HON'BLE SRI JUSTICE M. SATYANARAYANA MURTHY C.M.S.A. Nos.19 AND 28 OF 2010 COMMON JUDGMENT: 1. These two Appeals are separately preferred against the decree and judgment dated 31.03.2000 passed in Appeal Suit No.105 of 1991 by the I Additional District Judge, East Godavari District at Rajahmundry (for short, ‘the appellate Court’). 2. The appellant in CMSA No.19 of 2000 is the 1st petitioner and appellant in CMSA No.28 of 2000 is the 2nd petitioner in I.A. No.47 of 1982 in I.P. No.24 of 1970 on the file of the Court of Subordinate Judge, Rajahmundry (for short, ‘the trial Court’). 3. For convenience of reference, the ranks given to the parties, before the trial Court, will be adopted throughout this common judgment. 4. I.A. No.47 of 1982 is filed by the petitioners, who are the legal representatives of deceased insolvent, before the trial Court, under Section 68 of the Provincial Insolvency Act, 1920 (for short, the ‘PI Act’) to set-aside the sale held by the Official Receiver on 07.06.1982, in respect of petition schedule property, alleging that the Official Receiver failed to give notice to the insolvent’s representatives or creditors of the proposed sale; as an initial step, the Official Receiver should have postponed the sale when he was informed of the composite scheme of arrangement between the creditors and the insolvent’s representatives; the Official Receiver should have inspected the property proposed to be sold in auction in order to find out ways and means to get high and reasonable price for the property; the Official Receiver failed to obtain encumbrance certificate in respect of the property and notify all the mortgages; the publication of sale in ‘samacharam’ paper which is a very small daily paper not having wide circulation in the locality without any details of the area of item by item or in total and in which survey number the up stair building situate and it’s area, is not a valid publication. The Official Receiver failed to disclose in the publication or at the time of sale whether he was selling the share of the insolvent alone or the shares of his sons also and as such the sale is bad in that regard; the Official Receiver has no power to sell the shares of the sons because they got divided in status from the deceased insolvent long prior to Insolvency Petition and the insolvent lost the right to sell sons’ shares; the Official Receiver should have obtained the registration value of the stamp duty of the property sold as fixed by the Government under the Indian Stamp Act, 1899 to know the market value of the property which is Rs.100/- per Sq. yard of vacant site; the price fetched at the auction is very low when compared with the market value. If the Official Receiver informed the sons of the insolvent about the proposed sale, they would have helped the Official Receiver in dividing the property in convenient plots so that the property would have fetch higher price at the auction; the Official Receiver is interested even previously in the auction purchaser and is determined to knock down the sale in his favour; the Official Receiver overlooked the illegal conspiracy and combination among the considerable number of bidders present at the auction, who deputed an incredible small number of three persons to put up nominal bids to create that there was competition; whereas all the bidders who attended in considerable number did not take part in the auction only to divide the illegal spoils got through their nominal bidders among themselves. Therefore, the sale by the Official Receiver made on 07.06.1982 is improper, unfair and being for an incredibly low price and is liable to be set-aside. 5. The 1st respondent-Official Receiver filed counter denying material allegations of the petition inter-alia contending that he is not concerned about the alleged composition scheme or arrangement as the sale was already fixed and conducted as scheduled; the petitioner should have taken steps in the insolvent Court for stay of the sale and as alleged the ‘samacharam’ is not a small paper; the proposed sale by the Official Receiver is made known that he is selling the insolvent’s share and the sons’ shares; the administration of the estate by the Official Receiver is a long pending matter; the Official Receiver obtained permission of the insolvency court to sell the insolvent’s sons’ shares also in Items 2 to 6 of the schedule in I.A. No.135 of 1977 in I.P. No.24 of 1970. In pursuance of the permission accorded to him, the Official Receiver took possession of Item 4 and proposed to sell the same subject to 4 mortgages in favour of S.V. Subbarao and others. When the Official Receiver took possession of Item