Case: P. Srinivasa Naicker Vs. Smt. Engammammal And Another

Subordinate Judge would have been right in interfering with the sale proposed by the official receiver. That matter has been considered by the District Judge and he has held that there is no reason to hold that the properties were being sold for a low price. The Subordinate Judge in dealing with the question of price has pointed out that the insolvent had valued the properties at Rs. 80,000/-, though he was conscious of the fact that this was probably an exaggeration. He therefore did not hold that the properties were worth Rs. 80,000/-. He came to the conclusion that the properties would be worth at least Rs. 40,000/- and the main reason why he said so was that the "properties had been mortgaged for over Rs. 20,000/- in 1946. According to him, there seems to be some infallible rule that one must double the mortgage money in order to arrive at the valuation of the properties mortgaged. The District Judge has pointed out -and we think, rightly-that there can be no such rule. Therefore, the main basis on which the Subordinate Judge held that the properties were worth Rs. 40,000/ and therefore the bid of the appellant was low, falls to the ground, as pointed out by the District Judge. The Subordinate Judge also pointed out that the insolvents were in possession of the properties during the pendency of the insolvency appeal and had been depositing Rs. 2,000 - annually on the order of the High Court in order to remain in possession. The Subordinate Judge however did not calculate the value of the properties on the basis that their annual income was Rs. 2,000/- and rightly so because the amount deposited by a litigant on the order of a court in order to retain possession of some property cannot necessarily lead to the inference that that way the annual income of the property. It seems therefore that the District Judge was right when he held that there was no evidence on the record which would justify the finding of the Subordinate Judge that the price fetched by the sale in this case was inadequate or unreasonable. We may add that it was open to the respondent to show to the Subordinate Judge by well-recognised methods of valuation as to what the value of the properties was. The Subordinate Judge should have then taken into account the total amount of the encumbrance on these properties. The mortgage deed is not on the record and we do not know what interest, if any, the mortgage money carried. Before the Subordinate Judge could come to the conclusion that the price offered by the appellant was low, he had first to find out the price of the properties by some recognised method. He had then to find what was the total amount of encumbrance on the properties. If on finding these things it appeared that the difference between the two was much larger than the price bid by the appellant, the Subordinate Judge would have been justified in interfering with the order of the official receiver, even if there was no question of fraud, collusion or irregularity in the present case. But no such findings have been given by the Suborinate Judge and the District Judge consequently was right when he said that the view of the Subordinate Judge that the price fetched was inadequate and unreasonable is incorrect. Unfortunately, the High Court did not address itself to the question whether the order of the District Judge was according to law or not. It seems to have been impressed by the offer made by the respondent, over-looking the fact that the offer of Rs. 9,000/- as the minimum bid and Rs. 1,000/- for the appellant was being made three years after the auction during which, for all that we know, the prices might have risen. Further, the High Court has remarked that the price offered by the appellant was not unconscionably low but it felt that it was still low on a comparison with the offer made by the respondent in 1956.As the High Court did not consider the question whether the order of the District Judge was according to law or not and did not come to the conclusion that that order was not according to law, the High Court would have no jurisdiction to interfere with that order.11. Learned counsel for the respondent urged that even though the High Court may not have considered the matter from this aspect, we should not interfere with the order of the High Court if we are satisfied that in fact the price offered by the appellant was low, in the circumstances prevailing in 1953. We agree that if it was possible for us to come to the conclusion that the price offered by the appellant was low there would be no reason to interfere with the order of the High Court, even though it might not have considered what was necessary for it to do for interfering under the proviso to S. 75; but as we have pointed earlier, there is no sufficient material on the record on which we can say that the price offered by the appellant is low. As we have already pointed out no attempt was made in the Subordinate Judges court to value the properties by any of the well recognised methods by which properties are valued. Further no attempt was made to show the total encumbrance on the property. Unless the valuation was properly made and the encumbrance was found out, it is not possible to say that the offer made by the appellant was low, for that would depend upon the difference between the value of the properties and the amount of encumbrance. In these circumstances, it is not possible for us to say that the order of the District Judge when he held that the Subordinate Judge was not right in holding that the price fetched was inadequate or unreasonable, is not according to law.