C.R. No. 2920 of 2008 [1] IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. Date of Decision: October 9, 2009 1. C.R. No. 2920 of 2008 M/s Behari Lal Bhupinder Rai Ahuja …..Petitioner Vs. Sanjay Ahuja and others …..Respondents 2. C.R. No. 6543 of 2008 M/s Lal Singh and sons …..Petitioner Vs. Sanjay Ahuja and others …..Respondents CORAM: HON’BLE MR. JUSTICE M.M.S. BEDI. -.- Present:- Mr. A.K. Khunger, Advocate for the petitioners. Mr.Anand Chhibbar, Advocate Mr.Sandeep Khunger, Advocate Mr.Yogesh Putney, Advocate C.R. No. 2920 of 2008 [2] -.- C.R. No. 2920 of 2008 [3] M.M.S. BEDI, J. (ORAL) This order will dispose of two Civil Revision petitions bearing Nos. 2920 and 6543 of 2008, as common question of law and facts arise in the same. Petitioner- objectors have preferred these revision petitions under Article 227 of the Constitution of India impugning the order dated April 4, 2008 passed by Civil Judge (Junior Division), Abohar, dismissing the objection petition of the petitioners against the public auction of the immoveable property of judgment debtor M/s Ashoka Cotton Company, respondent No.2. Briefly stated the grievance of the petitioner firm-M/s Behari Lal Bhupinder Rai Ahuja (hereinafter referred to as ‘Objector No.1’), is that it had filed a suit for recovery against respondent No.2- M/s Ashoka Cotton Company for recovery of Rs.1544596.68/-. The immovable property of respondent No.2 was attached under Order 38 Rule 5 CPC by Civil Judge, Abohar. Though the suit of the petitioner was pending and the property of respondent No.2 stood attached yet the property of respondent No.2 was sold in open auction in execution proceedings filed by respondent No.1- Sanjay Ahuja and the same stands purchased in an open auction by respondents No.3 and 4 in collusion with Court auctioneer. The petitioner claims that when petitioner and other creditors of respondent No.2 came to know about the auction conducted by Tehsildar, Abohar, regarding immovable property comprised in Khasra No. 1542 (128/2) sq. yards, Khasra No.2119/1543 (61-1) sq. yards, Khasra No. 2102/1543 (61-1) sq. C.R. No. 2920 of 2008 [4] yards totaling 250.5 sq. yards falling within the municipal limits of Abohar town, the petitioner filed objection petition before the Executing Court pleading therein that respondents No.3 and 4 have purchased the property in open auction fraudulently as the property stood already attached by a Court of competent jurisdiction on application of petitioner under Order 38 Rule 5 CPC. It was also pleaded therein that the property was sold only for consideration of Rs.4.75 lacs whereas the market value of the property is Rs.80 lacs. The adequacy of sale consideration in open auction reflects that respondents No.3 and 4 have purchased the property in collusion with the Court auctioneer. Vide impugned order the Executing Court has dismissed the objections filed by the petitioner. So far as the objections of M/s Lal Singh and sons in C.R. No. 6543 of 2008 is concerned (hereinafter referred to as Objector No.2), it also filed an application through its Partner Ravinder Kumar, averring therein that the sale conducted by Tehsildar regarding the immoveable property of M/s Ashoka Cotton Company- respondent No.2 is illegal, void and without jurisdiction on the ground that the property stood attached by the Court of Sh.A.P.Batra, in case No.11-1, dated February 9, 1999 in execution titled M/s Lal Singh and Sons Vs. M/s Tek Chand Daulat Rai etc., which is now pending in the Court for recovery of Rs.5,98,460.21/- with interest. It was averred in the objection petition that both the firms i.e. M/s Ashoka Cotton Company and M/s Tek Chand Daulat Rai used to work and conduct business in the same premises. It was pleaded in the objection petition that the property which has been got attached by the objector is the C.R. No. 2920 of 2008 [5] same property which has been sold and that there is no property left with the defendants in the suit for recovery of the decretal amount. A copy of the judgment and decree dated November 28, 2006 passed in Civil Suit titled M/s Lal Singh and Sons Vs./ M/s Tek Chand Daulat Rai decreeing the suit of M/s Lal Singh and Sons for sum of Rs.397932.51 with interest has been placed on record as annexures R-1 and R-2 in C.R. No. 6543 of 2008. It is also averred in the objection petition that neither any munadi had been effected nor any report regarding munadi was procured. Had there been any munadi, objector would have come to know because the business premises and residence of the objector is adjacent to the property which is alleged to have been auctioned. There has also not been any