1. Loan recovery decree — Execution proceedings — Auction sale of property — Application to set aside sale under Order XXI Rule 90, Code of Civil Procedure. (Para 1 , 2 , 3 , 4 )
Back
Next 
2020 Supreme(SC) 265
SUPREME COURT OF INDIA
L. NAGESWARA RAO, DEEPAK GUPTA, JJ.
Aarifaben Yunusbhai Patel & Ors – Appellants
Versus
Mukul Thakorebhai Amin & Ors – Respondent
Civil Appeal Nos. 1643-1644, 1647 of 2020 With Contempt Petition(Civil)No. 63 of 2020
Decided On : 17-03-2020
Advocates Appeared:
For the Appellant(s) :Nikilesh Ramachandran, Rishabh Sancheti, Padma Priya, Anchit Bhandari, K. Paari Vendhan, Advocates
For the Respondent(s):Nikhil Goel, Advocate
For the Appellant(s) :Nikilesh Ramachandran, Rishabh Sancheti, Padma Priya, Anchit Bhandari, K. Paari Vendhan, Advocates
For the Respondent(s):Nikhil Goel, Advocate
IMPORTANT POINT
Any person claiming benefit of Section 14 of the Act can only claim exclusion of time of that period for which it had been prosecuting another remedy with due diligence and in good faith.
Headnote:
Code of Civil Procedure, 1908 - Order XXI Rule 90 - Application for objection to execution - limitation - Limitation act, 1963 - Section 14 - R-3 making a statement before High Court on 18.12.2007 that he would file objections to execution petition - Further, in view of statement made before Supreme Court on 21.04.2008 R-3 should have filed objections - Objection filed on 18.03.2008 - Proceedings before high court can neither be said to have been done in good faith nor in exercise of due diligence - R-3 not entitled to benefit of section 14 - Even if period from 26.12.2007 to 21.04.2008 is excluded u/s 14, the application of objection would be barred by limitation by 6 days - Petitions ought to be dismissed as time barred. (Para 12, 13)
Facts of the case:
M/s. Abhilasha Construction, Respondent No.3 herein, obtained a loan from Shree Mahalaxmi Mercantile Coop Bank Ltd., Respondent No. 2 herein, but failed to repay the loan and R-2 filed summary proceedings for recovery of the amount due to it from R-3 and Mukul Thakorebhai Amin, Respondent No.1 herein, who was a partner in the said Firm. During the pendency of the suit, R-3 applied for release of 12 flats and 2 penthouses which were permitted to be released on the said respondents depositing Rs. 65 lakhs. However, Respondent Nos. 1 & 3 failed to deposit the said amount. On 12.08.2004, the adjudicating authority granted leave to the defendants to contest the suit on the condition that they would deposit 33% of the amount claimed by R-2. This amount was also not deposited. Thereafter, a decree for a sum of Rs. 1,89,94,105.50, was passed on 14.09.2004 in favour of R-2 and against the defendants which included Respondent Nos. 1 & 3.
The said decree dated 14.09.2004 was challenged in appeal in which no stay was granted. In the meantime, R-2 filed an application for execution of the decree on 01.11.2007. On the very next day, i.e. 02.11.2007, an application was filed for appointment of receiver for execution of decree. The court allowed the said application on 02.11.2007 itself and the court receiver was permitted to sell the property and report to the Court within 15 days. R-2 also filed an application for attachment of property on which orders were also passed on 02.11.2007. Advertisement for auction of the said property was published in the newspaper on 21.11.2007. The upset price was not mentioned in the said advertisement. Pursuant to the public notice for sale, the auction of the attached property was conducted on 26.11.2007, wherein the appellants offered Rs.78,25,251/-. There were only two bidders and the appellants were the highest bidders and they deposited 25% of the sale consideration on the spot. Thereafter, on 10.12.2007 R-2 applied for permission to confirm the sale and vide order dated 10.12.2007 the executing court accepted the report of court receiver and permitted him to execute the same. Counsel appearing on behalf of R-3 sought time to file objections.
Instead of filing objections, R-1 filed a writ petition before the High Court challenging the sale of 12 flats and 2 penthouses pursuant to the court auction. Initially, the proceedings were stayed but when R-1 did not file any objections under Order XXI Rule 90 of the Code of Civil Procedure, 1908, sale certificate in respect of 12 flats and 2 penthouses was issued in favour of the appellants by the executing court on 29.02.2008.
On 05.03.2008, a statement was issued by R-1 that a buyer is ready and willing to purchase the properties for Rs.1.7 crores. The learned Single Judge of the High Court permitted the proposed buyer to deposit a sum of Rs.50 lakhs and status quo was granted. This amount of Rs.50 lakhs was deposited. Aggrieved, the appellants preferred a Letters Patent Appeal and order dated 05.03.2008 was stayed.
R-1 filed an application under Order XXI Rule 90 of the CPC and the main grievance in this application was that no notice had been sent to R-1 or R-3, either of the execution petition or of the attachment of the property or before settling the terms of proclamation of sale. In addition to this, another grievance was that the property had been sold for a price much less than the mortgaged price.
On 17.07.2008, R-1 made a submission before the High Court that it had filed an application under Order XXI Rule 90 of the CPC, before the executing court.
The Executing Court rejected the application of R-1 filed under Order XXI Rule 90 of the CPC. Thereafter, R-1 challenged the order of the executing court by filing a petition in the High Court which was allowed. The objections to the execution petition filed by R-1 were accepted and sale in favour of the appellants was set aside. The High Court went into the merits of the petition but did not decide the issue of limitation. Though the High Court noticed that the appellants had raised the plea of limitation, it did not decide the same.