No.4, there was a dilapidated building. The total amount due under the mortgages would be around Rs.4,00,000/-. The Official Receiver also made a publication in ‘Rajahmundry Samacharam’ which gives wide publicity not only at Rajahmundry but at various other places. In pursuance of the said publication, several persons about 50 in number came to the office and out of them 10 bidders participated in the bid. Before conducting auction by the Official Receiver, some of the creditors and sons of the deceased insolvent i.e., petitioners filed petitions and memos requesting the Official Receiver to stop the sale. The Official Receiver rejected their request on the ground that the petitions were filed with a view to delay the administration. By that time, an amount of Rs.40,000/- was outstanding due to the Income-tax Department towards the balance of capital gain tax out of the estate, that the auction fetched good price and that the price fetched is not at all low as alleged in the petition. The sale is for the benefit of the General Body of the creditors. The composition scheme is collusive one and it is not for the benefit of the General Body of creditors; the mortgages mentioned are bogus. The auction held on 07.06.1982 is legal and proper and the same cannot be set-aside. 6. The 2nd respondent-auction purchaser filed counter denying the material allegations of the petition inter-alia contending that the alleged composition scheme or arrangement is not true and correct and the same is engineered at the instance of the vested remainders for their own reasons and for their benefit but not for the benefit of the General body of creditors. He contended that bogus mortgage suits were filed by the insolvent’s daughter, daughter-in-law and others to deprive the general body of the creditors on the bonds alleged to have been executed by the insolvent nominally and without any consideration. He further contended that more than 12 members participated in the auction and they are very competitive but there is no collusion among the bidders as alleged and the sale price fetched is not low. He further paid an amount of Rs.50,000/- on the date of the sale and Rs.2,10,000/- within 14 days of the sale and thus deposited a sum of Rs.2,60,000/- that the sale took place in the presence of the petitioners Advocate Sri K. Vivekananda and other Advocates. Hence, the motive attributed to the 1st respondent is without any basis and for their own reasons. He further contended that he has no previous or prior acquaintance with the 1st respondent either in his personal capacity or official capacity and as such the contra allegations made in the petition are false. Therefore, the petition is liable to be dismissed. 7. Basing on the above pleadings, the trial Court framed the following point for consideration: Whether the auction sale dated 07.06.1982 conducted by the Official Receiver is liable to be set-aside? 8. During course of enquiry on behalf of the petitioners, PWs.1 to 7 were examined and Ex.A-1 was marked; on behalf of the respondents RWs.1 and 2 were examined and Exs.B-1 to B-7 and Exs.C-1 to C-3 were marked. 9. Upon hearing argument of both the counsel, considering the material available on record, the trial Court dismissed the petition approving the auction sale conducted by the Official Receiver in respect of schedule property on 07.06.1982. 10. Aggrieved thereby, the unsuccessful petitioners preferred Appeal Suit No.105 of 1991 raising various contentions wherein the 1st appellate Court dismissed the Appeal confirming the decree and judgment under challenge. 11. Aggrieved thereby, the petitioners separately preferred the instant Second Appeals raising similar contentions and, hence, to avoid repetition, the following contentions are taken from both the petitions: a) On 02.03.1982 itself there was a direction to the Official Receiver that before putting any of the schedule property in I.P. No.24 of 1970, notices be issued to the concerned parties including the creditors and debtors and their legal heirs as there was a division in status between the family members of deceased insolvent but contrary to the direction the Official Receiver conducted sale for one of the schedule property on 07.06.1982 and hence the sale is liable to be set-aside; b) The publication of notice by the Official Receiver in the local paper ‘samacharam’ is not covering the entire district of East Godavari and also does not indicate the specific particulars of the property including encumbrances etc., which are mandatory for conducting the valid sale and as such the Official Receiver has not exercised his duties particularly as per Sections 59 and 68 of the PI Act; c) Creditors 50 in number along with legal heirs of the deceased insolvent filed a memo stating that they were negotiating the terms of the composition scheme but the Official Receiver without considering the whole interest of the general body of creditors and without issuing notice to the parties proceeded with the sale and, finally prayed to allow the Appeals setting-aside the decree and judgment under challenge. 