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Judges : T.V.RAMAKRISHNAN,K.NARAYANA KURUP
Thomas Joseph - Appellant
Versus
Catholic Syrian Bank - Respondent
Case No : C.M.A. No. 319 of 1996
Decided On : 04/28/1998
Advocates Appeared :
Mathai M. Paikeday (Sr. Advocate), K.B. Ganesh & Joe Joseph For Appellant V.O. John, Jimmy John Vellanikaran, S. Venkatasubramaniya Iyer (Sr. Advocate) & V. Giri For Respondents
FRAUD - Execution Proceedings - O. XXI R.66(2) CPC - The sale of the property was ordered to be set aside on the grounds of fraud and material irregularity. The appellant contended that there was collusion between his mother and the respondents with the intention of purchasing the property for a song. The appellant further contended that the property worth Rs. 30,00,000/- was sold for a sum of Rs. 10,60,000/- as a result of fraud and collusion between his mother and respondents viz., the decree holder and the auction purchaser. The court found that the appellant was entitled to succeed in this appeal due to the failure to serve proper notice to the judgment debtor and the gross undervaluation of the property. The court held that the sale is liable to be declared as vitiated by material irregularity.
Fact of the Case:
The appellant filed an application to set aside the sale of his property on the ground of fraud and material irregularity. The appellant contended that there was collusion between his mother and the respondents with the intention of purchasing the property for a song. The appellant further contended that the property worth Rs. 30,00,000/- was sold for a sum of Rs. 10,60,000/- as a result of fraud and collusion between his mother and respondents viz., the decree holder and the auction purchaser. The court found that the appellant was entitled to succeed in this appeal due to the failure to serve proper notice to the judgment debtor and the gross undervaluation of the property.
Finding of the Court:
The court found that the appellant was entitled to succeed in this appeal due to the failure to serve proper notice to the judgment debtor and the gross undervaluation of the property. The court held that the sale is liable to be declared as vitiated by material irregularity.
Ratio Decidendi: The court held that the sale is liable to be declared as vitiated by material irregularity due to the failure to serve proper notice to the judgment debtor and the gross undervaluation of the property. The court also held that the sale is liable to be set aside on the grounds mentioned in R.90 of O. XXI CPC.
Final Decision: The sale was ordered to be set aside subject to the condition that the appellant pays to the auction purchaser interest at the rate of 10% on the amounts deposited by the purchaser in court for the period from the respective dates of deposit till date of payment and discharges the entire decree amount by deposit in court for payment to the decree holder Bank.
Key Points: - The court found that the appellant was entitled to succeed due to failure to serve proper notice to the judgment debtor and gross undervaluation of the property. (!) (!) (!) (!) (!) (!) - The sale was held to be vitiated by material irregularity because proper notice under Order XXI Rule 66(2) of the CPC was not served on the judgment debtor. (!) (!) (!) (!) (!) - Notice served on the 7th judgment debtor (the appellant’s mother) was not valid service on the appellant under Order V Rule 15 of the CPC because she was not residing with him at the relevant time. (!) (!) - The property was grossly undervalued; the upset price was fixed at Rs. 5 lakhs, while the Commissioner’s report indicated a market value of around Rs. 45 lakhs, causing substantial injury to the appellant. (!) (!) - The execution court failed in its duty to ensure only such portion of the property necessary to satisfy the decree was sold, as required under Order XXI Rule 64 of the CPC. (!) (!) (!) (!) - The appellant was denied the opportunity to quote his price for the property at the time of drawing up the sale proclamation, violating his rights under the Kerala Amendment to Order XXI Rule 66(2)(e). (!) - The sale was set aside subject to the condition that the appellant pays interest at 10% to the auction purchaser on the amounts deposited, and discharges the entire decree amount. (!) (!) (!) (!) (!) (!) (!) (!) (!) (!)
K. Narayana Kurup, J.
The second judgment debtor in E.P. 154 of 1990 in O.S.348 of 1987 on the file of the principal Sub Judge, Kottayam is the appellant. He is the petitioner in E. A. 290 of 1993 in E.P. 154 of 1990, an application filed under O. XXI, R.90 CPC to set aside the sale of his property on the ground of fraud and material irregularity. Respondents 1 and 2 are the decree holder and auction purchaser respectively.
2.0. S.348 of 1987 was instituted by the Catholic Syrian Bank for recovery of an amount of Rs. 3 lakhs with interest, an amount which was availed as loan by the first defendant firm of which defendants 2 to 6 in the original suit are the partners and the 7th defendant the mother of the appellant as the guarantor. The title deed of the immovable properties of the appellant-second defendant was given as collateral security for the loan. The 7th defendant i s the mother of the appellant as already noted. In the said suit defendants 2 to 6 filed a joined vakalath and the 7th defendant filed a separate vakalath. In the original suit though a written statement was filed on behalf of the 2nd defendant, it was later withdrawn as Insolvency Proceedings was instituted before the Subordinate Judge's Court, Kottayam as I.P. No. 8 of 1988. However, the suit was not contested which was finally decreed on 22.3.1989. At the time of filing of the written statement in the suit, the appellant - 2nd judgment debtor was residing at Changanacherry and his address at Changanacherry was shown in the written statement. Subsequently, in 1988 he shifted his residence to Kakkanad. The change of address was not informed to the court as the suit went uncontested. The decree holder Bank initiated execution proceedings in the Suit as E.P. 154 of 1990. On 26.5.1990 the court ordered notice to all the judgment debtors. As notice was not served on the judgment debtors, the court ordered fresh notice in the correct address to the judgment debtors on 17.8.1990. Subsequently, the process server who went to serve notice to the appellant at his earlier place of residence at Changanacherry, returned the notice as unserved with an endorsement that the appellant has changed his place of residence and therefore, the notice could not be served. Even though there was no notice to the appellant in the execution proceedings, the decree holder bank on 1.1.1991 applied to the court for proclamation of sale under O. XXI R.66 of the CPC. On the same day the court ordered R.66(2) notice to all the judgment debtors. However, R.66(2) notice was also not served on the appellant. Instead, the notice to the appellant was served on the mother of the appellant viz. the 7th judgment debtor who was not residing with the appellant. Upset price for the property was fixed on 23.1.1993 and subsequently proclamation of sale was made. Finally, the property was ordered to be sold in auction on 3.4.1993. However, the auction was not conducted on the said date and the property was actually sold in auction on 6.4.1993 for a sum of Rs. 10,60,000/-. The appellant, immediately on coming to know of the auction through his friend one Mathew on 20.5.1993, filed an application to set aside the sale and deposited the whole of the loan amount with up-to-date interest in court being the sum of Rs. 6,30,589.86 on 1.7.1993. The appellant had also discharged his entire liabilities in insolvency proceedings being I.P. 8 of 1988 and the said I.P. was closed in October 1994.
3. The main thrust of the contention of the appellant before the Court below was that he was never served with the notice of sale as contemplated under R.66(2) of O. XXI of the CPC and that there was collusion between his mother and the respondents with the intention of purchasing the property for a song. The appellant further contended that the property worth Rs. 30,00,000/- was sold for a sum of Rs. 10,60,000/-as a result of fraud and collusion between his mother and respondents viz., the decree holder and the a
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