affixation outside the conspicuous part of the Court. Objector No.2 has been appearing in as many as 20 civil cases in the Courts at Abohar and he visits Court premises daily. The process of sale is fraudulent and has been engineered by the auction purchasers themselves with active connivance of the Revenue Officer. There has been bosom proximity in between the auction purchasers and the officer as they have family relations with each other. The witness or participants of the bid sale are procured and close confident persons of the auction purchaser. It is averred in the objection petition that there are 8/9 tenants in the building which abuts the circular road as well as Mandi No.1 towards the northern and southern sides. The building is partly double storied and partly three storied and the market value is more than Rs.50 lacs. The sale of the property of judgment debtor is absolutely void. The objection petitioner specifically pleaded that the C.R. No. 2920 of 2008 [6] objections can only be adjudicated if the evidence is called for. The objection petitions were seriously contested by the auction purchasers by taking preliminary objection that the property had been attached in the execution proceedings vide rapat No. 707 dated August 30, 2002 and later on in execution application it was auctioned in public auction conducted at the spot by revenue authorities and the auction purchaser were declared the highest bidder of the property in dispute for an amount of Rs.4.75 lacs conducted on December 29, 2005 and 1/4th auction money was deposited by the auction purchaser at the spot with the Court auctioneer Naib Tehsildar and share amount was deposited by the auction purchaser in the court and 1/4th share was deposited at the time of auction of the property. There had not been any claim of the objection petitioner before the Executing Court or before the auctioneer at the spot where the conditions were announced by the Court auctioneer regarding the claim of the objectors. The auction purchasers claimed that the objector has played a foul play with the Court of Sh.A.P.Batra by intentionally including the property in dispute in the list for attachment with malafide intention to cause wrongful loss to the auction purchasers whereas it was within the knowledge of the objector that the suit property stood auctioned on December 29, 2005. It was claimed that the objection petition is vague without disclosing the particulars of the property. The objections are barred by time. The affidavit has not been furnished. It was claimed that the auction purchasers are bonafide purchasers of the property in dispute in public auction for consideration. A legal objection as also taken that the objection petition is under Order 21 Rule 89 CPC or C.R. No. 2920 of 2008 [7] Order 21 Rule 90 CPC and the objections have been filed without depositing 5% of the auction money and the full amount of the auction money which was required to be deposited in the court before filing the objection petition. The Executing Court dismissed the objection petition by passing the following order:- “10. Though, it is not mentioned in the objections under which provisions the same have been filed but it is clear that after the auction proceedings are completed, the objections can be filed u/o 21 Rule 89 or u/o 21 Rule 90 CPC. 11. It is an admitted fact that sale of property of JD Vidya Sagar has already been effected vide order dated 29.12.2005 by a revenue officer under the orders of the Court. Even during the course of arguments, Ld. Counsel for the applicants/ objectors were not able to disclose under which section or provision of law, the applicant or objector has filed these objections. Any how, the applicant had not paid 5% of the purchased money, as required U/O 21 Rule 89 (1) (a) of CPC nor had made any payment to the DH, as required u/O 21 Rule 89 (1) (b) of CPC. In fact, these objections should have been filed against the attachment of this property which was attached C.R. No. 2920 of 2008 [8] vide rapat No.707 dated 30.8.2002 i.e. approximately five years ago. Therefore, at the most these objections can be said to have been filed u/o 21 rule 90 CPC. The applicant- objector has no where given particulars of any irregularity or fraud nor has alleged the existence of these facts. It is also not alleged anywhere that the sale should be set aside on the ground of any material irregularity or fraud in publishing or conducting it nor pleaded by substantial injury by such irregularity or fraud. The ground pleaded for setting aside the sale are i) its earlier attachment with it, ii) that the property has been sold for a