Finding of the Court:
Any person claiming benefit of Section 14 of the Act can only claim exclusion of time of that period for which it had been prosecuting another remedy with due diligence and in good faith.
Result: Appeals allowed.
Legal Category Hierarchy
Table of Contents
2. Challenge to auction sale based on lack of notice and undervaluation — Dispute over the applicability of limitation and condonation of delay. (Para 4 , 7 )
3. The court found the application to set aside the sale was time-barred and the High Court erred by ignoring the issue of limitation. (Para 6 , 7 , 11 , 12 , 13 )
4. Section 5 of the Limitation Act does not apply to Order XXI CPC proceedings; delay in filing applications under Order XXI Rule 90 cannot be condoned. (Para 9 )
5. Appeals allowed — High Court judgment set aside — Order of the executing court upholding the auction sale restored. (Para 14 )
6. Does Section 5 of the Limitation Act, 1963, allow for the condonation of delay in applications filed under Order XXI of the Code of Civil Procedure, 1908?
No. Section 5 of the Limitation Act specifically excludes applications under any of the provisions of Order XXI of the Code of Civil Procedure, 1908. Consequently, any delay in filing such applications cannot be condoned by the court. (Para 9 )
7. Under what conditions can time be excluded under Section 14 of the Limitation Act for prosecuting another civil proceeding?
Time may be excluded if the applicant has been prosecuting another civil proceeding with due diligence and in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it. (Para 10 )
8. Should a court decide the merits of an application to set aside an auction sale if the application is filed beyond the limitation period?
The issue of limitation must be decided first. If the petition is filed beyond the prescribed period of limitation, it is not necessary for the court to examine other issues, such as fraud or material irregularity in the sale. (Para 7 )
9. How does the court evaluate good faith and due diligence when considering the exclusion of time under Section 14 of the Limitation Act?
The court examines whether the party pursued the alternative remedy promptly and honestly. Pursuing a writ petition while failing to file objections in the executing court, despite having knowledge of the sale, may indicate a lack of good faith or due diligence. (Para 12 )
JUDGMENT :
DEEPAK GUPTA, J.
1. M/s. Abhilasha Construction, Respondent No.3 herein (hereinafter referred to as R-3), obtained a loan from Shree Mahalaxmi Mercantile Coop Bank Ltd., Respondent No. 2 herein (hereinafter referred to as R-2), but failed to repay the loan and R-2 filed summary proceedings for recovery of the amount due to it from R-3 and Mukul Thakorebhai Amin, Respondent No.1 herein (hereinafter referred to as R-1), who was a partner in the said Firm. During the pendency of the suit, R-3 applied for release of 12 flats and 2 penthouses which were permitted to be released on the said respondents depositing Rs. 65 lakhs. However, Respondent Nos. 1 & 3 failed to deposit the said amount. On 12.08.2004, the adjudicating authority granted leave to the defendants to contest the suit on the condition that they would deposit 33% of the amount claimed by R-2. This amount was also not deposited. Thereafter, a decree for a sum of Rs. 1,89,94,105.50, was passed on 14.09.2004 in favour of R-2 and against the defendants which included Respondent Nos. 1 & 3. We have given the facts of Civil Appeal No.1643-1644 of 2020. As far as Civil Appeal No.1647 of 2020 is concerned, that relates to advertisement for sale of a bungalow which was issued on 13.01.2008, and sale was made on 03.03.2008.
2. The said decree dated 14.09.2004 was challenged in appeal before the Gujarat State Cooperative Tribunal. It appears no stay was granted. In the meantime, R-2 filed an application for execution of the decree before the Civil Judge, Vadodara on 01.11.2007. On the very next day, i.e. 02.11.2007, an application was filed for appointment of receiver for execution of decree. The court allowed the said application on 02.11.2007 itself and the court receiver was permitted to sell the property and report to the Court within 15 days. R-2 also filed an application for attachment of property on which orders were also passed on 02.11.2007. Advertisement for auction of the said property was published in the newspaper on 21.11.2007. The upset price was not mentioned in the said advertisement. Pursuant to the public notice for sale, the auction of the attached property was conducted on 26.11.2007, wherein the appellants offered Rs.78,25,251/-. There were only two bidders and the appellants were the highest bidders and they deposited 25% of the sale consideration on the spot. Thereafter, on 10.12.2007 R-2 applied for permission to confirm the sale and vide order dated 10.12.2007 the executing court accepted the report of court receiver and permitted him to execute the same. Thereafter, the receiver filed some application for clarification and on 18.12.2007 counsel appearing on behalf of R-3 sought time to file objections.
3. Instead of filing objections, R-1 filed a writ petition before the High Court of Gujarat challenging the sale of 12 flats and 2 penthouses pursuant to the court auction. This petition was filed on 26.12.2007. It also appears that R-1 kept appearing before the executing court and requested the executing court to stay further proceedings. Initially, the proceedings were stayed but when R-1 did not file any objections under Order XXI Rule 90 of the Code of Civil Procedure, 1908 (CPC for short), sale certificate in respect of 12 flats and 2 penthouses was issued in favour of the appellants by the executing court on 29.02.2008.
4. On 05.03.2008, a statement was issued by R-1 that a buyer is ready and willing to purchase the properties for Rs.1.7 crores. The learned Single Judge of the High Court permitted the proposed buyer to deposit a sum of Rs.50 lakhs and status quo was granted. This amount of Rs.50 lakhs was deposited. Aggrieved, the appellants preferred a Letters Patent Appeal (LPA for short) and order dated 05.03.2008 was stayed by order dated 01.04.2008. Aggrieved by the order of the Division Bench, R-1 filed SLP in this Court. It appears that in the meantime, R-2 had filed an application before the executing court on the ground that it had n
