PETITIONER: SMT. LAXMI DEVI Vs. RESPONDENT: SETHANI MUKAND KANWAR & TWO OTHERS DATE OF JUDGMENT: 09/10/1964 BENCH: GAJENDRAGADKAR, P.B. (CJ) BENCH: GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N. HIDAYATULLAH, M. MUDHOLKAR, J.R. CITATION: 1965 AIR 834 1965 SCR (1) 726 CITATOR INFO : R 1971 SC1201 (4) F 1976 SC 737 (14) ACT: Transfer of Property Act (4 of 1882), ss. 2(d), 5 and 100- Auction sale in execution of decree-If transfer of property- Charge-If enforceable against auction purchaser. Code of Civil Procedure (Act 5 of 1908), 0. 21, r. 90- Substantial injury-What is-Application to set aside auction sale-Averment regarding substantial injury-Necessity for. HEADNOTE: The 2nd respondent obtained a money decree against the 3rd respondent and in execution of that decree brought the suit property to sale and the appellant purchased it. Prior to the sale, however, there was a decree, in favour of the 1st respondent, for arrears of maintenance, and a charge in favour of the 1st respondent was declared over the proper- ties of the 3rd respondent, including the suit property. The 1st respondent therefore filed an application under 0. 21, r. 90 of the Code of Civil Procedure, 1908, to set aside the sale. The Executing Court dismissed the application holding that she had failed to show any substantial injury. The order was set aside by the High Court on appeal. In the appeal to the Supreme Court, it was contended that the application should be dismissed as : (i) there was no allegation of substantial injury in the application, and (ii) in fact the 1st respondent had not suffered any substantial injury. HELD : The appeal should be allowed. While s. 5 of the Transfer of Property Act, 1882 defines "transfer of property" only as a transfer effected by act of parties inter vivos, s. 2(d) provides that save as provided by Chapter IV of the Act, the provisions of the Act are not deemed to affect transfers in execution of decrees. Since the positive provision in s. 2(d) prevails over s. 5, Chapter IV and s. 100 in that Chapter would apply to auction sales in execution of decrees. Section 100 provides that a charge shall not be enforced against any property in the hands of a person to whom the property has been transferred for consideration and without notice of the charge. The result would be that as a consequence of the material irregularity in not referring to the charge in favour of the 1st respondent in the proclamation of sale under 0. 21, r. 66 of the Civil Procedure Code, 1908, the 1st respondent would not be able to enforce the charge against the suit property purchased by the appellant in auction sale. When injury is thus implicit in the irregularity it would be too technical to dismiss the application on the ground that there was no express averment of substantial injury as required by the proviso to 0. 21 r. 90(1) of the Code. But the application should however be dismissed, because the injury suffered by the 1st respondent was not in fact a substantial injury. There were other propertiesto the charge and they would be available to meet all her legitimateby way of maintenance. [731 C-D, G; 732 B; 733 E-G; 734 E-F; 735E-F, H] Nawal Kishore v. The Municipal Board, Agra, I.L.R. [1943] AU. 453 (F.B.), R. L. Nanadkeolvar v. Sultan Jahan, I.L.R. 31 Pat. 722 and 727 Munna Singh Allah Singh v. Wasti Ram Saraf and others, A.I.R. 1960 Punj. 296, approved. Arumilli Surayya v. Pinisetti Venkataramanamma and others, A.I.R. 1940 Mad. 701 and Creet v. Ganga Ram Gool Rai, I.L.R. [1937] 1 Cal. 203, overruled. JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 247 of 1962.
Appeal from the judgment and order dated July 29, 1960, of
the Rajasthan High Court in D. B. Civil Misc. Appeal No. 54
of 1957.
Bishan Narain, Amar Chand Inani and B. P. Maheshwari, for
the appellant.
