{"id":133308,"date":"1974-03-20T00:00:00","date_gmt":"1974-03-19T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/kayjay-industries-p-ltd-vs-asnew-drums-p-ltd-ors-on-20-march-1974"},"modified":"2016-10-26T14:35:00","modified_gmt":"2016-10-26T09:05:00","slug":"kayjay-industries-p-ltd-vs-asnew-drums-p-ltd-ors-on-20-march-1974","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/kayjay-industries-p-ltd-vs-asnew-drums-p-ltd-ors-on-20-march-1974","title":{"rendered":"Kayjay Industries (P) Ltd vs Asnew Drums (P) Ltd. & Ors on 20 March, 1974"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Kayjay Industries (P) Ltd vs Asnew Drums (P) Ltd. & Ors on 20 March, 1974<\/div>\n
Equivalent citations: 1974 AIR 1331, \t\t 1974 SCR (3) 678<\/div>\n
Author: V Krishnaiyer<\/div>\n
Bench: Krishnaiyer, V.R.<\/div>\n
           PETITIONER:\nKAYJAY INDUSTRIES (P) LTD.\n\n\tVs.\n\nRESPONDENT:\nASNEW DRUMS (P) LTD. & ORS.\n\nDATE OF JUDGMENT20\/03\/1974\n\nBENCH:\nKRISHNAIYER, V.R.\nBENCH:\nKRISHNAIYER, V.R.\nPALEKAR, D.G.\nBHAGWATI, P.N.\n\nCITATION:\n 1974 AIR 1331\t\t  1974 SCR  (3) 678\n 1974 SCC  (2) 213\n CITATOR INFO :\n R\t    1984 SC1471\t (26,54)\n\n\nACT:\nCode  Of  Civil Procedure (Act 5 of 1908),  O.21,  r.90\t and\nState  Financial  Corporation Act, 1951,  Sec.\t31--Material\nirregularity  in conduct of sale and substantial  injury  to\njudgment--debtor, what are.\n\n\n\nHEADNOTE:\nThe  State Finance Corporation lent a sum of Rs. 10 lacs  to\nthe  first respondent on the security of a mortgage  of\t its\nland etc.  The first respondent having failed to repay,\t the\nCorporation  applied to the District Court under  the  State\nFinancial  Corporation Act, 1951, for recovering the  amount\nby  attachment\tand sale of the mortgaged  properties.\t The\nsale  proclamation was settled after notice to the  parties,\nand   after  several  adjournments,  caused  by\t the   first\nrespondent's dilatory tactics, the sale was held.  The court\nfelt  that  it was better to have some valuation  report  to\nserve  as  a basis and to guide it in deciding\twhether\t the\noffer  of  Rs.\t11,10,000 was  grossly\tunjust.\t  The  first\nrespondent  did\t not  have the\tproperties  valued  but\t the\n(Corporation  had  the properties valued and  the  mortgaged\nproperties were valued at about Rs. 17 lacs.  Thereafter  an\nauction\t was  again held and the appellant was\tthe  highest\nbidder.\t  His offer was less by about Rs. 40,000\/- than\t the\namount on the previous occasion.  He however agreed to raise\nthe  offer  to Rs. 11,50,000\/- and the court  concluded\t the\nsale at that amount.  The first respondent applied under  0.\n21,  r.\t 90,  C.P.C.  for setting aside\t the  sale  but\t the\napplication  was dismissed.  His appeal was allowed  by\t the\nHigh Court.\nAllowing the appeal to this Court.\nHELD  : Under s. 32(8) of the Act, the Civil Procedure\tCode\nis attracted to proceedings for the realisation of the\tdues\nof the Corporation.  Therefore, 0. 21, r. 90 ,was applicable\nand if there was any material irregularity in the and if  it\ncaused a substantial injury to the judgment-debtor,  ,aside.\nWhere  a court mechanically conducts the sale not  bothering\nconduct\t of  the sale the sale could be set to\tsee  if\t the\noffer is too low and a better price could have been obtained\nand if in factthe price is substantially inadequate,  there\nis both irregularity and injury. But atthe  same  time\tthe\ncourt should not go on adjourning the sale till a  goodprice\nisgot  as  otherwise,  decreeholders can  never\t get  the\nproperty  of  judgment debtors sold.  There is\talways\tcon-\nsiderable difference between the court sale price and market\nprice.\tA court sale '.is a forced sale, and notwithstanding\nthe competitive element of a public auction, the best  price\nis not always forthcoming.  