Case: Kanhaiyalal Vs. Dr. D.R. Banaji &amp; Others

2. In order to appreciate the points in controversy in this appeal, it is necessary to state the following facts: One Bhagchand Jairamdas was the occupant of a plot, situated in the District town of Yeotmal in what was then called the Province of Central Provinces and Berar, measuring 1,91,664 square feet in area, on which stood a ginning factory and its appurtenant buildings. Bhagchand aforesaid had executed a mortgage-bond in favour of one Abubakar. The mortgagee aforesaid instituted a suit on the original side of the Bombay High Court, being Civil Suit No. 1543 of 1934, to enforce the said mortgage. A Receiver was appointed on 20th October 1936, during the pendency of the suit in respect of the mortgaged properties including the plot described above. The land and the buildings and the factory, have been valued by the Courts below at about Rupees 70,000. The revenue payable in respect of the plot in question, at the rate of Rs. 129 per year, appears to have remained in arrears for two years, namely, 1936-37 andThe Sub-Divisional Officer of Yeotmal, functioning as the Deputy Commissioner under the Code, sold at auction the plot in question, free of all encumbrances, on 17th December 1937, without impleading or giving notice to the Receiver who was in charge of the estate of Bhagchand, as aforesaid. At that auction, Kanhaiyalal, the appellant, purchased the property for Rs. 270 only. The sale in his favour was confirmed on 26th January 1938, but in appears that the then Receiver had sent Rs. 275 by a cheque to the Sub-Divisional Officer concerned, in full payment of the arrears of land revenue, and thus, to have the sale set aside. But it was received two days after the confirmation of the sale. Before the confirmation of the sale, the Receiver had made an application on 19th 1938, to the Sub-Divisional Officer, offering to pay the arrears, but it appears that through some bungling in the office, the attention of the Sub-Divisional Officer was not drawn to the application until after the confirmation of the sale. The Receiver then applied for a review of the order confirming the sale, and the Sub-Divisional Officer allowed the application and set aside the sale. The Deputy Commissioner, Yeotmal, and the Commissioner, Berar, also upheld the order setting aside the sale. Thereupon, the auction-purchaser, Kanhaiyalal, moved in revision the Financial Commissioner who was then the highest Revenue authority under the Code, against the order of the Commissioner, and ultimately, the order setting aside the sale, was vacated by the Financial Commissioner on the ground that there was no application under S. 155 or S. 156 of the Code.The then Receiver, having ultimately failed in having the sale of the valuable properties by the revenue authorities, set aside, instituted the suit out of which this appeal arises, impleading the Provincial Government of Central Provinces and Berar, as the first defendant, Kanhaiyalal, the auction-purchaser, as the second defendant, and Duli Chand Bhagchand as the third defendant. He prayed for a declaration that the auction sale held on 17th December 1937, was void, on a number of grounds including the grounds that no notice of demand had been sent to the Receiver who was in charge of the property; that the attachment and sale proclamation had not been effected according to law, and that though the revenue authorities were aware of the appointment of Receiver of the property, by the Bombay High Court, they did not implead the Court Receiver. This suit was contested on the preliminary ground that it was barred by the provisions of Ss. 157 and 192 of the Code. That plea found favour, both, with the trial Court and the Court of appeal (Additional District Judge, Yeotmal). On second appeal to the High Court of Judicature at Nagpur, the case was heard by a single Judge, Niyogi, J., who allowed the appeal by judgment dated 29th MarchOn a Letters Patent appeal by the auction-purchaser, Kanhaiyalal, the matter was heard by a Division Bench (Mangalmurti and Deo., JJ). The Bench affirmed the decision of the learned Single Judge, and held that the suit was not barred. Hence, this appeal.6. The facts as set out above, are not in controversy. During the time that the proceedings culminating in the sale of the property, had been pending in the Revenue Courts, the Receiver was in effective control and management of the property. The revenue authorities had been appraised of the fact that the Receiver appointed by the Bombay, High Court, was in charge of the property. As a matter of fact, an attempt had been made by the revenue authorities, in the first instance, to approach the Collector of Bombay for realising the arrears of land revenue in respect of the plot in question, but the mistake was that no approach was made to the Bombay High Court or even to the Receiver for paying up the arrears of the Government demands, It was certainly the duty of the Receiver to see to it that all public demands in respect of the properties in his charge, were paid in due time, and in this case certainly, the arrears in respect of the year 1937-38, which fell due in Augustaccrued in his time, if not also the arrears in respect of the previous yearIf the Receiver had been more vigilant, or if the revenue authorities had made the demand from the Receiver in respect of the arrears, they may have been paid up in due course without the necessity of putting the property to sale.