B. D. Sharma, for respondent No. 1.
The Judgment of the Court was delivered by
Gajendragadkar C.J. This appeal arises out of an application
made by respondent No. 1, Smt. Mukand Kanwar, challenging
the validity of an auction sale held on the 14th May, 1954
in execution of a money decree passed in favour of Ratan Lal
Dani, Secretary, Hindu Charitable Aushdhalaya, Ajmer,
respondent No. 2, and against Umrao Mal, respondent No. 3.
The property sold at the auction sale is “old Daikhana” at
Ajmer. On the 24th June, 1950, Umrao Mal who was the owner
of the property, mortgaged it to the appellant Laxmi Devi.
Later, respondent No. 2 obtained a money decree against
respondent No. 3 for a large amount, and in execution of
this money decree he brought the property in question to
sale. Auction sale was accordingly held on the 14th May,
1954, and the appellant purchased the property subject to
the preexisting mortgage in her favour. The amount due
under the mortgage was Rs. 33,264 and as auction-purchaser,
the appellant paid Rs. 2,800 whereby she purchased the
equity of redemption vesting in respondent No. 3, the
judgment-debtor. It is the validity of this sale that is
challenged in the present proceedings.
Long before the mortgage was executed, respondent No. 3 had
executed in favour of his mother, respondent No. 1, a docu-
ment whereby her maintenance was guaranteed. This document
had created charge over certain properties belonging to
respondent No. 3. On the strength of this document,
respondent No. 1 sued- respondent No. 3 (civil suit No. 233
of 1952). In this suit, she claimed arrears of maintenance
and asked for a declaration that the properties specified in
the plaint, which were the
728
same as the properties covered by the previous agreement
between the parties, were subject to a charge for her
maintenance. The trial Court gave her a decree for arrears
of maintenance, but declined to make the declaration as to
charge claimed by her. This decree, was pronounced on the
31st July, 1952. Against this decree, respondent No. 1
preferred An appeal (No. 80 of 1952) to the Judicial
Commissioner, Ajmer. Her appeal succeeded and the charge
over the properties was declared in her favour. This
decision was pronounced on the 10th February, 1954.
After the auction sale was held on the 14th May, 1954, it
was challenged by two separate applications, one was made by
respondent No. 3, the judgment-debtor, on the 28th June,
1954, and the other by respondent No. 1 on the same date.
Both these applications were made under 0. 21 r. 90 of the
Code of Civil Procedure. The application made by respondent
No. 3 was dismissed on the 30th April, 1955, while the
application made by respondent No. 1 went to a trial. The
Executing Court which heard this application tried three
issues. The first issue was whether the sale had been
vitiated by any irregularity as required by 0. 21 r. 90.
The second was whether respondent No. 1 was a person whose
interests had been affected by the impugned sale; and the
third was whether the irregularity alleged by respondent No.
1 had caused substantial loss to her. All these issues were
decided in favour of respondent No. 1. In the result, the
impugned sale was set aside on the 4th May, 1955.
The appellant challenged the correctness of this decision
before the Judicial Commissioner, Ajmer. It was urged on
behalf of the appellant that the application made by
respondent No. 1 did not satisfy the requirements of 0. 21
r. 90 of the Code inasmuch as appropriate allegations had
not been made in the application showing that substantial
injury had been suffered by respondent No. 1 by reason of
the irregularities which, according to her, had vitiated the
said sale. This plea was rejected by -the Judicial
Commissioner. It was then urged that respondent No. 1 was
not competent to make the said application. The Judicial
Commissioner did not accept even this plea. The last
argument which was pressed before the Judicial Commissioner
was that the finding recorded by the Executing Court that
respondent No. 1 had suffered substantial injury was not
justified, and that in fact, the appellant had no
opportunity to lead her evidence on that issue, because all
the three issues on which the Executing Court had made its
findings had been framed by it at a very late stage of the
proceedings.
729
This plea was upheld by the Judicial Commissioner, and so,
he set aside the finding of the Executing Court on that
issue and sent the case back for disposal in accordance with
law, with a direction that the issue as to substantial
injury should be tried afresh. This order was pronounced on
the 26th August, 1955.
