that the lapses committed by the defendant No. 1 are condonable? The statutory position in regard to sales held under the power of the mortgagee to bring the mortgaged property to sale without the intervention of Court, is set out in S. 69 of the T.P. Act. Decided cases on the subject make it clear that unless there be fraud the only remedy of the mortgagor is by way of damages against the mortgagee who brings the property improperly to sale. If there is fraud then there may be a cause of action against the purchaser to have to the sale declared void or to have it set aside on the ground of fraud see AIR 1940 Mad 903. If the mortgagee exercises his or her power of sale bona fide for the purpose of realising his/ her debt and without the collusion with the purchaser, the Court will not interfere even though the sale be very disadvantageous, unless the price is so low as in itself to be evidence of fraud 1882, 20 Can Div 220. The power conferred upon the mortgagee under S. 69 has been termed “a drastic provision” in Batcha Saheb v. Nariman K. Irani, . Krishnaswarmi Nayudu J. who delivered the main judgment in the said case makes certain observations which bear reproduction here for the passage of time has done nothing to lessen the draconian nature of the measure. Said the learned Judge:–
“We have no hesitation in observing that S. 69 of T.P. Act is a drastic provision and places “bona fide” mortgagors who have a real defence to any action on the mortgage, in a very disadvantageous and helpless position. S. 69 empowers the mortgagee in whom the
power of sale without the intervention of the Court is expressly conferred by the terms of the mortgage deed and where the properties are situated in certain important towns including the city of Madras, to sell either giving 3 months’ time in writing and calling upon the mortgagors to pay the principal sum; and when once the sale has been effected in exercise of such a power S. 69(3) provides that the title of the purchaser shall not be impeached on the ground that no ease had arisen to authorise the sale or that due notice was not given, or that the power was otherwise improperly or irregularly exercised and the only remedy of a person who is demnified by an unauthorised or improper or irregular exercise of the power is to sue the mortgagee for damages.”
It will be argued that these observations are inappropriate to the facts of the present case for here the power of sale was exercised by the mortgagee after the mortgagor had defaulted on the condition imposed upon him by the City Civil Court to make a deposit in order to get an earlier attempted sale stayed. But the facts of the case do not indicate a mere impropriety on the part of defendant No. 1, Of course, defendants have taken the stand that they did not know each other prior to 6-7-1974. Direct evidence of fraud is rarely available. It will be the circumstances which will lead to an inference of fraud. The circumstances have to be convincingly established and the conclusion of fraud must be one which irresistibly flows from the established circumstances. Read in that light, the established position is-
i) that defendant No. 2 was doing all that possibly could be done and more to see that the plaintiff came to grief in the matter of occupation of the premises agreed to be let out to him under Exh. S-2;
ii) that sale proclamation falsely described the additional structure as being ‘incomplete’ and defendant No. 2 knew that the description was false in every sense of the word;
iii) the sale proclamation which had been advertised did not give out the reserve price as also the estimated price. This could not have
been an unintended omission. On so vital a matter, the omission has the effect of deterring the likely buyers;
iv) the exact sum payable by the purchaser towards unpaid property tax not having been specified, a normal reader of the advertisement would get the impression of the property
being seriously encumbered.
v) the advertisement did not give the mental income the property yielded and this would certainly affect the class of buyers who would consider the property as an investment.
Defendant No. 2 admits that he was following the advertisements with some attention. In other words he had an eye on the property. He was aware about the incorrectness of the sale proclamation vis-a-vis the incomplete nature of the additional structure. To his knowledge a sum of at least Rs. 1,15,000/- had gone into the putting up of this structure. Exh. S-2 stipulated the figure of Rs. 1600/- to be the three months rent for the premises agreed to be let out to defendant No. 2. Even if this figure be taken as representing the rent fetchable by the premises agreed to be let out to defendant No. 2, the total rent accruing on Satyapal Bhavan i.e. property in suit, would exceed Rs. 1000/- per month. Plaintiffs witness Sam Rao (P.W. 4) testifies that the value of the property had increased to Rs. 2,84,321.00 after the coming into existence of the newly added portions. Witness has been subjected to a somewhat strenuous cross-examination, but has remained unshaken. His report is at Exh. S-14. The land on which the property stands measures 920 sq. yards. There are near about 3 multi-storeyed structures in it. Good reasons have been given in Exh. S-14 to justify the price estimated by the witness. Taking Mr. Rao’s report as the basis, it would follow that the auction held on 6-7-1974 fetched only near about 25% of the real value. By any reckoning, the pittance at which the property was acquired is itself evidence of a fraud. It may be argued that the plaintiff had run up huge debts and had enjoyed the property for near about 14 years before it was sold. But judicial notice has to be taken of the fact that the prices of real estate are going up right since
the Commencement of the second world war and that the increase has been by leaps and bounds. Though the plaintiff purchased the property for Rs. 40,000/- in 1961 and though he enjoyed the rental income for near about 14 years, what cannot be lost sight of is the fact that he had also raised a great deal of money to improve the property and make it more lucrative. It was this indulgence coupled with the failure of defendant No. 2 to honour his commitment made under Exh. S-2, which led the plaint iff to fall into arrears vis-a-vis the property tax; The property tax did not exceed Rs. 20,000/-. The purchaser had of course to discharge this liability and that would take the total price to about Rs. 81,000/-. But this also was less than 35% of the property’s true value. When the defendant No. 2 bid at the auction he was privy to all that was concealed or unknown to the other bidders. In fact the greater portion of the bidders had been kept away because of the unattractive terms in which the property was depicted in the sale proclamation. It cannot be a mere coincidence that defendant No. 2 was the beneficiary of the deficiencies found in the sale proclamation. The inference that the two defendants were acting in tandem is clear.
13. Issues Nos. 1, 2 and 4 are found in the
affirmative and issue No. 4-A in the negative.
Having regard to the complex questions that
arose for consideration, it will be appropriate
to leave the parties to bear their own costs:
Hence the order:–
ORDER
Declared that the auction sale of the suit property held on 6-7-1974 by M/s. Gandhi & Co., Auctioneers under the instructions of defendant No. 1, is void and not binding upon the plaintiff. Defendants are hereby permanently injuncted against taking any further steps to complete the aforementioned sale.
Costs in suit to be borne as incurred.
14. Order accordingly.