“C.R.” IN THE HIGH COURT OF KERALA AT ERNAKULAM3 PRESENT : THE HONOURABLE MR. JUSTICE THOMAS P.JOSEPH FRIDAY, THE 30TH JULY 2010 / 8TH SRAVANA 1932 CRP.NO. 60 OF 2010() -------------------- (E.A. NO.57 OF 2009 IN E.P. NO.56 OF 2002 IN O.S. NO.405 OF 2001 SUB COURT, PALAKKAD) REVN. PETITIONER(S): PETITIONER IN CRP -------------------------------------- M/S.A.G.M.CONSTRUCTIONS (P) LTD., 16/602, KUNNATHURMEDU, PALAKKAD-678 013, REPRESENTED BY ITS MANAGING DIRECTOR. BY ADV. SRI.P.B.KRISHNAN RESPONDENT(S): RESPONDENTS IN CRP --------------------------------- 1. S.SHIBU KUMAR, S/O.M.SETHU, NAVANCHIKODE, PUTHUR, PALAKKAD. 2. VISRUTHA KUMAR, S/O.C.K.NAIR, KATTALATH HOUSE, KOTTEKKAD, PALAKKAD. 3. DR.KRISHNA MOHAN, S/O.DR.P.G.MENON, KRISHNA NIKETHAN, COLLEGE ROAD, PALAKKAD. ADV. SRI.G.S.REGHUNATH FOR R3 THIS CIVIL REVISION PETITION HAVING BEEN FINALLY HEARD ON 30/07/2010, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: “C.R.” THOMAS P.JOSEPH, J. ==================================== C.R.P. No.60 of 2010 ==================================== Dated this the 30th day of July, 2010 O R D E R The following points arising for a decision. (i) Is a pendente lite purchaser of property placed under court attachment a 'representative' of the transferor – defendant entitled to challenge the court auction sale? (ii) Could a sale be set aside for non- compliance of Rule 64 of Order XXI of the Code of Civil Procedure, 1908 (for short, “the Code”) in an application preferred under Section 47 of that Code after the period 60 days prescribed under Article 127 of the Limitation Act, 1963 (for short, "the Act”)? (iii) Whether the executing court was correct in rejecting the application of petitioner to set aside the auction sale on the ground of C.R.P. No.60 of 2010 -: 2 :- illegality, fraud and collusion in publishing and conducting the sale? 2. This Revision is brought from the order passed by learned Sub Judge, Ottappalam on E.A. No.57 of 2009 in E.P. No.56 of 2002 in O.S. No.405 of 2001. Respondent No.1-decree holder instituted the suit for recovery of money due from respondent No.2. 25 cents and a marriage hall situated thereon belonging to respondent No.2 was placed under attachment before judgment on 16.11.2001. The court passed a decree in favour of respondent No.1 allowing him to recover the amount from respondent No.2. That decree was put into execution. Notice under Rule 22 of Order XXI of the Code was served on respondent No.2-judgment debtor but there was no response. Respondent No.1 waned to sell the attached property and produced draft proclamation of sale of the said 25 cents and marriage hall. Notice under Rule 66(2) of Order XXI was issued to respondent No.2. Allegedly on behalf of respondent No.2, that notice was served on one Dr.P.G. Menon (later he informed the executing court that he was not authorised to receive the notice on behalf of respondent No.2). The proclamation of sale was settled fixing the upset price at Rs.5 lakhs (subject to the liability to the Kerala Financial Corporation – for short, “the KFC” to the C.R.P. No.60 of 2010 -: 3 :- tune of Rs.80 lakhs). Respondent No.3 purchased the property for Rs.5.50 lakhs (subject to the liability to the KFC) in the court auction held on 04.03.2008. Executing court confirmed the sale in favour of respondent No.3 on 06.08.2008 and issued sale certificate on 30.12.2008. Petitioner, a Private Limited Company claimed to have purchased 44 cents including the 25 cents and marriage hall (sold in court auction) as per sale deed No.2067 of 2002 dated 10.06.2002 executed by respondent No.2 through his Power of Attorney Holder, Dr. P.G. Menon. According to the petitioner, it got possession of the said property on execution of the said sale deed. It was agreed between petitioner and respondent No.2 that the latter would discharge liability to the KFC or other financial institutions due as on the date of sale. While so, the KFC initiated steps against petitioner for recovery of amount and two Directors of petitioner volunteered to clear major portion of that liability. On 15.01.2009 petitioner learnt that in execution of the decree in O.S. No.405 of 2001, 25 cents and marriage hall (which formed part of the 44 cents covered by sale deed No.2067 of 2002) was sold in court auction and purchased by respondent No.3 who is the son of Dr.P.G. Menon. Petitioner filed E.A. No.57 of 2009 to set aside the sale on following grounds: C.R.P. No.60 of 2010 -: 4 :- 1. Respondent No.2 did not inform the executing court about the assignment (of the property) in favour of petitioner as per document No.2067 of 2002 dated 10.07.2002. 