After remand, the Executing Court considered the issue as to
substantial injury and held that respondent No. 1 had failed
to show any substantial injury. As a result of this
finding, it ordered that her application under 0. 21 r. 90
should be dismissed, and the sale should be confirmed. This
order was pronounced on the 27th April, 1957.
Aggrieved by this order, respondent No. 1 preferred an
appeal, and since the High, Court of Judicature at Rajasthan
had then come into existence, her appeal was heard by the
said High Court. The High Court has held that the Executing
Court was in error in coming to the conclusion that
respondent No. 1 had not proved substantial injury. The
contentions raised by the appellant in support of the
ultimate decision reached by the Executing Court were
rejected by the High Court, and as a result, the application
made by respondent No. 1 was allowed and the impugned sale
set aside. This appellate order was pronounced on the 29th
July, 1960. It is against this order that the appellant
has come to this Court with a certificate granted by the
said High Court. Thus, it willbe noticed that the sale
which took place on the 14h May, 1954 still remains to be
confirmed.
On behalf of the appellant, Mr. Bhasin Narain has conceded
that as a person holding a charge over the property sold at
the auction sale, respondent No. 1 can rely on s. 100 of the
Transfer of Property Act and as such was competent to make
the application under 0. 21 r. 90. Order 21, r. 90(1)
provides, inter alia. that where any immovable property has
been sold in execution of a decree, any person whose
interests are affected by the sale, may apply to the Court
to set aside the sale on the ground of a material
irregularity or fraud in publishing or conducting it. There
is a proviso to this rule which is relevant for our purpose.
This proviso lays down that no sale shall be set aside on
the ground of irregularity or fraud unless upon the facts
proved, the Court is satisfied that the applicant has
sustained substantial injury by reason of such irregularity
or fraud. While conceding that respondent No. 1 was
entitled to make an application as a person whose interests
were affected by the impugned sale, Mr. Bishan Narain argues
that if the application made by her is properly
730
construed, it would appear that the material allegations of
fact which must be made by the applicant invoking 0. 21 r.
90(1), have not been made; and so, the said application
should be. dismissed on that ground alone. On the merits,
he contends that there is no evidence on which a finding can
be made in favour of respondent No. 1 that she has suffered
substantial injury by reason of any irregularity committed
in the conduct of the sale.
The application made by respondent No. 1 is no doubt
somewhat defective, because it does not, in terms, allege
that as a result of the irregularity alleged in the
application, respondent No. 1 has suffered substantial
injury. The application avers that before the impugned
auction sale was held, a proclamation had been issued, but
the said proclamation did not refer to the charge in favour
of respondent No. 1 which had already been recognised by
decree in a suit between respondent No. 1 and respondent No.
3 and that naturally attracts the provisions of 0. 21 r. 66
of the Code. Order 21 r. 66(2) (e) requires that the
proclamation shall be drawn up and shall specify as fairly
and accurately as possible any incumbrance to which the
property sought to be sold is liable. The failure to
mention the charge in favour of respondent No. 1 would,
therefore, constitute an irregularity within the meaning of
0. 21 r. 90(1). This position is also not in dispute.
The contention, however, is that the application made by
respondent No. 1 does not show what injury she has suffered
as a result of the said irregularity, and that, it is
argued, constitutes a serious infirmity in the application
which would entail its dismissal. On the other hand, Mr.
Sharma for respondent No. 1 has relied on the fact that the
auction sale would virtually wipe out or extinguish the
rights which have accrued to respondent No. 1 by virtue of
the charge declared by a decree in her favour, and he has
suggested that the legal consequence flowing from the fact
that the auction sale has been held without notice of the
charge in favour of respondent No. 1 itself constitutes
substantial injury to the interests of respondent No. 1.
This argument is based on the latter part of S. 100 of the
Transfer of Property Act. We will presently refer, to this
provision. At this stage, it is enough to state that if Mr.