lesser value. Although ld. Court has restrained the JD from alienating the suit property till the final decision of the case or has attached the suit property in civil suit No.11-1 dated 9.2.99 and the civil suit was finally adjudicated by the Ld. Court on 28.11.2006 and in execution filed by the DH, the property of JD was attached on 29.2.2007 vide rapat No.105 but no such fact was brought to any light at the time of conducting auction, as evident from those proceedings dated 29.12.2005. Even no entry was found in the revenue record. However, C.R. No. 2920 of 2008 [9] attachment of the property of JD in civil suit (supra) is subsequent in nature. Applicant - objector has not placed on file any document to know the exact value of property. Even if there is a prior attachment of auction purchaser, even then it does not create bar for the court sale in execution of another decree and with the court sale, interest of JD passes away to auction purchaser and there is nothing left to be sold later at the instance of another decree holder who may have attached the property earlier. Here I am supported with case law reported as AIR 1978 Kerala 11 wherein it has been observed that:- “The purpose of the attachment is solely for the purpose of protecting the attaching creditor’s right to bring to sale in execution the right, title and interest in the attached property of the judgment- debtor and there is no reason for holding that it continued to affect the attached property in any way when the attached property no longer continues to be the property of the judgment- debtor. The auction purchaser takes the property free from attachment. Hence it must be taken as fairly settled and when a property is old in C.R. No. 2920 of 2008 [10] execution of a money decree it cannot be sold against at the instance of the decree holder who had attached it before it was actually sold. The consequence is on the happening of a judicial sale, all previous attachments effected upon the property sold fall on the ground (1886 ILR 12 Cal 317 and AIR 1921 Mad 30 and AIR 1921 Pat 409 and 14 Trav. LT 767).” 12. Therefore, after going through documents placed on file and respective contentions, the Court is of the opinion that there is no substance in objection petitions filed by objector/ applicant. So, the same deserve dismissal and are herby dismissed.” A perusal of the above finding of the Executing Court indicates that the Executing Court has considered the objections under Order 21 Rule 89 CPC as well as Order 21 Rule 90 CPC. The following factors weighed with the Executing Court while dismissing the objection petition:- i) the objection petition does not discloses under which Section or provision of law the same has been filed; ii) the objector has not paid 5% of the purchase money as required under Order 21 Rule 89 (1) CPC; C.R. No. 2920 of 2008 [11] iii) no payment has been made to decree holder as required under Order 21 Rule 89 (1) (b) CPC; iv) the objections should have been filed against the attachment of the property which was attached vide rapat No.707 dated August 30, 2002, approximately five years prior to the passing of the order; v) no particulars of irregularity or fraud have been established; vi) it is not alleged anywhere that sale should be set aside on the ground of any material irregularity or fraud in publishing or conducting it; vii) it has not been pleaded that any substantial injury has been caused on account of illegality or fraud; viii) though civil Court had restrained the judgment debtor from alienating the suit property till final decision of the civil suit in Civil Suit No. 11-1 dated February 9, 1999, which suit stood finally adjudicated by the civil Court on November 28, 2006 and in execution filed by decree-holder, the property was attached on February 28, 2007 vide rapat No.105 but no such fact was brought to light at the time of conducting auction; C.R. No. 2920 of 2008 [12] ix) no document indicating exact value of the property has been placed on file; x) even if there is prior attachment, it will not debar the Court to sell the property in Court auction. It will not be out of place to mention here that C.M. No. 18660- CII of 2009 was filed in C.R. No. 2920 of 2008 under Order 1 Rule 10 CPC by Punjab National Bank claiming that the property which has been sold in auction for a sum of Rs.4.75 lacs has got value of more than Rs.3 crores whereas it has been sold for Rs.4.75 lacs only. It has been disclosed that the said property stood already attached by Debt Recovery Tribunal before the sale was conducted which is evident from Commissioner’s report dated February 17, 2003 