2. The 25 cents and marriage hall worth more than Rs.2 crores was sold in court auction for a paltry sum of Rs.5.50 lakhs. Even the annual income from the said property was Rs.2.40 lakhs which would show that market value shown and upset price fixed are low. 3. Respondent No.1 has not produced the relevant document and affidavit as required by the Rules of procedure before settlement of proclamation of sale. 4. Considering the prevailing market value of property at the time of settlement of proclamation respondent No.1 had no right to sell the entire property for realization of the decree amount. Only a portion of the property proportionate to the amount due as per the decree alone ought and need to have been sold. There was no finding arrived at by the executing court whether entire property or what extent of property should be sold considering market value of the property. 5. Executing court has not entered into any finding as to the market value of the property at the time of settlement of proclamation. C.R.P. No.60 of 2010 -: 5 :- 6. Sale conducted without complying with the mandatory duty cast on the executing court made the sale null and void. 7. Respondent No.3 who purchased the property is a major shareholder of petitioner-company and is the son of Dr. P.G. Menon, Power of Attorney Holder of respondent No.2. Respondent No.3 was fully aware that value of the property is more than Rs.two crores. Suppressing that fact from the executing court respondent No.3 has purchased the property playing fraud on court and petitioner. Respondent No.3 bid the auction in collusion with respondent Nos.1 and 2 and Dr.P.G. Menon. Hence sale held on 06.08.2008 is null and void. 3. Respondent No.3 resisted the application contending that it is bared by limitation as the application is filed beyond 60 days of the date of sale prescribed under Article 127 of the Act; that petitioner has no locus standi to file the application, signatory to the application (Managing Director of the Company) has no right to present the application or represent petitioner- Company, its Board of Directors has not resolved to file any such application and that sale deed dated 10.06.2002 relied on by petitioner is invalid and void as it is executed after the property was attached before judgment and cannot prevail over the court sale. It is incorrect to say that property is worth more than Rs.two C.R.P. No.60 of 2010 -: 6 :- crores. Even as per the sale deed relied on by petitioner value of the 44 cents (including property sold in auction) is only Rs.19 lakhs and that property was subject to a mortgage in favour of the KFC for Rs.80 lakhs, there were also several other creditors who had initiated action against respondent No.2 and the said property. Respondent No.3 purchased the property in court auction subject to all those claims and hence the sale price of Rs.5.50 lakhs is reasonable. Respondent No.3 denied the allegation of illegality, fraud and collusion in publishing and conducting the sale. 4. In the Executing court Exts.A1 and A2 were marked for petitioner. Exhibit A1 is the Certificate of Incorporation of petitioner-Company while Ext.A2 is a letter dated 30.03.2007. Executing court held that there is no evidence of any agreement for sale preceding execution of the sale deed as argued on behalf of petitioner. On the other hand property was attached before judgment on 16.11.2001 but even the sale deed relied on by petitioner is executed only on 10.06.2002, pendente lite after attachment and is hit by Sec.64 of the Code. Exhibit A1 shows that petitioner - company came into existence only on 13.04.2002. Exhibit A2, letter dated 30.03.2007 shows that petitioner was aware of attachment of the property even before C.R.P. No.60 of 2010 -: 7 :- 2009. Executing Court held that grounds urged by petitioner to set aside the sale squarely fell under Order XXI Rule 90 of the Code and hence the application (E.A. No.57 of 2009) filed beyond 60 days from the date of sale prescribed under Article 127 of the Act is time barred. It is also found that no evidence is produced to show that petitioner was in possession of the auctioned property at the relevant time. According to the executing court property could not have been sold piece meal since its extent is only 25 cents and the building covered major portion of that property. Hence sale of a portion of the property would have affected convenient enjoyment of rest of the property. Executing court also observed that though property was sold for Rs.5.50 lakhs the sale was subject to liability to the KFC to the tune of Rs.80 lakhs. In the circumstances contention that property was sold for a paltry amount was not accepted. E.A.No.57 of 2009 was dismissed. That order is under