A valuer's report though good as\na  basis,  is not as good as an actual offer and  there\t are\nbound  to  be  variations  within  limits  between  such  an\nestimate,  however  careful, and the real bids\tby  seasoned\nbusiness:man.\tMere inadequacy of price cannot\t demolish  a\ncourt  sale.   Further, if court ,sales are  too  frequently\nadjourned  with\t a view to obtaining a\tstill  higher  price\nprospective  bidders  will  lose faith in  the\tactual\tsale\ntaking place and may not attend at the auction'Nor is  it\nright  to judge the unfairness of the price in the light  of\nthe :subsequentevents\twhich  were  not   within   the\nknowledge of the executing court at the time ofthe  sale.\nWhat  is  expected  of the court is  to\t make  a  realisitic\nappraisals  of\tthe  factors  in  a  pragmatic\tway  and  if\nsatisfied  that\t in  the  given\t circumstances\tthe  bid  is\nacceptable  it\tshould\tconclude the sale.   The  court\t may\nconsider  the  fair  value  of\tthe  property,\tthe  general\neconomic  trends, the large sum required to be\tproduced  by\nthe  bidder, the formation of a syndicate, the\tfutility  of\npostponements and the possibility of litigation and  several\nother  factors depending on the facts of each case.  If\t the\ncourt\thas  fairly  applied  its  mind\t to   the   relevant\nconsiderations\twhile  accepting  the final bid\t it  is\t not\nnecessary to give a speaking order nor can its order be exa-\nmined meticulously. [682 A-E; 683C; 684 A-F]\nIn  the\t present case, the executing  court  had  admittedly\ndeclined  to  affirm  the  highest  bids  on  the   previous\noccasions  in  its anxiety to secure a better  price.\tWell\nknown industrialists in the public and private sectors\tknew\nabout  it  and bid at the auction.  All\t interested  parties\nwere present at the auction and no one raised any  objection\nregarding  the conduct of the sale.  The  Corporation  could\nnot  be\t put  off indefinitely in  recovering  its  dues  on\nbaseless  expectations\tand  distant  prospects.  The\tsale\nproceedings  had  been\tPending\t too  long  and\t the   first\nrespondent  would  not,\t even when  given  the\topportunity,\nproduce\t buyers\t by private negotiation.  He ,did  not\teven\nproduce a valuer's report.  He by his litigious attitude has\ncontributed\n679\nto  possible  buyers  being afraid  of\thurdles\t thereafter.\nTherefore,  it\tmust be held that the  executing  court\t had\ncommitted  no  material irregularity in the conduct  of\t the\nsale in accepting the highest offer of the appellant and  in\nconcluding  the\t sale at Rs. 11,50,000\/- though\t the  market\nvalue may be over Rs. 17 lacs. [684G-685B]\nNayalkha  and  Sons  v.\t Ramanya Das,<\/a>  [1970]  3  S.C.R.  1,\nreferred to.\n(2)  The appeal is not against the approval of the  sale  by\nthe  executing court but against the High Court's  order  in\nappeal\tagainst\t an order refusing to set  aside  the  sale,\nunder  0.  21,\tr.  90.\t  Therefore,  the  question  of\t the\nappellate  court's power to review the discretion  exercised\nby the trial court does not arise. [685F]\nWard v. James, [1966] 1 Q.B. 273 at 293, referred to.\n[It is odd that financial Organisation in the public  sector\nshould\thave  readily  lent huge amount of Rs  10  lacs\t and\nstruggled  for\tseveral years to recoup\t the  amount.\tThis\naspect of the matter should receive the anxious attention of\nthe  concerned\tauthorities  so that  public  money  may  be\nhandled\t by public servants with public\t responsibility\t and\nfor public benefit. [685D-E]\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  2150  of
\n1972.\n<\/p>\n
From  the judgment and decree dated the 7th  \/8th  February,
\n1972 of the Bombay High Court in Appeal No. 152 of 1970.
\nSom  Nath Chatterjee , S. N. Saraf, Pramod Soroff and H.  K.