12. The following are the substantial questions of law which fell for consideration at the time of admission: 1) Whether the publication of notice by the official receiver can be treated as notice to the parties to the proceedings when there was a specific order of the court to the O.R. to issue notice to the parties? 2) Whether the reasons, grounds and circumstances considered by the official receiver in putting the property for sale is valid or not? 3) Whether the sale of one of the scheduled property mentioned in petition, pending main composition scheme is valid particularly when 3/4th of the value the creditors agreed for the scheme? 13. One of the contentions raised before this Court by Sri P. Sri Raghuram, learned senior counsel, appearing on behalf of Sri A. Prabhakar Rao and Sri M.V. Suresh, learned counsel for the appellants, is that the Appeal was decided by the Principal District Judge in the absence of both the counsel and decided the matter on merits; when both the parties did not appear before the Court, the District Court, which is a Court of first appeal is not supposed to decide the Appeal on merits and, at best, the Court would have dismissed the Appeal for default. Therefore, the disposal of Appeal on merits is serious illegality committed by the trial Court. Though Second Appeal lies against such judgment, the jurisdiction of the High Court under Second Appeal is limited as the High Court cannot decide the factual findings recorded by the trial Court and appellate Court in which case, much prejudice would be caused to the appellants and on this ground alone the decree and judgment of the 1st appellate Court in Appeal Suit No.105 of 1991 is liable to be set-aside. 14. Per contra, Sri T.S. Anand, learned counsel for the respondents 17 and 19, contended that the appeal before the first appellate Court was filed under Section 75 of the PI Act, the provisions of C.P.C. more particularly order XLI has no application to such appeals, therefore, the procedure adopted by the first appellate Court in deciding the Appeal on merits cannot be found fault with and filed written arguments only on this particular aspect contending that the schemes of the PI Act provides for adjudication of the actions/acts of the official receiver and the power of the Court is to decide all questions arising in insolvency proceedings. The person aggrieved by the act of official receiver can make an application under Section 68 of the PI Act which bars the Court to exercise inherent power to entertain application after lapse of 21 days. The Court has no power to directly entertain a petition under Section 68 of the PI Act filed after 21 days except in a decision on the allegation made in the Appeal under Section 68 of the PI Act. Against the order passed under Section 68, appeal is provided under Section 75 of the PI Act which clearly lays down the parameters of the power of the appellate Court. Thus, the appeal under Section 75 of the PI Act can only be disposed of convenient to the jurisdiction of the appellate Court under Section 75 of the PI Act and rules framed thereunder. In view of the comprehensive provision contained in the statute, this Court cannot apply the provisions of C.P.C. to the Appeal filed under Section 75 of the PI Act. It is further contended that the Appeals are not maintainable under law on this ground alone and finally prayed for dismissal of the Appeals. 15. In the grounds of Appeal, learned counsel for the appellants did not raise any specific contention questioning the order under challenge adverting to Order XLI Rule 17 of C.P.C. but during argument, such contention was raised; however, According to Order XLI Rule 2 of C.P.C. without leave of the Court, the appellants cannot raise any new ground other than the grounds of objections contained in the memorandum of Appeals but at the same time the proviso to Order XLI Rule 2 says that the Court shall not raise its decision on any other ground unless the party who may be affected thereby had sufficient opportunity to decide the case on that ground. Therefore, it is clear from the proviso to Order XLI Rule 2 of C.P.C. that this Court cannot decide the Appeal on the ground other than mentioned in the memorandum of grounds of Appeal without giving sufficient opportunity to the contesting party. In the present case, when such ground was urged during hearing without filing any application in writing, Sri T.S. Anand, learned counsel for the respondents, who is appearing for the affecting party advanced his argument and filed written argument dated 18.08.2015. Therefore, sufficient opportunity was afforded to the counsel appearing for the effecting party. Hence, failure of the appellants to raise an objection about the disposal of the Appeal by the appellate Court without adverting to order XLI Rule 17 of C.P.C. will not come in the way of this Court to decide the present Appeal. 