challenge in this revision. Learned counsel for petitioner contended that though transfer in favour of petitioner was pendent lite and subsequent to the attachment, petitioner is a 'representative' of respondent No.2 entitled to challenge the court auction sale in the same way respondent No.2 could challenge it. According to the learned counsel non-compliance with Rule 64 of Order XXI of C.R.P. No.60 of 2010 -: 8 :- the Code in settling the proclamation of sale affected jurisdiction of the executing court to sell the property and hence sale effected without complying with the said provision is a nullity which could be urged by respondent No.2 and/or as his 'representative' under Sec.47 of the Code. The period of limitation for an application under Sec.47 of the Code is three years (from the date of sale) as per Article 137 of the Act. E.A. No.57 of 2009 has been preferred within the said period. Hence the finding of executing court that E.A. No.57 of 2009 is barred by limitation is not correct. So far as allegation of fraud is concerned it is contended by learned counsel that facts and circumstances of the case indicated that there was fraud and collusion between respondent Nos.1, 3 and Dr.P.G. Menon. Learned counsel contends that though all the relevant documents could not be produced in the executing court those documents are appended to the revision petition and may be received in evidence. Those documents would show the fraud played by Dr.P.G.Menon in obtaining property in the name of petitioner and later getting the property sold in the name of his son for a paltry amount. Learned counsel contended that fraud vitiated even the solemn proceedings of the court. In response it is contended by learned counsel for respondent No.3 that the C.R.P. No.60 of 2010 -: 9 :- alleged sale in favour of petitioner is hit by Sec.64 of the Code, it is invalid as against all claims arising under the attachment and hence petitioner has no locus standi to challenge the court sale. It is contended that at any rate on the grounds pleaded it is Rule 90 of Order XXI of the Code that applied and the application ought to have been preferred within 60 days of the sale as required by Article 127 of the Act. It is incorrect to say that there is no compliance with Rule 64 of Order XXI of the Code. Learned counsel has referred me to the order of executing court to buttress his contention that the sale though for Rs.5.50 lakhs was subject to the liability to the KFC to the tune of Rs.80 lakhs and at a time when the property was subject to several attachments at the hands of other creditors. It is contended by learned counsel that as observed by the executing court in the order under challenge property could not have been sold piece meal as severance would have affected enjoyment of rest of the property. Points 1 & 2. 5. The property sold in court auction was attached by respondent No.1-decree holder on 16.11.2001 and according to the petitioner, it purchased 44 cents including the said C.R.P. No.60 of 2010 -: 10 :- property as per sale deed No.2067 of 2002 dated 10.6.2002. A copy of that sale deed is produced along with the Revision Petition. That document states that petitioner purchased 44 cents (including the property attached and sold) for a total consideration of Rs.19 lakhs. Section 64 of the Code states that where an attachment has been made any private transfer or delivery of the property attached or of any interest therein and any payment to the judgment debtor of any debt, dividend or other moneys contrary to such attachment shall be void as against all claims enforceable under the attachment. Could petitioner in the circumstances challenge the court sale? 6. Relevant provisions of Sec.47 of the Code reads, “47. Questions to be determined by the Court executing decree:- (1) All questions arising between the parties to the suit in which the decree was passed, or their ‘representatives’, and relating to the execution, discharge or satisfaction of the decree, shall be determined by the Court executing the decree and not by a separate suit. (2) ................... (3) Where a question arises to whether C.R.P. No.60 of 2010 -: 11 :- any person is or is not the 'representative' of a party, such question shall, for the purposes of this section, be determined by the Court.” A 'representative' of a party to the suit is a person coming under sec.47 of the Code. Section 244(c) of Code of Civil Procedure, 1882 (for short “the old Code”) contained a provision almost similar to Sec.47 of the Code. Section 244 read, “The following questions shall be determined by (order of) the Court executing a decree and not by separate suit (namely):- (a) ................... (b) ................... (c) any other questions arising between the parties to the suit in which the decree was passed, or their 'representatives', and relating to execution, discharge or satisfaction of the decree (or to the stay of execution thereof).” 