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1930 Supreme(SC) 85
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD MACMILLAN, SIR JOHN WALLIS, AND SIR GEORGE LOWNDES
SETH NANHELAL - Appellant
Versus
UMRAO SINGH - Respondents
On Appeal from the Court of the Judicial Commissioner, Central Provinces.
Decided On : Dec. 16. 1930.
Solicitors for appellants : T. L. Wilson & Co.
An out-of-court adjustment between a decree-holder and judgment-debtor cannot set aside an execution sale once a third-party purchaser's interest has intervened. The judgment-debtor must follow the statutory procedure under Order XXI, Rule 89 of the Code of Civil Procedure to set aside such a sale.
Headnote:(A) Code of Civil Procedure, 1908 - Order XXI, Rules 2, 89, 90, 91 and 92 - Execution of decree - Sale of immovable property - Application to set aside sale - Out-of-court adjustment between decree-holder and judgment-debtor - Once a sale has been effected, a third-party interest intervenes - Certification of adjustment under Rule 2 contemplates a stage where no other interests have come into being - The only means by which a judgment-debtor can set aside a duly carried out sale is by following the procedure under Rule 89, including the deposit of the decree amount and statutory compensation within the prescribed limitation period - If no application under Rule 89, 90, or 91 is made or allowed, the Court is mandated under Rule 92 to confirm the sale, making it absolute.
Facts of the case:
Immovable property was sold in execution of a decree and knocked down to an auction purchaser. The judgment-debtors applied to set aside the sale on grounds of fraud and irregularity. Subsequently, the decree-holder applied to have the property released on the ground that the debt had been adjusted through an out-of-court arrangement with the judgment-debtors. While the lower court rejected the application to set aside the sale based on irregularity, the District Court subsequently set aside the sale based on the adjustment between the decree-holder and judgment-debtor.
Findings of Court:
The court found that an adjustment between the decree-holder and judgment-debtor cannot nullify a sale once a third-party purchaser's interest has been created. The procedure for setting aside a sale is strictly governed by the Code, and Rule 89 is the only remedy for a judgment-debtor to recover property by payment.
Issues: Whether a court, having rejected an application to set aside a sale on the ground of material irregularity, could entertain an application by the decree-holder to set aside the sale on the ground of an out-of-court adjustment with the judgment-debtor, without following the procedure prescribed under Order XXI, Rule 89.
Ratio Decidendi: The court ruled that Order XXI, Rule 2 applies only when the matter lies solely between the judgment-debtor and decree-holder. Once a sale is effected, the purchaser's interest must be protected. Under Rule 92, if applications under Rules 89, 90, or 91 are not made or are disallowed, the court must confirm the sale. An out-of-court settlement cannot override the statutory procedure for setting aside an execution sale.
Result: Appeal allowed; orders of the lower courts set aside and the case referred back for decision on remaining issues.
Legal Category Hierarchy
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practice and procedure
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execution of decrees
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sale of immovable property
- setting aside sale
- out-of-court adjustment
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sale of immovable property
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execution of decrees
Judgement
Appeal (No. 94 of 1928) by special leave from an order of the Court of the Judicial Commissioner, Central Provinces (December 17, 1926), affirming an order of the District Judge of Hoshangabad, who had reversed an order of the Subordinate Judge.
The appeal raised a question of procedure with regard to sales in execution. That question in effect was whether the Court having rejected an application by the judgment-debtor to set aside a sale under Order xxi., r. 90 (1.), on the ground of material irregularity, could entertain an application by the judgment-creditor to set aside the sale, on the ground that the decree had been satisfied by an arrangement since made with the judgment-debtor, without the procedure prescribed by
r. 89 being followed.
The facts of the case, the material provisions of Order xxi., and the grounds of the decision in the present case, all appear from the judgment of the Judicial Committee.
1930. Nov. 27. Dunne K.C. and Dube for the appellants. The only method of procedure where, apart from irregularity and fraud, it is desired to set aside a sale is that prescribed by Order xxi., r. 89. The deposit provided for in that rule is an essential part of the procedure. The application under r. 90 having failed, the Court was bound by r. 92 (1.) to confirm the sale. The decree was, in any event, subsisting at the date of the sale, from which date the purchasers title runs by s. 65 of the Code. The decision of the Calcutta High Court in Bibi Sharofan v. Mahomed Habibuddin (( 1911) 15 C. W. N. 685.) was right, and Nilkanth v. Yeshwant (( 1920) 18 Nag. L. R. 134.) and Maroti v. Vithoba (C. P. Civil Rev. No. 252 of 1925.), which were applied in this case, were wrongly decided. Procedure with regard to executions is determined wholly by the Code and the rules thereunder. [Reference was made also to Zain-ul-Abdin Khan v. Muhammad Ashgar Ali Khan (( 1887) L. R. 15 I. A. 12.) and Birj Mohun Thakur v. Rai Uma Nath Chowdhry . (( 1892) I, R. 19 I. A. 154.)]
The respondents did not appear.
Dec. 16. The judgment of their Lordships was delivered by
SIR GEORGE LOWNDES. This is an appeal by special leave. It raises an interesting question as to execution proceedings which seems to be of not infrequent occurrence. Differing opinions have been expressed in India, particularly in the Court from which the appeal comes, and the matter calls for an authoritative decision. Under these circumstances it is a matter of regret to their Lordships that the respondents have not been represented before them.
The proceedings in question commenced with an award by the Registrar of Co-operative Societies, Central Provinces and Berar. By this award, the respondents were ordered to pay to the Manegaon Society a sum of Rs.2109.2 with interest, and in default, certain immovable property of the respondents, which had been mortgaged to the Society, and which was described as Patti No. 2, half share of mauza Bagada (or Bagra) Manegaon in the Hoshangabad District, was ordered to be sold. By virtue of rules made by the Local Government under the Co-operative Societies Act (II. of 1912) the award was enforceable in the same manner as the decree of a Civil Court. The money not having been paid, execution proceedings were taken by the Society as decree holders and after the usual formalities, the property was, on September 15, 1923, put up to auction and knocked down to the appellants at the price of Rs.7100, of which the prescribed 25 per cent, was paid at the time of the sale.
On September 24, before the sale was confirmed, the respondents, the judgment-debtors, put in what may be called the usual application to set aside the sale on the ground of fraud and irregularity in the conduct of the sale.
The law relating to such applications is contained in Order xxi., rr. 89-92, which are in the following terms—
" 89.—(1.) Where immovable property has been sold in execution of a decree, any person either owning such property or holding an interest the