submitted to the Recovery Officer, DRT, Chandigarh, prepared by Sh.Amit Rishi, Advocate, who was appointed as Court Commissioner attaching the abovesaid properties. A copy of the Commissioner’s report in case PNB Vs. M/s Ashoka Cotton Company and others has been placed on record. The said report indicates that the warrants of attachment were pasted in front of the wall of the residence of Sh.Ravi Kant Ahuja son of Late Sh.Chunni Lal, resident of Street No.10-11, Chowk No.1, Abohar on February 17, 2003. The applicant- Punjab National Bank claimed that the consideration amount received on account of re-sale of the property can be paid to the secured creditor i.e. Punjab National Bank as no one else is entitled to receive the sale consideration as the property stands attached in favour of Punjab National Bank. The Punjab National Bank sought to be impleaded as respondent No.5. C.R. No. 2920 of 2008 [13] Counsel for Punjab National Bank was heard. Counsel was directed to produce a copy of the order of Debt Recovery Tribunal. Pursuant to the directions, copy of the order passed by the Debt Recovery Tribunal, Chandigarh, in case Punjab National Bank Vs. M/s Tek Chand Daulat Rai was made available for perusal of the Court which indicated that an award of recovery of Rs.6100180.00/- had been passed in favour of the Bank against 12 defendants with interest at the rate of 14.79% per annum. A certificate dated July 31, 2002 under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 against M/s Ashoka Cotton Company through its partners issued by Presiding officer, Debt Recovery Tribunal at Chandigarh directing M/s Ashoka Cotton Company to pay jointly or severally a sum of Rs.6100180.00/- with interest. Taking into consideration the abovesaid facts, it is apparent that the PNB being a decree-holder against M/s Ashoka Cotton Company has got an interest in the same property. Property had been got attached by the Punjab National Bank and warrant of attachment had been served upon the partners of judgment debtor company on February 17, 2003 whereas the sale has been effected in favour of auction purchasers (respondents No.3 and 4) on December 29,2005. In view of said circumstances, impleadment of Punjab National Bank is necessary for just decision of the present revision petitions and is, therefore, permitted to be impleaded as respondent No.5 exercising powers under Order 1 Rule 10 (2) CPC. But it is made clear that the Bank has been permitted to be impleaded as a party in order to enable the Court to arrive at a just conclusion in the case. The Punjab C.R. No. 2920 of 2008 [14] National Bank will be entitled to avail the legal remedy available to it by challenging the auction proceedings dated December 29, 2009, in accordance with law. Counsel for the petitioners have vehemently contended that the patent fraud has been played on the Court by the judgment debtor in connivance with auction purchaser with sole objective to dupe the creditors who have got a claim against the judgment debtor and are entitled to get the amount due to them by fair auction of the property sold without following the procedures of law. Sanjay Ahuja had obtained an exparte decree for recovery of Rs.314423.85/- vide decree dated November 13, 2001 against M/s Ashoka Cotton Company and its partners. The judgment debtor in collusion with plaintiff Sanjay Ahuja got the decree passed against it and subsequently got it sold to the auction purchasers to play fraud with the court as well as with the creditors who have been deceived. It is an admitted fact that the property stands attached by civil Court as well as by Debt Recovery Tribunal. On the other hand, counsel for the respondents-auction purchasers has raised objections that the fraud and misrepresentation has to be pleaded and proved. It was also argued by counsel for the respondents that mere inadequacy of price is not a ground for setting aside a Court sale. In support of the said contention, reliance was placed on Rajender Singh Vs. Ramdhar Singh and others, AIR 2001 SC 2220 and Om Parkash Vs. Land Acquisition Collector, Urban Estates, Punjab, 1997 (3) PLR 176. C.R. No. 2920 of 2008 [15] I have heard counsel for the parties and carefully gone through the impugned order and the documents placed on record. The objectors are the creditors from judgment debtors having interest in the property. All have claimed that there has been material irregularity in conduct of sale. It has been claimed that there is inadequacy of the sale consideration. Punjab National Bank claims that the value of the property is worth Rs.3 crores whereas the objector No.1 claims Rs.80 lacs and objector