7. Is an assignee pendente lite from a party to the proceeding a ‘representative’ of such party as understood in Section 47 of the Code?. The word 'representative' occurring in Sec.47 of the Code includes not only a legal representative in C.R.P. No.60 of 2010 -: 12 :- the sense of heirs, executors or administrators but also takes in a “representative in interest”, i.e., a transferee of a party to the proceeding or a transferee of such party's interest who so far as such interest is concerned is bound by the decree in the case. The word 'representative' is used in Sec.47 of the Code as meaning a person in whom an interest in the property is vested either by an act of party or by operation of law. A Full Bench of the Calcutta High Court considered the significance of the word “representative” which occurred in Sec.244(c) of the Old Code in Ishan Chunder Sirkar v. Beni Madhub Sirkar ([1896] ILR [24] Calcutta 62). The court held that the word 'representative' occurring in Sec.244(c) of the Old Code has a wider significance than 'legal representative' and hence the word 'representative' included a person who is a representative in interest of the judgment debtor. Speaking for the Bench Banerjee, J, observed, “The Code of Civil Procedure in Sec.244 uses the term 'representative' which may well include a 'representative in interest', that is, a purchaser of interest of the judgment debtor in any property, which is affected by the decree, and this is the view C.R.P. No.60 of 2010 -: 13 :- taken by Mr.Justice Pontifex in Rash Mehary Mookhopadhya v. Surnomoyee (ILR 7 Calcutta 403).” The following tests were laid down in Ajodhya Roy v. Hardwar Roy ([1909] 9 Calcutta Law Journal 485) to determine whether a person is a 'representative' of a party to the suit: “(1) Whether any portion of the interest of the decree holder or of the judgment debtor which was originally vested in one of the parties to the suit, has, by act of parties or by operation of law, vested in the person who is sought to be treated as representative, and; (2) If there has been a devolution of interest, which so far as such interest is concerned, that person is bound by the decree.” It was held that the word 'representative' used in Sec.244(c ) of the Old Code includes any 'representative' in interest, i.e., any C.R.P. No.60 of 2010 -: 14 :- transferee of the interest of the decree holder or judgment debtor, who so far as such interest is concerned is bound by the decree. The Allahabad High Court in Gulzari Lal v. Madho Ram and Another (1904 [26] ILR (All.) 447), Calcutta High Court in Nishi Kanta v. Kumar Promatha (AIR 1934 Calcutta 145), Privy Council in Parameshari Din v. Ram Charan (AIR 1937 PC 206), Mysore High Court in Madam Naranappa v. P.D. Khurana (AIR 1953 Mysore 153), Madras High Court in R.D.Deshpande v. R.Srinivasan and Others ([1954] 1 MLJ 501) and the Delhi High Court in J.L.Arora v. M.E. Periera (AIR 1977 Delhi 12) have taken that view. This Court in Saju George v. Thomas (2008 [4] KLT 486) has also taken the view that a pendent lite transferee is a 'representative' of the defendant. Though initially the Bombay High Court did not agree with the above view (See Basappa v. Bhimangowda – AIR 1928 Bombay 65) that court also later accepted the view that a pendent lite transferee is a ‘representative’ of his vendor (See Gopal Attu Tippe v. Dnyanu Maruti Khade – AIR 1938 Bombay 649). Thus the expression 'representative' occurring in Sec.47 of the Code is wide enough to take in a transferee in C.R.P. No.60 of 2010 -: 15 :- interest of any of the parties to the suit provided the interest transferred is bound by the decree that may be passed in the suit. Petitioner being a transferee of the attached property from respondent No.2 though pendente lite is a 'representative' of respondent No.2 coming within the scope of Section 47 of the Code since the property transferred to the petitioner is bound by the decree passed in the case. 8. Would the fact that property purchased by petitioner pendente lite was subject to an attachment change the character of petitioner as a ‘representative’ of respondent No.2 and disable it from challenging the court auction sale? Section 64 of the Code does not make the transfer after attachment invalid or ineffective between the defendant and his transferee. That provision only makes the transfer to the extent it concerned claims enforceable under