Sharma is right in contending that an auction sale of
immovable property which has followed the proclamation
issued under 0. 21 r. 66 in which no reference to a charge
is made, materially affects the rights of the charge-holder,
some injury would automatically flow from the irregularity
alleged in the application filed by respondent No. 1, and
so, it would not be
731
appropriate to hold that the said application should be
dismissed on the ground that no substantial injury has been
alleged as required by the proviso to 0. 21 r. 90(1).
It is true that before an application made under 0. 21 r..90
can succeed, the applicant has to show that the impugned
sale was, vitiated by a material irregularity or fraud in
publishing or conducting it; and as required by the proviso,
it is also necessary that he should show that in consequence
of the said irregularity or fraud he had sustained
substantial injury. Therefore, Mr. Bishan Narain is right
when he contends that the application made by respondent No.
1 ought to contain an allegation in regard to the material
irregularity as well as an allegation-as to substantial
injury. But, in our opinion, in a case like the present,
where substantial injury is alleged to be implicit in the
material irregularity set out in the application, it would
be, too technical to hold that the application should be
dismissed on the preliminary ground that no specific or
express averment has been made as to substantial injury
suffered by respondent No. 1.
Now, in dealing with the question as to whether respondent
No. 1 can be said to have alleged that she has suffered
substantial injury by reason of the fact that she has
alleged a material irregularity which, in law, necessarily
leads to substantial injury, it is necessary to consider the
question as to whether the latter part of s. 100 of the
Transfer of Property Act applies to the present case.
Section 100 deals with charges, and it provides when a
person can be said to have a charge on the property; and
adds that all the provisions hereinbefore contained which
apply to a simple mortgage shall, so far as may be, apply to
such charge. It is common ground that respondent No. 1 can
claim to be charge-holder as defined by s. 100.
That takes us to the latter part of s. 100. This part
provides, inter alia, that save as otherwise expressly
provided by any law for the time being in force, no charge
shall be enforced against any property in the hands of a
person to whom such property has been transferred for
consideration and without notice of the charge. Mr. Sharma
contends that the auction-purchaser holds the property as a
result of the auction sale, and in that sense, the property
must be held to have been transferred to him. He adds that
the charge was not notified in the proclamation, and so, the
auction purchaser has no notice of the charge, and the sale
is undoubtedly supported by consideration. In other words,
the case of the appellant directly falls under this part of
s. 100, and so, respondent
732
No. 1 would not be able to enforce her charge against the
property purchased by the appellant at the auction sale.
That, according to him, constitutes substantial injury.
This argument raises the question as to whether the relevant
provision of s. 100 takes in the cases of auction purchase
at all. For answering this question, it is necessary to
refer to two other provisions of the Transfer of Property
Act. Section 2(d) provides that nothing herein contained
shall be deemed to affect, save as provided by S. 57 and
Chapter IV of this Act, any transfer by operation of law or
by, or in execution of, a decree or order of a Court of
competent jurisdiction. The effect of this provision is
that the provisions of the Transfer of Property Act will not
apply to any transfer by operation of law or by, or in
execution of, a decree or order of a Court of competent
jurisdiction. This provision is clear and emphatic. It
says that nothing in the Transfer of Property Act will apply
to the transfers just indicated; and that would naturally
take in the whole of S. 100. But there is an exception made
to this provision by S. 2(d) itself by the saving clause,
and this exception covers cases provided by s. 57 and
Chapter IV. Chapter IV deals with mortgages of immovable
property and charges.. and includes sections 58 to 104.
Section 100, therefore, falls within Chapter IV; and, the
result of the saving clause is that s. 100 would apply to
transfers by operation of law. There is, therefore, no
doubt that if the question as to the applicability of the
latter part of S. 100 to cases of auction sales had to be
determined only by reference to S. 2(d), the answer would
clearly be in favour of such applicability.
It is true that when S. 2(d) was originally enacted, the
latter part of S. 100 was not included in the Transfer of
Property Act; this was added in 1929 by S. 50 of Act 20 of
1929. That, however, would make no difference to the
interpretation of the relevant clause in s. 2(d). The fact
that the saving clause included in s. 2(d) as it was
originally enacted, could not have taken in the latter part
of s. 100, makes no difference to its construction, because
as soon as the latter provision was added to S. 100, it
became a part of the provisions contained in Chapter IV and
automatically fell within the terms of the saving clause.