\nPuri, for the appellant.\n<\/p>\n
Hardayal Hardy, Suresh Parekh and B. Dutta, for respondents
\n1  and 2, M. N. Phadke, Rameshwar Nath and  Rajinder  Narian
\nfor respondents. 4 & 5.\n<\/p>\n
The Judgment of the Court was delivered by
\nKRISHNA\t  IYER,\t J.   The  appellant  in  this\tappeal,\t  by
\ncertificate is the auction purchaser whose sale has been set
\naside  by the High Court in reversal of the decision of\t the
\nExecuting  Court  which\t dismissed the\tapplication  of\t the
\njudgment  debtor (first respondent herein) under  Order\t XXI
\nrule  90,  C.  P. C. Although many  points  were  urged\t and
\nconsiderable time was taken in the arguments, attention\t was
\nprincipally focussed on one issue which we will mainly\tdeal
\nwith.  Of course, a brief but sufficient reference will also
\nbe made to the other points.\n<\/p>\n
The  Maharashtra State Finance Corporation (for\t short\t“the
\nCorporation”) plays the role of decree-holder in the present
\ncase.\tIt  had\t lent a sum of Rs. 10  lakhs  to  the  first
\nrespondent,  which is a drum manufacturing  private  limited
\ncompany, in May 1961, on the security by way of mortgage  of
\nits  land, factory building, plant and machinery situate  at
\nKalwa,District\tThana.\tRespondents 2 and 3  had  guaranteed
\nthe  repayment of the said loan.  It is also seen  from\t the
\nfacts\tthat  in  or  about  1964  the\tDena  Bank,  now   a
\nnationalised   institution   but  not  a  party\t  to   these
\nproceedings had also advanced to the first respondent a\t sum
\nof Rs. 20 lakhs presumably on the security of its plant\t and
\nmachinery  and raw material stocks, although this aspect  is
\nnot  quite  clear from the record and is  not  perhaps\tvery
\nrelevant  for  the disposal of this appeal.  We\t would\tonly
\nlike  to make it clear that the rights and remedies  of\t the
\nsaid  Bank, whatever they are, against the appellant of\t the
\nother respondents, are not dealt with in this appeal.\n<\/p>\n
680<\/span><\/p>\n
The  first  respondent\twhich  had taken  the  loan  for  an
\nindustrial  purpose defaulted in making repayment and  so  a
\nnotice\twas  issued  to it by  the  fourth  respondent,\t the
\nCorporation, under s. 30 of the State Financial\t Corporation
\nAct,  1951  (hereinafter referred to as the  Act)  demanding
\nprompt\tdischarge of the liability under the-  mortgage\t and
\nindicating  that  in default of\t payment  legal\t proceedings
\nunder  s.  31  of  the Act to  realise\tthe  dues  would  be
\nundertaken.   No fruitful response was forthcoming  and\t the
\nCorporation,  therefore, made an application,  Miscellaneous
\nApplication  No. 75 of 1965, in the District  Court  against
\nrespondents  1, 2 and 3, under s. 31 of the Act, seeking  to
\nlevy by attachment and sale of the properties covered by the
\nmortgage,   the\t amounts  due  to  it.\t The  total   amount
\nrecoverable was stated to be a little over Rs. 16 lakhs, but
\nwe are not concerned with the figure as it is not in dispute
\nbefore us.\n<\/p>\n
In  June  1966\tthe  Corporation moved\tthe  Court  for\t the
\nappointment  of a receiver to take charge of the  properties
\nwhich  had been by then attached and to sell them  by  court
\nauction.  A receiver was duly appointed, who entered on\t his
\nduties\t and  took  steps  for\tconducting  the\t  sale.\t   A
\nproclamation  of  sale\twas  settled  after  notice  to\t the
\nparties, on December 5,1967, and the sale was fixed to\ttake
\nplace  on  January 8, 1968.  However,the sale did  not\ttake
\nplace that day and the happenings thereafter culminating  in
\nthe sale on September 3, 1969, wherein the present appellant
\nwas  the  highest bidder, and consequent purchase,  are\t the
\nsubject matter of the present appeal.\n<\/p>\n
We  will take a close-up of certain pivotal events on  which
\nthe  fate of the appeal depends.  With the consent  of\tboth
\nparties,  the Court decided to sell in two lots,  presumably
\nbecause that would fetch a better price, one lot being\tmade
\nup  of the land and what was permanently fixed thereon,\t and
\nthe  other the plant and machinery.  There is no doubt\tthat
\nthe  items sold are of considerable value, land in that\t in-
\ndustrial  area\tescalating  in price  as  time\tpassed,\t the