Court's reasoning:
7. So far as the Indian Courts are concerned, it is settled law that a sale held without making attachment of the property, or without duly complying with the provisions of the law relating to attachment of property, its not void but only voidable.Rule 52 of O. 21 of the Code of Civil Procedure, requires that where the property is in the custody of any court or public officer, attachment shall be made by a notice to such court or officer. But the absence of such a notice would not render the sale void ab initio into because the jurisdiction of the court or the authority ordering the sale, does not depend upon the issue of the notice of attachment. It is also settled law that proceedings taken in respect of a property which is in the possession and management of a Receiver appointed by court under O. 40, R. 1 of the Code of Civil Procedure, without the leave of that Court, are illegal in the sense that the party proceeding against the property without the leave of the Court concerned, is liable to be committed for contempt of the court, and that the proceedings so held, do not affect the interest in the hands of the Receiver who holds the property for the benefit of the party who, ultimately, may be adjudged by the Court to be entitled to the same.The learned counsel for the respondent was not able to bring to our notice any ruling of any Court in India, holding that a sale held without notice to the Receiver or without the leave of the Court appointing the Receiver in respect of the property, is voidab initio.In the instant case, we do not think it necessary to go into the question raised by the learned counsel for the respondents that a sale of a property in the hands of the Court through its Receiver, without the leave of the Court, is a nullity.The American Courts appear to have taken the view that such a sale is void. In our opinion, it is enough to point out that the High Court took the view that the sale was voidable and could be declared illegal in a proper proceeding or by suit. We shall assume for the purposes of this case that such a sale is only voidable and not voidabis beyond question that the Code lays down a special machinery for the realization of Government revenue which has been declared as the paramount charge on the property, It lays down a summary procedure for the realization of public revenue, and all questions coming within the purview of the Code, must be determined according to the procedure laid down in that Code. Hence, in so far as the Code has laid down specific rules of procedure, those rules and no others, must apply in the determination of all controversies coming strictly within the terms of the statute.One thing is absolutely clear, namely, that the Code does not lay down any specific rules in respect of property which has been placed incustodia legis.The Code contemplates regular payment of government, revenue by the owner, possessor or the occupant of the property in respect of which Government revenue is payable. It also takes notice of devolution of interest by transfer or succession, but it does not contemplate the inter-position of a Receiver in respect of the property subject to the payment of Government revenue.This aspect of the matter becomes important because the only point for determination in this appeal, is whether the auction-sale held under the Code, without the leave of the Court or without notice to the Receiver appointed by the Court, should affect the interest which the Bombay High Court had, by appointing the Receiver, sought to protect if the sale in favour of the appellant, stands. The mortgagees security for the payment of the mortgage debt, in the event of the auction-sale being sustained, is to that extent adversely affected without his having any voice in the matter. Perhaps, if the Receiver were not there, the mortgagee may have been more vigilant and may have taken timely steps to pay the Government demand in respect of the property if only for conserving it for satisfying his own dues on theis no doubt that the matter of the setting aside of a sale by payment of the arrears under S. 155, and on the specific grounds under S. 156, as discussed above, has been provided for in the Code,but, as already observed, the suit does not raise any ground which is covered by the specific provisions of the Code for setting aside a sale. Strictly speaking, this is a suit for a declaration that the sale held by the revenue Courts, does not affect the interests which are in the custody of the Court through its Receiver, and for recovery of possession as against the auction-purchaser who is alleged to be in wrongful possession of the property which should have continued in possession of the Receiver, under the directions of the Bombay High Court. In short, this is not a suit simpliciter to set aside the sale held by the revenue authorities but a suit for a declaration and a consequential relief. A suit for such a declaration on the grounds taken by the Receiver and for possession, is not a matter, which the several authorities under the Code, have been empowered to determine, decide or disposeour opinion, those sections have no bearing on the present controversy. Section 32 deals with appeals and appellate authorities, and lays down the hierarchy of officers to deal with an appeal. Section 38 prescribes the authorities to deal with revisional matters, and S. 159 conserves the power of the Deputy Commissioner to pass ordersuo motu, that is to say, where no application has been made under S. 155 or S. 156, or even beyond the period of 30 days, which is the prescribed period for making applications under those sections. Thus, if the leave of the Bombay High Court had been taken to initiate proceedings under the Code, for the realization of Government revenue, or if the Receiver had been served with the notice of demand, it would have been his bounden duty to pay up the arrears of land revenue and to continue paying Government demands in respect of the property in his charge, in order to conserve it for the benefit of the parties which were before the Court in the mortgage suit. If such a step had been taken, and if the Receiver, in spite of notice, had allowed the auction-sale to be held for non-payment of Government demands, the sale would have been valid and subject only to such proceedings as are contemplated under Ss. 155 and 156 of the Code. In that case, there would have been no conflict of jurisdiction, and, therefore no question of infringing the sound principle discussed above. But the absence of the leave of the Court and of the necessary notice to the Receiver, makes all the difference between a valid and an illegal sale. The High Court has also relied upon the well-known rule of natural justice-audi alteram partem-as another reason for holding the sale to be illegal. It is not necessary for the purposes of this case to pronounce upon the difficult question of how far a principle of natural justice can override the specific provisions of a statute.