If the legislature had intended that the provision added to
s. 100 in 1929 should not fall within the saving clause, an
appropriate provision would have been made by amending S.
2(d) in that behalf. Therefore, s. 2(d) by itself clearly
supports Mr. Sharma’s contention that the appellant who is
an auction-purchaser would be able to claim
733
immunity against the enforcement of the charge in favour of
respondent No. 1 by virtue of the provisions contained in
the latter part of s. 100.
This position, however, has become somewhat complicated by
reason of the provisions contained in s. 5 of the Transfer
of Property Act. Section 5 provides, inter aria, that in
the following sections “transfer of property” means an act
by which a living person conveys property, in present or in
future, to one or more other living persons. In other
words, in terms, the definition of the expression “transfer
of property” as used in all the sections of the Transfer of
Property Act is intended to take in transfers effected by
acts of parties inter vivos, and an auction-sale clearly is
not such an act. Section 5 would, therefore, appear to
exclude auction sales from the purview of s. 100 altogether.
This result would appear to be consistent with the provision
in the preamble of the Act which says that the Transfer of
Property Act was enacted because it was thought expedient to
define and amend certain parts of the law relating to the
transfer of property by act of parties. That is the
position which emerges from the reading of s. 5 coupled with
the preamble; and that naturally raises the question as to
how to reconcile these two inconsistent positions.
In our opinion, the positive provision contained in s. 2(d)
must prevail over the definition of “transfer of property”
prescribed by s. 5. No doubt, the purpose of the definition
is to indicate the class of transfers to which the
provisions of the Transfer of Property Act are intended to
be applied; but a definition of this kind cannot over-ride
the clear and positive direction contained in the specific
words used by s. 2 (d). As we have already seen, the result
of the saving clause enacted by s. 2(d) is to emphasise the
fact that the provisions of s. 57 and those contained in
Chapter IV must apply to transfer by operation of law. Such
a positive provision cannot be made to yield to what may
appear to be the effect of the, definition prescribed by s.
5, and so, we are inclined to hold that notwithstanding the
definition prescribed by s. 5, the latter part of s. 100
must be deemed to include auction sales.
This question has been considered by our High Courts on
several occasions, and, on the whole, the majority view
appears to be in favour of the conclusion which we have just
indicated. In Nawal Kishore v. The Municipal Board, Agra,
(1), this question was referred to a Full Bench of the
Allahabad High Court, because there appeared to be a
conflict between two previous decisions of
(1)I.L.R. [1943] All. 453.
734
Division Benches of the said High Court on this point.
These two decisions were Rai Indra Narain v. Muhammed
Ismail(1), and Municipal Board, Kanpore v. Roop Chand
Jain(2). In the first decision, the Allahabad High Court
had taken the view that auction sales do not fall within the
purview of the latter part of s. 100, while in the latter
case, a contrary view had been accepted. The Full Bench
preferred that latter view to the former. Since this Full
Bench decision was pronounced in the Allahabad High Court,
auction-purchasers have been consistently held to fall under
the latter part of S. 100. It has been held by the Full
Bench that when the relevant clause in the latter part of S.
100 speaks of any property in the hands of person to whom
such property has been transferred, the concept of transfer
is wide enough to include transfers effected by acts of
parties as well as transfers effected by operation of law.
The same view has been accepted by the Patna High Court in
R. L. Nanadkeolvar v. Sultan Jehan(3), and by the Punjab
High Court in Manna Singh Al1ah Singh v. Wasti Ram Saraf and
Others(1). The decision of the Madras High Court in
Arumilli Surayya v. Pinisetti Venkataramanamma and Ors.(5)
and the decision of the Calcutta High Court in Creet v.