\nmachinery  being  imported and costly and the  industry\t for
\nwhich  they were needed being of growing importance for\t the
\ncountry.   Even so, let us look at the panorama of  forensic
\nevents\tas  they unfolded from stage to stage.\t On  january
\n11,1966\t the  order for sale was made.\tLater  the  judgment
\ndebtor\tapplied\t for time to negotiate a  private  sale\t but
\nfailed to find a suitable buyer. On January 12, 1967,  the
\nCorporation applied for the sale of theentire  unit.\tThe
\nsale was fixed to take place on January 8, 1968when,   at
\nthe instance of the Dena Bank, it was Postponed on the\tplea
\nthat.  the  machinery not fixed to the earth  had  not\tbeen
\nshown  separately.   In August, 1968,  the  judgment  debtor
\nagain  prayed for postponement to enable him to raise  funds
\nto  discharge  the  debt privately and\tthe  District  Judge
\nacceded\t to the request conditionally.\tThe prayer was\tmade
\non August 7, 1968 and the Court directed the judgment debtor
\nto  deposit  Rs.  1-1\/2\t lakhs\tby  October,  15,  1968\t and
\npostponed  the\tsale  till the last week  of  October.\t The
\njudgment debtor could not deposit the preliminary sum by the
\ntime fixed.  Even so, the sale did not take place on October
\n29,  1968  since  the Corporation and the  Bank\t wanted\t the
\ndescription   of  the  machinery  to  be  inserted  in\t the
\nproclamation of sale.\n<\/p>\n
681<\/span><\/p>\n
Early in December the judgment debtor applied that the\tsale
\nshould be of the whole property in one lot, which was turned
\ndown  by the Court on December, 12, 1968 since the  sale  in
\ntwo  lots was a course already consented to by him  and\t the
\nmove  was  purely dilatory.   However,\tthe  judgment-debtor
\nmoved  the  High Court and obtained stay of  sale,  and\t the
\nappeal\twas withdrawn by him on February 26, 1969  whereupon
\nhe filed a suit for declaration that the order for sale\t was
\nwithout\t jurisdiction.\t When  he  found  that\tan   interim
\ninjunction against holding the sale was refused, he withdrew
\nthe  suit on April 16, 1969.  Naturally, the sale fixed\t for
\nMay  1,\t 1969  could  not take place  for  want\t of  bidders
\nalthough  a  neighbouring industrial concern,  Mukund  Iron,
\ngave  an offer of Rs. 2.20 lakhs for the land and  buildings
\nonly.  The next attempt was to hold the sale on May 16, 1969
\nand the highest bids then offered were Rs. 2 lakhs for\tland
\nand  building and Rs. 80,000\/-for the machinery.  The  Court
\nconsidered  the\t bids too low and preferred to\tadjourn\t the
\nsale.  This circumstance certainly discloses that the  Court
\nwas  alert  to see that a fair price was obtained,  and\t the
\nfact that it was a court auction was not allowed to  operate
\nto  the detriment of the judgment debtor.  A sale was  again
\nattempted  on June 5, 1969 when the highest offers for\tland
\nand  building  went up to Rs. 2.60 lakhs and  for  machinery
\nRs.2.  10 lakhs.  The judge endeavoured to secure  a  better
\nprice  since  the Corporation pleaded that the\toffers\twere
\ninadequate.   In the circumstances, the judge postponed\t the
\nsale.\n<\/p>\n
We now come closer to the final.  On August 28, 1969 a\tsale
\nwas held and the highest bids for land and buildings went up
\nto Rs. 5.70 lakhs and for machinery 5.40 lakhs.\t It must  be
\nnoted that at this time the Judge, who was then holding\t the
\nsale, was not the presiding officer but another judge, since
\nthe  former was on leave. it was felt by the latter that  it
\nwould be better to have some valuation report to serve as  a
\nbasis and to guide the court in concluding whether a grossly
\nunjust\toffer was being fobbed off on it.  The Receiver\t who
\nwas  in\t charge requested both the judgment debtor  and\t the
\nCorporation to get valuation reports from competent  valuers
\nand  the sale itself stood adjourned.  The  judgment  debtor
\ndid  not  bother  to  have the\tProperties  valued  but\t the
\nCorporation secured the services of a competent valuer, M\/s.
\nCorona\tElectricals  of Bombay, who estimated the  land\t and
\nbuildings to be worth Rs. 10,46,096\/- and the machinery\t Rs.
\n7,02,000\/-.   The  total  value\t thus  arrived\tat  was\t Rs.
