1. Execution of money decree — Sale of mortgaged property — Challenge to validity of sale under Order 21, Rule 97, CPC. (Para 2 )
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1996 Supreme(SC) 594
1996(3) Supreme 441
SUPREME COURT OF INDIA
K. Ramaswamy and G.T. Nanavati , JJ.
Seethammal -Appelant
versus
Senthll Finance & Anr. -Respondents
Civil Appeal No. 5092 of 1996
(Arising out of SLP © No. 27566/95)
Decided on 15-3-1996
The Court held that a sale conducted by an executing court is illegal if the property is sold at a grossly undervalued price, particularly when the purchaser is the mortgagee and the bid is nominal relative to the property's valuation, rendering the sale unfair.
Headnote:Civil Procedure Code 1908- Order 21, Rule 97-Execution - Validity of sale questioned-Money decree-Property sold for a sum of Rs. 15100/- subject to discharge of mortgage sum of Rs. 40.000/- encumbered on property-Property was originally valued for a sum of Rs.75,000/- -Subsequently it was reduced to Rs. 50,000/- -At an auction, it was sold for a sum of Rs.15,100/- -Respondent s bid was for Rs. 15400/-Respondent himself is a mortgagee of that property for a sum of Rs. 40,000/- -Respondent himself purchased it for a sum of Rs. 15.100/- -Sale conducted by executing court was illegal-Appellant had already deposited entire decretal amount-It was withdrawn by decree-holder-Appellant directed to deposit interest @ 18% from date of sale till date on amount of Rs.15,100/- deposited by respondent-Appellant shall also pay a sum of Rs.2000 towards poundage fee. (Para 3)
Act Referred
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Table of Contents
2. Validity of the court-conducted auction sale of property in execution of a money decree. (Para 2 )
3. Sale of property at a price significantly lower than valuation, where the purchaser was the mortgagee, is considered illegal. (Para 3 )
4. An execution sale conducted at a grossly inadequate price, particularly when the purchaser is the mortgagee, is illegal. (Para 3 )
5. Appeal allowed — Sale set aside — Appellant directed to deposit interest on the purchase price and poundage fees. (Para 3 , 4 )
6. Under what circumstances is an execution sale of property deemed illegal?
A sale is considered illegal when it is conducted at a price significantly lower than the property's valuation, particularly when the purchaser is the mortgagee and no other bidders participate. (Para 3 )
7. Which provision of the Code of Civil Procedure allows a judgment-debtor to challenge an execution sale?
A judgment-debtor may question the validity of a sale conducted by the executing court under Order 21, Rule 97 of the Code of Civil Procedure. (Para 2 )
ORDER
Leave granted.
Heard learned counsel for both the parties.
2. In-execution of money decree in O.S. No. 67/87, the property, i.e., 1053 sq. feet of land with built-in house was sold for a sum of Rs. 15,100/- subject to discharge of the mortgage sum of Rs. 40,000/- encumbered on the property. The appellant/judgment-debtor questioned the validity of the sale under Order 21, Rule 97, CPC. The executing Court rejected the same which was confirmed in C.R.P. No. 1895/93 by the impugned order dated September 26,1993 of the High Court of Madras. Thus this appeal.
3. Having heard the learned counsel on both sides, we are of the view that the sale is in excess of the execution. It is not in dispute that the property sold consists of a built-up house in a portion measuring 1053 sq. ft. The property was originally valued for a sum of Rs. 75,000/-. But subsequently, it was reduced to Rs. 50,000/-. At an auction, it was sold for a mere sum of Rs. 15,100. The upset price was Rs. 15,000/-. The respondent s bid was for Rs.15,100/- and the sale was knocked down as stated earlier, subject to the discharge of the mortgage for a sum of Rs, 40,000/-. It is now stated by Mr. A.T.M. Sampath, the learned counsel for the second respondent that the respondent himself is a mortgagee of that property for a sum of Rs. 40.000/-. It is, therefore, clear that nobody was coming forward to purchase the property and the respondent himself had purchased it for a sum of Rs. 15,100/-. Under these circumstances, we are of the view that the sale conducted by the executing Court was obviously illegal. It is stated that the appellant had already deposited the entire decretal amount and it was withdrawn by the decree-holder also. In addition, the appellant is directed "to deposit interest @ 18% from the date of the sale, namely, January 20, 1992 till date on the amount of Rs. 15,100/- deposited by the respondent and the respondent shall be at liberty to withdraw the same. In addition, the appellant shall also pay a sum of Rs. 2000/- towards poundage fee. The amount shall be deposited within a period of six months from today.
4. The appeal is accordingly allowed subject to the above terms. No costs.
Appeal accordingly allowed.
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