16. Considering rival contentions and perusing the material available on record, the following is the recasted substantial question of law which fell for consideration in these Appeals: Whether Order XLI of C.P.C. is applicable to the Appeals filed under Section 75 of the Provincial Insolvency Act? If so, whether deciding the Appeal on merits, without hearing the counsel on either side, by the Principal District Judge, East Godavari District at Rajahmundry is in contravention of Order XLI Rule 17 of C.P.C.? If not, the decrees and judgment under challenge be sustained? 17. POINT: The first and foremost contention urged before this Court by Sri P. Sri Raghuram, learned senior counsel, is that dismissal of the Appeal on merits is an apparent error and it is totally in contravention of Order XLI Rule 17 of C.P.C. Whereas Sri T.S. Anand, learned counsel for the respondents, vehemently contended that the provisions of C.P.C. cannot be invoked while deciding the Appeal under Section 75 of the PI Act as this is a special enactment. In view of rival contentions, it is appropriate to advert to Section 75 of the PI Act and Order XLI Rule 17 of C.P.C. for better appreciation. 18. Section 75 of the PI Act reads as follows: “75. Appeals: (1) The debtor, any creditor, the Receiver or any other person aggrieved by a decision come to or an order made in the exercise of insolvency jurisdiction by a Court subordinate to a District Court may appeal to the District Court, and the order of the District Court upon such appeal shall be final: Provided that the High Court, for the purpose of satisfying itself that an order made in any appeal decided by the District Court was according to law, may call for the same and pass such order with respect thereto as it thinks fit; Provided, further, that any such person aggrieved by a decision of the District Court on appeal from a decision of a subordinate Court under Section 4 may appeal to the High Court on any of the grounds mentioned in sub-section (1) of Section 100 of the Code of Civil Procedure, 1908. (2) Any such person aggrieved by any such decision or order of a District Court as is specified in Schedule 1, come to or made otherwise than in appeal from an order made by a subordinate Court, may appeal to the High Court. (3) Any such person aggrieved by any other order made by a District Court otherwise than in appeal from an order made by a Subordinate Court may appeal to the High Court by leave of the District Court or of the High Court. (4) The period of limitation for appeals to the District Court and to the High Court under this section shall be thirty days and ninety days respectively.” 19. Order XLI Rule 17 is the relevant provision in the C.P.C. which deals with deciding the Appeals in the absence of Appellants and it reads as follows: “17. Dismissal of appeal for appellant's default:(1) Where on the day fixed, or on any other day to which the hearing may be adjourned, the appellant does not appear when the appeal is called on for hearing the Court may make an order that the appeal be dismissed. Explanation: Nothing in this sub-rule shall be construed as empowering the Court to dismiss the appeal on the merits. (2) Hearing appeal ex parte: Where the appellant appears and the respondent does not appear, the appeal shall be heard ex parte.” 20. The explanation to Rule 17(1) was incorporated by amending Act 104 of 1976 which came into force on 01.02.1977. Prior to amendment, there is some conflict of opinion expressed by different Courts but after amendment, incorporating explanation, it is made clear that the Court is not empowered to dismiss the Appeal on merits for default of the appellant. 21. Section 5 of the Provincial Insolvency Act deals with applicability of C.P.C. and it reads as follows: “5. General powers of Courts : (1) Subject to the provisions of this Act, the Court, in regard to proceedings under this Act, shall have the same powers and shall follow the same procedure as it has and follows in the exercise of original civil jurisdiction. (2) Subject to as aforesaid, High Courts and District Courts, in regard to proceedings under this Act in Courts subordinate to them, shall have the same powers and shall follow the same procedure as they respectively have and follow in regard to civil suits.” 