\n17,48,096\/-.   In the light of various facts, including\t the
\nabsence\t of  an\t alternative  evaluation  report  from\t the
\njudgment  debtor’s side, these Corona figures  were  rightly
\ntreated\t by both courts as tentatively sound.\tThe  auction
\nheld  on  September 3, 1969, however,  fetched\tthe  highest
\noffer  for  the\t two  lots of  only  Rs.  5,65,000\/-and\t Rs,
\n5,00,000\/-  respectively,  in the latter case  Rs.  40,000\/-
\nless  than  on the previous  occasion.\t After\tconsiderable
\npersuasion  by the Judge, the appellant agreed to raise\t the
\noffer  for  both  lots\ttogether to  a\tgross  sum  of-\t Rs.
\n11,50,000\/-  and  making an intelligent guess on  the  given
\ncircumstances  the  Court approved the sale,  which  is\t now
\nbeing  challenged in these proceedings as an insensible\t and
\ninjurious  sanctioning\tof the sale,  ignoring\tthe  hopeful
\nprospects  of higher prices had the auction  been  adjourned
\nand better and fuller publicity given.\n<\/p>\n
682<\/span><\/p>\n
Certain salient facts may be highlighted in this context.  A
\ncourt  sale  is\t a forced  sale\t ‘and,\tnotwithstanding\t the
\ncompetitive  element of a public auction, the best price  is
\nnot often forthcoming.\tThe judge must make a certain margin
\nfor this factor.  A valuer’s report, good as a basis, is not
\nas  good  as an actual offer and  variations  within  limits
\nbetween such an estimate, however careful, and real bids  by
\nseasoned businessmen before the auctioneer are quite on\t the
\ncards.\t More so, when the subject-matter is  a\t specialised
\nindustrial plant, which has been out of commission for a few
\nyears, as in this case, and buyers for cash are bound to  be
\nlimited.  The brooding fear of something out of the imported
\nmachinery  going  out of gear, the  vague  apprehensions  of
\npossible claims by,the Dena Bank which had a huge claim\t and
\nwas  not a party, and the litigious sequel at the  judgment-
\ndebtor’s   instance,  have  ‘scare’  value   in\t  inhibiting
\nintending  buyers from coming forward with the best  offers.
\nBusinessmen  make  uncanny calculations\t before\t striking  a
\nbargain\t and  that  circumstance  must\tenter  the  judicial
\nverdict before deciding whether a better price could be\t had
\nby  a  postponement ,of the sale.  Indeed,  in\tthe  present
\ncase, the executing court had admittedly declined to  affirm
\nthe  highest  bids  made on May 16, 1969 June  5,  1969\t and
\nAugust 28, 1969, its anxiety to secure a better price  being
\nthe  main  reason.   If\t court\tsales  are  too\t  frequently
\nadjourned  with a view to obtaining a still higher price  it
\nmay prove a self-defeating exercise for industrialists\twill
\nlose faith in the actual sale taking place and may not\tcare
\nto  travel up to the place of auction being  uncertain\tthat
\nthe  sale  would at all go through.  The  judgment  debtor’s
\nplea  for postponement in the expectation of a higher  price
\nin  the future may strain the credibility of the court\tsale
\nitself\tand may yield diminishing returns as was  proved  in
\nthis very case.\n<\/p>\n
A material circumstance which weakens the first respondent’s
\ncase  is  that on both the dates-August 28 and\tSeptember  3
\nShri  B.  Paul director of the judgment debtor\tcompany\t was
\npresent ;it the auction and never voiced any grievance about
\nthe conduct of the sale or asked for its postponement on the
\nground\tthat better price may be obtained on a\tlater  date.
\nEqually\t significant is the fact sworn to by the  authorised
\nofficer of the Corporation that ‘the valuation of the  total
\nassets’\t was around Rs. 15 lakhs ‘when the  application\t was
\nmade  by the petitioner Corporation for sale of\t the  assets
\nunder  sec. 31 of the State Financial Corporation  Act’\t and
\n‘that  the  said  estimate was given on\t the  basis  of\t the
\ninformation  supplied by the applicants at the time  of\t the
\ndisbursal  of  the loan’.  The Dena Bank the  second  charge
\nholder\twith considerable stakes in the sale was present  on
\nthe   August  and  September  auctions\tthrough\t  a   senior
\nrepresentative\tand did not think it necessary to raise\t any
\nobjection  regarding  the conduct of the sale or  the  price
\ntendered.  Nor do the proceedings disclose an unfair  under-
\nvalue  on  account of the absence of  effective\t bidders  or
\ninertness of the Judge.\t On both occasions there were  about
\n30  or 40 bidders.  The judgment debtor. the  second  charge
\nholder\t the  Indian  Oil  Corporation\tand  other   leading
\nindustrial  concerns  interested in the drum  industry\twere
\nrepresented.   All the bidders on the 28th August were\ttold
\nof  the\t next  auction date and most  of  them\tparticipated
\npassively
\n683<\/span>
\nor  actively in the September sale.  On both the sale  dates
\nthe  judges (they were different on the two days) were\tkeen
\non  maximising the’ price.  A total of Rs.  11,10,000\/-\t was
\nthe  highest bid in late August and in early  September\t the
\nbest  offer for lot No. 2 sagged from Rs. 5,40,000\/- to\t Rs.