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]8. It may be accepted that the power of the court under S. 68 is not hedged in by those, considerations which apply in cases of auction sales in execution proceedings. Even so, the power under S. 68 is a judicial power and must be exercised on well recognised principles, justifying interference with an act of the receiver which he is empowered to do under S. 59 (a) of the Act. The fact that the act of the receiver in selling properties under S. 59(a) is subject to the control of the court under S. 68 does not mean that the court can arbitrarily set aside a sale decided upon by the official receiver. It is true that the court has to look in insolvency proceedings to the interest in the first place of the general body of creditors; in the second place to the interest of the insolvent, and lastly, where a sale has been decided upon by the official receiver to the interest of the intending purchaser in that order.10. Let us therefore turn first to the order of the Subordinate Judge and see if it is justified on the grounds mentioned above.Now both the subordinate Judge and the District Judge found that there was no reason to hold that there was any fraud or collusion on the part of the official receiver in this case. Further, the Subordinate Judge did not find that there was any irregularity committed by the official receiver in conducting the sale and the District Judge has definitely found that there was no such irregularity. The only ground on which the subordinate Judge held that the sale should be set aside was that the price fetched was low. Now if that ground is justified, the Subordinate Judge would have been right in interfering with the sale proposed by the official receiver. That matter has been considered by the District Judge and he has held that there is no reason to hold that the properties were being sold for a low price. The Subordinate Judge in dealing with the question of price has pointed out that the insolvent had valued the properties at Rs. 80,000/-, though he was conscious of the fact that this was probably an exaggeration. He therefore did not hold that the properties were worth Rs. 80,000/-. He came to the conclusion that the properties would be worth at least Rs. 40,000/- and the main reason why he said so was that the "properties had been mortgaged for over Rs. 20,000/- in 1946. According to him, there seems to be some infallible rule that one must double the mortgage money in order to arrive at the valuation of the properties mortgaged. The District Judge has pointed out -and we think, rightly-that there can be no such rule. Therefore, the main basis on which the Subordinate Judge held that the properties were worth Rs. 40,000/ and therefore the bid of the appellant was low, falls to the ground, as pointed out by the District Judge. The Subordinate Judge also pointed out that the insolvents were in possession of the properties during the pendency of the insolvency appeal and had been depositing Rs. 2,000 - annually on the order of the High Court in order to remain in possession. The Subordinate Judge however did not calculate the value of the properties on the basis that their annual income was Rs. 2,000/- and rightly so because the amount deposited by a litigant on the order of a court in order to retain possession of some property cannot necessarily lead to the inference that that way the annual income of the property. It seems therefore that the District Judge was right when he held that there was no evidence on the record which would justify the finding of the Subordinate Judge that the price fetched by the sale in this case was inadequate or unreasonable. We may add that it was open to the respondent to show to the Subordinate Judge by well-recognised methods of valuation as to what the value of the properties was. The Subordinate Judge should have then taken into account the total amount of the encumbrance on these properties. The mortgage deed is not on the record and we do not know what interest, if any, the mortgage money carried. Before the Subordinate Judge could come to the conclusion that the price offered by the appellant was low, he had first to find out the price of the properties by some recognised method. He had then to find what was the total amount of encumbrance on the properties. If on finding these things it appeared that the difference between the two was much larger than the price bid by the appellant, the Subordinate Judge would have been justified in interfering with the order of the official receiver, even if there was no question of fraud, collusion or irregularity in the present case. But no such findings have been given by the Suborinate Judge and the District Judge consequently was right when he said that the view of the Subordinate Judge that the price fetched was inadequate and unreasonable is incorrect. Unfortunately, the High Court did not address itself to the question whether the order of the District Judge was according to law or not. It seems to have been impressed by the offer made by the respondent, over-looking the fact that the offer of Rs. 9,000/- as the minimum bid and Rs. 1,000/- for the appellant was being made three years after the auction during which, for all that we know, the prices might have risen. Further, the High Court has remarked that the price offered by the appellant was not unconscionably low but it felt that it was still low on a comparison with the offer made by the respondent in 1956.As the High Court did not consider the question whether the order of the District Judge was according to law or not and did not come to the conclusion that that order was not according to law, the High Court would have no jurisdiction to interfere with that order.We agree that if it was possible for us to come to the conclusion that the price offered by the appellant was low there would be no reason to interfere with the order of the High Court, even though it might not have considered what was necessary for it to do for interfering under the proviso to S. 75; but as we have pointed earlier, there is no sufficient material on the record on which we can say that the price offered by the appellant is low. As we have already pointed out no attempt was made in the Subordinate Judges court to value the properties by any of the well recognised methods by which properties are valued. Further no attempt was made to show the total encumbrance on the property. Unless the valuation was properly made and the encumbrance was found out, it is not possible to say that the offer made by the appellant was low, for that would depend upon the difference between the value of the properties and the amount of encumbrance. In these circumstances, it is not possible for us to say that the order of the District Judge when he held that the Subordinate Judge was not right in holding that the price fetched was inadequate or unreasonable, is not according to law.