the attachment void. The transaction continues to be valid between the transferor and transferee but the only limitation is that the transaction cannot prevail over claims arising under the attachment. The transfer in favour of petitioner being pendente lite and being after the court attachment on 16.11.2001, property is bound by the decree that may be passed in the suit. Referring to Sec.244(c ) of the old C.R.P. No.60 of 2010 -: 16 :- Code (quoted supra) the Allahabad High Court in Gur Prasad and Others v. Ram Lal and Others ([1898] 22 Allahabad 20) held that the purchaser of property which at the time of purchase is under attachment in execution of a decree is also a 'representative' of judgment debtor-vendor within the meaning of Sec.244(c) of the old Code. In Mathewson v. Gobardhan Tribedi (XXVIII Calcutta 492) a property was attached in execution of a decree against the judgment debtor. While the attachment was in force judgment debtor granted a lease of that property to the defendant who set up a right to hold possession of the property. It was held that defendant is a 'representative' of the judgment debtor within the meaning of Sec.244(c) of the old Code. In Paramananda Das v. Mahabeer Dossji (XX ILR (Mad.) 378) decree holder attached the property and prepared to bring it for sale. The judgment debtor executed a mortgage deed in favour of a third person. That person was held to be a 'representative' of the judgment debtor as that word is understood in Sec.244(c) of the old Code. The Allahabad High Court has also taken the same view in Gur Prasad and others v. Ram Lal and others (XXI ILR C.R.P. No.60 of 2010 -: 17 :- (All.) 20). Viewed in that line, that the property transferred pendent lite was subject to an attachment did not change character of the transferee – he continued to be a ‘representative’ in interest of the transferor defendant and hence a 'representative' of the defendant as the expression is used in Sec.47 of the Code. I accept the contention of learned counsel for petitioner that notwithstanding that assignment of the property (sold in auction) was pendente lite and subsequent to the court attachment, petitioner in its capacity as a 'representative' of respondent No.2 is entitled to challenge the sale under Sec.47 of the Code. 9. Could petitioner being a transferee from respondent No.2 pendente lite and subsequent to the attachment bring a petition under Order XXI Rule 90 of the Code?. A judgment debtor could bring an application under that provision as his interests are affected by the sale. In Narayanan v. Pappayi (AIR 1927 Madras 783) a purchaser of one item of the mortgaged property was found entitled to apply under Rule 90 of Order XXI of the Code to have the sale of other items of mortgaged property set aside as he is a person whose interests are affected by the sale. Mitter, J. in Bhupendra Nath Roy Choudhury v. Jatindra Nath Roy Choudhury (AIR 1933 Calcutta 788) held that a C.R.P. No.60 of 2010 -: 18 :- purchaser after attachment and before sale is a person whose interests are affected by the sale within the meaning of Rule 90 of Order XXI of the Code. Hence petitioner by virtue of the assignment in its favour though pendent lite and subsequent to the attachment can be said to be a person the interest of which is affected by the sale. Section 146 of the Code (newly introduced in the Code of 1908) states that save as otherwise provided by the Code or by any law for the time being in force, where any proceeding may be taken or application made by or against any person, then such proceeding may be taken or the application may be made by or against any person claiming under him. The Supreme Court said in Saila Bala v. Nirmala Sundari (AIR 1958 SC 394) that Sec.146 has been introduced in the Code with the object of facilitating the exercise of right by persons in whom they come to be vested by devolution or assignment and that being a beneficient provision, it should be construed liberally so as to advance justice and not in a restricted or technical sense. Petitioner who purchased the property from respondent No.2 though pendente lite could assail the court auction sale in the way its assignor, respondent No.2 could even under Rule 90 of Order XXI of the Code. C.R.P. No.60 of 2010 -: 19 :- 10. Petitioner has a case that it is pursuant to an agreement for sale which was prior to the court attachment that it purchased the property and hence Sub-sec.(2) of Section 64 of the Code applied. Sub-sec.2 of Section 64 of the Code says that nothing in that Section shall apply to any private transfer or delivery of the property attached or of any interest therein made in pursuance of any contract