\n5,00,000\/-.This\t downward  trend  could\t have  persisted  if
\nfurther postponements of sale had taken place and the  judge
\ndid his best to boost the total price to Rs. 11.5 lakhs and-
\nfinalised  it taking no chances by adjourning  the  auction.
\nThe  trend of to-day may be the silhouette of  tomorrow\t and
\nthe  reduced offer for lot No. 2 this time may\twell  infect
\nlot No. I next time. The Court did a good job taking a cons-
\npectus of the circumstances and avoiding the ominous  maybes
\nof  future auctions.  Such are the broad facts to which\t the
\nlaw must be applied.  Section 32(8) of the Act attracts\t the
\nCode  of  Civil\t Procedure  as far  as\tpracticable  in\t the
\nrealisation of the dues of the Corporation. and so it may be
\nright to apply the provisions of Order XXI r. 90.  In  short
\nwas  there any material irregularity in the conduct  of\t the
\nsale and did it cause substantial injury to the debtor ?
\nThe  first  respondent’s  counsel  Shri\t Parekh.  drew\t our
\nattention to condition No. 3 in the present proclamation  of
\nsale which is as follows:\n<\/p>\n
\t      “The highest bidders for the two lots shall be
\n\t      declared\t to   be  the  purchasers   of\t the
\n\t      respective  lots,. provided always that he  or
\n\t      they are legally qualified to bid and provided
\n\t      that  it\tshall be in the\t discretion  of\t the
\n\t      undersigned  Receiver  holding  the  sale\t  to
\n\t      decline acceptance of the highest bid for\t any
\n\t      lot when the price offered for any of the\t two
\n\t      lots  appears so manifestly inadequate  as  to
\n\t      make its acceptance inadvisable.\tThe  highest
\n\t      bid offered by any bidders for any of the\t two
\n\t      lots  shall  be subject to  the  sanction\t and
\n\t      approval of the District Judge Thana.”\n<\/p><\/blockquote>\n
Form  29  prescribed  in Appendix E  to\t the  Code  contains
\ncondition  No.\t3  which  is in\t like  terms.\tThe  court’s
\nactivist obligation to exercise a discretion to make a\tfair
\nsale  out  of a court auction and avert a distress  sale  is
\nunderscored  by\t this provision.  In all  public  sales\t the
\nauthority must protect the interests of the parties and\t the
\nrule  is  stated  by this Court in  Nayalkha  and  Sons\t vs.
\nRamanya Das<\/a> (1) thus
\n\t      “The    principles   which    should    govern
\n\t      confirmation  of sales are  well\testablished.
\n\t      Where  the  acceptance  of the  offer  by\t the
\n\t\t\t    Commissioners  is subject to  confirma
\ntion  of
\n\t      the  Court  the  offerer\tdoes  not  by\tmere
\n\t      acceptance   get\tany  Vested  right  in\t the
\n\t      property\tso  that  he  may  demand  automatic
\n\t      confirmation  of his offer.  The condition  of
\n\t      confirmation  by\tthe  Court  operates  as   a
\n\t      safeguard\t against the property being sold  at
\n\t      inadequate  price\t whether  or  not  it  is  a
\n\t      consequence  of any irregularity or  fraud  in
\n\t      the conduct of the sale.\tIn every case it  is
\n\t      the  duty of the Court to satisfy itself\tthat
\n\t      having  regard  to  the market  value  of\t the
\n\t      property\tthe price offered  is  unreasonable.
\n\t      Unless  the  Court  is  satisfied\t about\t the
\n\t      adequacy of the price the act of\tconfirmation
\n\t      of the sale would not be a proper exercise  of
\n\t      judicial discretion.”\n<\/p>\n
(1) [1970] 3 S.C.R. 1.\n<\/p>\n
684<\/span><\/p>\n
Be it by a receiver, commissioner, liquidator or court\tthis
\nprinciple must govern.\tThis proposition has been propounded
\nin  many rulings cited before us and summed up by  the\tHigh
\nCourts.\t  The  expressions  ‘material  irregularity  in\t the
\nconduct of the sale’ must be benignantly construed to  cover
\nthe  climax  act  of the court accepting  the  highest\tbid.