22. In view of various provisions referred above, the first appellate Court can entertain an Appeal under Section 75 of the PI Act, which empowers the District Court to decide all questions arising out of orders passed by the Court exercising jurisdiction under PI Act subject to limitations contained therein but no procedure is contemplated for dispensing with notice and deciding the Appeal in the absence of appellant or in the absence of the respondent and in the absence of any specific procedure under Section 75 of the PI Act, CPC can be made applicable for deciding the Appeals filed under Section 75 of the PI Act. 23. In view of Order XLI Rule 17 of C.P.C., the appellate Court is incompetent to decide the Appeal on merits in the absence of appellant and, at best, the course open to the appellate Court is to dismiss the Appeal for default. 24. Time and again the Apex Court and various High Courts reiterated the same principle. In Harbans Pershad Jaiswal and others Vs. Urmila Devi Jaiswal and others, the Apex Court discussed about the scope of Order XLI Rule 17 of C.P.C., placing reliance on its earlier decision in Abdur Rahman and others Vs. Athifa Begum and others distinguishing the judgment in Ajit Kumar Singh and others Vs. Chiranjibi Lal and others, and held as follows in Para 16: “16……………….In so far as appeal of the respondent is concerned, the same has been allowed exparte as nobody appeared on behalf of the Appellants. This course of action was available to the High Court as Sub- rule (2) of Order XLI Rule 17 categorically permits it. Though the Appellants moved application for setting aside this order, the same was dismissed on the ground that no reasonable or sufficient cause for non-appearance was shown. Therefore, this part of the order of the High Court is without blemish and is not to be interfered with. Appeal there against is dismissed. 17. In so far as appeal of the Appellants against grant of preliminary decree in respect of Schedule B is concerned, it could not have been heard on merits in the absence of the Appellant. The Court could only dismiss it in default.” 25. In Sk. Azgarali Vs. Sk. Nazir Basha and others, this Court placing reliance on the decisions of the Apex Court in Abdur Rahman2 and Thakursukhpal Singh Vs. Thakur Kalyan Singh and another, with reference to Order XLI Rule 17 of C.P.C. held that the course adopted by the learned Judge in dismissal of the appeal cannot be sustained in the light of clear express language used under Order XLI Rule 17 of C.P.C. declined to express any opinion relating to other merits and demerits of the matter. 26. In Yachamalla Shiva Ramulu Vs. Mallagari Ramakrishan Rao, this Court while deciding the Second Appeal in paragraphs 4 and 5 held as follows: “4. The short point that falls for consideration in the second appeal is, as to whether the lower appellate Court has justified in dismissing the appeal, on merits. It is not in dispute that on 3-3-2003, the date on which the appeal was heard, there was no representation for the appellant. Rule 17 of Order 41 C.P.C. enables the Court to dismiss the appeal, if there is no representation for the appellant. Explanation-I added to it, through Act 104 of 1976, directs that Rule 17(1) of Order 41 C.P.C. shall not be construed, as empowering the Court to dismiss the appeal, on merits. In other words, the appellate Court cannot dismiss the appeal on merits, in case there is no representation for the appellant. In such a situation, the appeal had to be dismissed for default. 5. Dismissal of the appeal, on merits, had its own consequences. It disables the party from filing an application under Rule 19 of Order 41 C.P.C. Challenge to such a decree has to be made, only by filing a second appeal, by paying the entire Court fee. The scope of interference, under Section 100 C.P.C., is very limited, and the circumstances that led to the absence of appellant, or his Counsel, hardly constitutes a substantial question of law. When such are the drastic consequences, flowing out of dismissal of an appeal on merits, in the absence of appellant, and when there is clear prohibition against the lower appellate Court from dismissing the appeal on merits in such cases, A.S. No.45 of 2000 ought not to have dismissed, on merits.” 27. In view of the law declared by the Apex Court and this Court, it is clear that when the appellants failed to appear before the appellate