Ganga Ram Gool Raj,(1) which appear to support the contrary
view do not, in our opinion, correctly represent the true
legal position in this matter. Therefore, we must deal with
the present appeal on the basis that as a result of the
failure of the proclamation to refer to the charge in favour
of respondent No. 1, she would not be able to enforce her
charge against the property purchased by the appellant by
auction sale; and that means that the impugned sale has been
conducted in a materially irregular manner and as a conse-
quence of the said irregularity, some injury has resulted to
respondent No. 1.
That raises the question as to whether the said injury can
be said to amount to substantial injury within the meaning
of proviso to 0. 21 r. 90(1); and this inevitably would be a
question of fact. The High Court appears to have held that
as soon as it is shown that the charge would become
unenforceable against the appellant auction-purchaser by
virtue of the provisions of S. 100, it follows as a matter
of law that respondent No. 1 has suffered substantial
injury, and so, the impugned sale must be set aside. We are
not prepared to accept this view. We do not think it can be
reason-
(1) I.L.R. [1939] All. 885.
(2) I.L.R. [1940] All. 669.
(3) I.L.R. (1952) 31 Pat. 722.
(4) A.I.R. 1960. Punj. 296.
(5) A.I.R. .1940 Mad. 701.
(6) I.L.R. [1937] 1 Cal. 203.
735
ably assumed as a matter of law that in every case where a
charge has become unenforceable against an auction-purchaser
by reason of the fact that it was not shown in the
proclamation preceding the auction sale, it follows that the
charge-holder has suffered substantial injury. Whether or
not the injury suffered by the charge-holder is substantial,
must depend upon several relevant facts. How many
properties have been sold at the auction sale; how many out
of them were the subject-matter of the charge; what is the
extent of the claim which the charge-holder can legitimately
expect to enforce against the properties charged, these and
other relevant matters must be considered before deciding
whether or not the injury suffered by the charge-holder is
substantial. It is from this point of view that the
material facts in the present case must now be considered.
Properties which are the subject-matter of the charge are
five in number. Out of these properties, it is property No.
3 alone which has been sold at auction sale. It appears
that properties Nos. 1 and 2 have already ceased to be
available to the charge holder, and so, the consideration of
the question as to whether the injury suffered by respondent
No. 1 is substantial, must depend upon the relative values
of properties Nos. 4 and 6. This question has been
considered by the Executing Court when the matter was sent
back to that Court by the Judicial Commissioner and the
Executing Court has made a definite finding that the injury
suffered by respondent No. 1 cannot be said to be
substantial. According to it, properties Nos. 4 and 6 which
would be available to respondent No. 1 would be enough to
meet all her legitimate claims against the judgment-debtor,
respondent No. 3. The value of Property No. 4 is Rs.
1,18,967 whereas the value of property No. 6 is Rs.
1,25,464. The Executing Court has taken into account the
amount which respondent No. 1 is entitled to claim by way of
maintenance from respondent No. 3, has also borne in mind
the fact that respondent No. 1 is an old lady past 70 years
of age and has come to the conclusion that, on the whole,
the sale of property No. 3 to the auction-purchaser cannot
be said to have caused substantial injury to her. In our
opinion, it is difficult to differ from this conclusion; and
so, it follows that though respondent No. 1 has been able,
to show that her charge could not be enforced against the
appellant, it is not shown that this circumstance has caused
substantial injury to her. The result, therefore, is that
the requirement of the proviso to 0. 21 r. 90 of the Code is
not satisfied in the present case.
736
We ought to add that pending the appeal before this Court,
respondent No. 3, Umrao Mal has died leaving behind him his
mother respondent No. 1 and his widow, and the estate of
Umrao Mal has devolved on these two widows; and so,
respondent No. 1 has now become the owner of part of the
properties against which she would otherwise have been
entitled to proceed in execution of tier maintenance decree.
The result is, the appeal is allowed, the order passed by
the
High Court is set aside and the application made by
respondent No. 1 under 0. 21 r. 90 is dismissed. There
would be no order as to costs throughout.
Appeal allowed.
737