\nindeed under the Civil Procedure Code it is the court  which
\nconducts  the  sale and its duty to apply its  mind  to\t the
\nmaterial factors bearing on the reasonableness of the  price
\noffered\t is part of the process of obtaining a proper  price
\nin  the course of the sale.  Therefore failure to apply\t its
\nmind to this aspect of the conduct of the sale may amount to
\nmaterial  irregularity.\t  Here\tsubstantial  injury  without
\nmaterial  irregularity\tis  not\t enough\t even  as   material
\nirregularity not linked directly to inadequacy of the  price
\nis  insufficient.  And where a court  mechanically  conducts
\nthe  sale or routinely signs assent to. the sale papers\t not
\nbothering to see if the offer is too low and a better  price
\ncould\thave  been  obtained  and  in  fact  the  price\t  is
\nsubstantially  inadequate there is the presence of both\t the
\nelements  of irregularity and injury.  But it is not  as  if
\nthe court should go on adjourning the sale till a good price
\nis  got\t it  being a notorious fact that  court\t sales.\t and
\nmarket\tprices\tare distant  neighbours.   Otherwise  decree
\nholders can never get the property of the debtor sold.\t Nor
\nis  it\tright  to  judge the  unfairness  of  the  price  by
\nhindsight  wisdom.  May be subsequent events not within\t the
\nken of the executing court when holding. the sale may  prove
\nthat  had the sale been adjourned a better price could\thave
\nbeen  had.   What is expected of the judge is not  to  be  a
\nprophet\t but  a pragmatist and merely to  make\ta  realistic
\nappraisal of the factors and if satisfied that in the  given
\ncircumstances the bid is acceptable conclude the sale.\t The
\ncourt  may  consider  the fair value of\t the  property,\t the
\ngeneral\t economic  trends  the\tlarge  sum  required  to  be
\nproduced  by the bidder, the formation of a  syndicate,\t the
\nfutility of postponements and the possibility of litigation,
\nand  several other factors, dependent on the facts  of\teach
\ncase.\tOnce  that  is\tdone, the  matter  ends\t there.\t  No
\nspeaking  order is called for and no meticulous post  mortem
\nis  proper.   If  the court has\t fairly,  even\tif  silently
\napplied\t its mind to the relevant considerations before\t him
\nwhile  accepting  the final bid no probe  in  retrospect  is
\npermissible.  Otherwise, a new threat to certainty of  court
\nsales will be introduced.\n<\/p>\n
So  viewed,  we are satisfied that the\tdistrict  court\t had
\nexercised   a\tconscientious  and  lively   discretion\t  in
\nconcluding the sale at Rs. 11 .5 lakhs.\t If the market value
\nwas over 17 lakhs, it is unfortunate that a lesser price was
\nfetched.   Mere\t inadequacy of price cannot  demolish  every
\ncourt  sale.   Here, the court tried its  best,\t time  after
\ntime,  to raise the price, well-known industrialists in\t the
\npublic\tand  private sectors knew about it  and\t turned\t up.