No.2 claims Rs.50 lacs. It has also been claimed that a fraud has been played on the Court as well as on the decree holders. The lower Court has considered the subject matter very casually without realizing that inadequacy of the price has always been considered to be a sufficient ground for setting aside the sale in M/s Kayjay Industries (P) Ltd. Vs. M/s Asnew Drums (P) Ltd and others, AIR 1974 SC 1331, wherein a Court had declined to affirm the highest bid in its anxiety to secure a better price. Upholding the said order, the Hon’ble Supreme Court observed as follows:- “Certain salient facts may be highlighted in this context. A Court sale is a forced sale and, notwithstanding the competitive element of a public auction, the best price is not often forthcoming. The judge must make a certain margin for this factor. A valuer’s report, good on a basis, is not as good as an actual offer and variations within limits between such an estimate, however, careful, and real bids by seasoned businessmen before the auctioneer are quite on the cards. More so, when the C.R. No. 2920 of 2008 [16] subject- matter is a specialized industrial plant, which has been out of commission for a few years, as in this case, and buyers for cash are bound to be limited. The brooding fear of something out of the imported machinery going out of gear, the vague apprehensions of possible claims by the Dena Bank which had a huge claim and was not a party, and the litigious sequel at the judgment-debtor’s instance, have ‘scare’ value in inhibiting intending buyers from coming forward with the best offers. Businessmen make uncanny calculations before striking a bargain and that circumstance must enter the judicial verdict before deciding whether a better price could be had by a postponement of the sale.” Following the judgment in Navalkha and Sons Vs. Ramanya Das, AIR 1970 SC 2037, it was held that in every case it is the duty of the Court to satisfy itself that having regard to the market value of the property, the price offered is unreasonable. Unless the Court is satisfied about the adequacy of the price, the Act of confirmation of sale would not be proper exercise of judicial discretion. Relevant portion of the judgment is reproduced as under:- “Form 29 prescribed in Appendix E the Code contains condition No.3 which is in like terms. The Court’s active obligation to exercise a discretion to make a fair sale out of a Court auction and advert a distress sale- is C.R. No. 2920 of 2008 [17] under scored by this provision. In all public sales the authority must protect the interests of the parties and the rule stated by this Court in Navalkha & Sons v. Ramanya Das, (1970) 3 SCR 1 (AIR 1970 SC 2037) thus: “The principles which should govern confirmation of sales are well established. Where the acceptance of the offer by the Commissioners is subject to confirmation of the Court the offerer does not by mere acceptance get any vested right in the property so that he may demand automatic confirmation of his offer. The condition of confirmation by the Court operates as a safeguard against the property being sold at inadequate price whether or not it is a consequence of any irregularity or fraud in the conduct of the sale. In every case it is the duty of the Court to satisfy itself that having regard to the market value of the property the price offered is unreasonable. Unless the Court is satisfied about the adequacy of the price the act of confirmation of the sale would not be a proper exercise of judicial discretion.” Be it by a receiver, commissioner, liquidator or Court this principle must govern. This proposition has been propounded in many rulings cited before us and summed up by the High Courts. The expressions material irregularity in the conduct of the sale must be C.R. No. 2920 of 2008 [18] benignantly construed to cover the climax act of the Court accepting the highest bid. Indeed, under the Civil Procedure Code, it is the Court which conducts the sale and its duty to apply its mind to the material factors bearing on the reasonableness of the price offered is part of the process of obtaining a proper price in the course of the sale. Therefore, failure to apply its mind to this aspect of the conduct of the sale may amount to material irregularity. Mere, substantial injury without material irregularity is not enough even as material irregularity not linked directly to inadequacy of the price is insufficient. And where a Court mechanically conducts the sale or routinely signs assent to the sale papers, not bothering to see if the offer is too low and a better price could have been obtained, and in fact the price