\nOffers\t reached   a  stationary  level.   Nor\t could\t the
\nCorporation  be put off indefinitely in recovering its\tdues
\non   baseless  expectations  and  distant  prospects.\t The
\njudgment  debtor himself, by his litigious exercises,  would
\nhave  contributed  to the possible buyers  being  afraid  of
\nhurdles\t ahead.\t After all, producing around Rs. 11.5  lakhs
\nopenly to buy an industry is not easy even for an
\n 685<\/span>
\napparently  affluent businessmen.  The sale proceedings\t had
\nbeen  pending too long and the first respondent\t could\tnot,
\neven  when given the opportunity, produce buyers by  private
\nnegotiation.   ‘Not even a valuer’s report was\tproduced  by
\nhim, we are satisfied that the District Judge had  committed
\nno  material  irregularity  in the conduct of  the  sale  in
\naccepting the highest offer of the appellant on September 3,
\n1969.\n<\/p>\n
Shri Parekh has levelled a number of criticisms of the court
\nsale  which  we regret are more captious  than\tsubstantial,
\nmore  fictitious than genuine.\tComplaining about the  rains
\nin Bombay that day-, i.e. September 3, dissecting the Corona
\nElectricals’  valuation\t for  minor  omissions\tand  errors,
\nholding\t up the exaggerated figure of about Rs. 36 lakhs  as
\nthe  market  value  of\tthe property  and  other  like\tcir-
\ncumstances  can\t hardly convince anyone that  the  hoped-for
\nhappy  day  would  arrive when a  handsome  price  would  be
\nforthcoming if the auction were adjourned ad libitum at\t the
\ninstance of the judgment debtor.  Prima ‘facie it may look a
\nlittle\todd  that  a financial\torgnisation  in\t the  public
\nsector,\t with a special responsibility to the people not  to
\nplay  with public funds or advance for shady enterprises  or
\npersons\t should\t have readily lent a huge amount of  Rs.  10
\nlakhs on a valuation obviously bloated as is established  by
\nthe  sequel,  and  struggled for long years  to\t recoup\t the
\nmoney.\tThis aspect of the matter, we hope, will receive the
\nanxious\t attention  of\tthe concerned  authorities  so\tthat
\npublic\tmoney may be handled by public servants with  public
\nresponsibility and concern for public benefit.\tHowever,  we
\ndo  not\t wish  to express any opinion  because\twe  have  no
\nmaterial  before  us as to what were  the  circumstances  in
\nwhich  Dena  Bank  advanced the loan, what  were  the  other
\nsecurities given by the Company, and what was the then worth
\nof the guarantors.\n<\/p>\n
Several\t other\tunsuccessful grounds were urged\t before\t the
\nHigh  ,Court by the judgment debtor and we need not go\tover
\nthose grounds again as they possess little merit.  Nor\tneed
\nwe   consider  the  ambit  of  appellate  power\t to   review
\ndiscretion exercised by the trial court (vide Ward v.  James
\n(1)  since here we are concerned with no appeal against\t the
\napproval  of  the sale by the executing court  but  with  an
\norder refusing to set aside the sale under Order XXI r.\t 90,
\nand an appeal therefrom.\n<\/p>\n
We see no merit in the application to set aside the sale and
\nare   constrained   to\tallow  the  appeal.    Mr.   Somnath
\nChatterjee,  who  argued the appeal  with  thoroughness\t and
\nfairness,  in his opening submissions, told the court  that,
\nregardless  of the outcome, he had persuaded his  client  to
\nraise  the price to a sum equal to the amount at  which\t the
\nproperties,  lots  I and 2, were estimated  by\tM.\/s  Corona
\nElectricals, namely, Rs. 17, 48,096\/-. He stuck to it to the
\nend  a good gesture.  Consequently, we shall accept that  as
\nthe  price  offered by the auction  purchaser-appellant\t and
\ndirect\tthat  the appellant do deposit the balance  of\tthis
\namount of Rs. 17,48,096\/- over what he has already paid into
\n(1) [1966] 1 Q.B. 273 at 293.\n<\/p>\n
686<\/span><\/p>\n
court (Rs. 2,75,000\/-) within two months from to-day, in the
\nDistrict Court, Thana, in which event the appellant will  be
\nput  in\t possession  of\t the  properties  purchased  by\t him
\nforthwith.  Liberty is given to the Corporation to  withdraw
\nto the extent of its dues with up-to-date interest.
\nWe  think  that the circumstances of the  case\twarrant\t the
\ndirection that parties will bear their costs throughout.\n<\/p>\n
V.P.S.\t\t\t Appeal allowed,.\n687<\/span>\n\n\n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Kayjay Industries (P) Ltd vs Asnew Drums (P) Ltd. & Ors on 20 March, 1974 Equivalent citations: 1974 AIR 1331, 1974 SCR (3) 678 Author: V Krishnaiyer Bench: Krishnaiyer, V.R. PETITIONER: KAYJAY INDUSTRIES (P) LTD. Vs. RESPONDENT: ASNEW DRUMS (P) LTD. & ORS. DATE OF JUDGMENT20\/03\/1974 BENCH: KRISHNAIYER, V.R. BENCH: KRISHNAIYER, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-133308","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nKayjay Industries (P) Ltd vs Asnew Drums (P) Ltd. & Ors on 20 March, 1974 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/kayjay-industries-p-ltd-vs-asnew-drums-p-ltd-ors-on-20-march-1974\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Kayjay Industries (P) Ltd vs Asnew Drums (P) Ltd. & Ors on 20 March, 1974 - 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