Case: Manilal Mohanlal Shah And Others Vs. Sardar Sayed Ahmed Sayed Mahmad And Another

2. The respondents are the Judgment-debtor and the legal representative of the deceased decree-holder.The decree-holder applied on March 30, 1940 for execution of his decree by sale of 4 lots of property belonging to the Judgment-debtor. The properties were valued at 1,50,000 and were subject to a previous mortgage of Rs. 60,000 existing in favour of the auction-purchasers. It appears that under the terms of the mortgage-deed the mortgagees were entitled to proceed in the first instance against the first 3 lots and against the fourth lot only in the event of a deficiency in sale price to cover the decretal amount. The first 3 lots with which alone we are concerned in the appeal were sold to the mortgagees for Rs. 53,510 on August 13,1942. They were sold free from the encumbrance under the order of the court passed at the instance of the decree-holder and the mortgagees by without notice to themay however, be noted that on the application of certain third parties their right of annuity over the properties sought to be sold was notified in the sale proclamation. On the same date the mortgagees applied for a set-off stating that the purchase price was Rs. 53,510 while the amount due to them was Rs. 1,20,000. The Court allowed the set off then and there. It is important to bear in mind that the mortgagees had filed no suit and obtained no decree to recover the money due on the mortgage.3. The order notifying the claim to annuity was challenged by the judgment - debtor in revision to the High Court but it was dismissed on November 10, 1943, by Sen, J. who observed that as the sale had already taken place, the proper remedy of the judgment-debtor was to move the Court for setting aside the sale. Thereupon the judgment debtor applied on November 20,1943, under Order 21, Rule 90 of the Civil Procedure Code to have the sale set aside (Ex. 51). Allegations imputing fraud and collusion to the mortgagees were added in the application; in particular it was alleged that the 3 lots were purchased at a grossly inadequate price by under-valuing them in the proclamation and that the mortgages not having paid 25 per cent, of the bid the sale should not have been sanctioned in their favour.While this application was pending, the judgment - debtor made another application on January 15, 1947, challenging the sale as a nullity on the ground that the purchaser had neither made the deposit required under Rule 84 of Order 21 nor paid the balance of the purchase-price as required by Rule 86, and praying for resale of the property to realize the price. The order allowing set-off was attacked as being without jurisdiction, No separate order was passed on this application as the application Ex. 51 was granted on the same grounds. The trial court found that at the time of attachment on April 30, 1940, lost Nos. 1 and 2 and lost No. 3 were valued at Rs. 40,000/- each separately but at the time of proclamation of sale on March 6,1942, the first two were valued at Rs. 45,000/- and the third at Rs, 8,000/- only.The property did not consist of mere survey numbers but admittedly had bungalows, and superstructures and in the opinion of the court the subsequent valuation was bound to mislead bidders. The court, however, set aside the sale on the ground that the provisions of Order 21, Rules 34 and 35 had not been complied with in that the price was not deposited but a set-off was wrongly claimed and allowed om the absence of the judgment debtor by the Court, which had no authority or jurisdiction. The Courtis nothing to show that these Opponents took any permission from the court to bid at the auction and in fact they could hardly have contained any such permission , they being mortgages whose dues had yet to be proved and determined. If they could ask for set-off, there is no reason why they should not be required also to seek previous permission from the Court to bid under Order 21, Rule 72 of the Civil Procedure Code. It may be noted that one of these Opponents is himself a pleader and he was not justified in taxing such an unauthorised order from the court without fully acquainting with all theall these circumstances, these Opponents can with little justification avoid the consequence of non-compliance with the provisions of Order 21, Rules 84 and 85, referred to above. Without proving their claim under the mortgage, they have succeeded in purchasing for a gross under value these properties and even that value they have not paid in court by taking resource to the device of set off... In my opinion, there could not be a more fraudulent and materially irregular procedure than what has taken place in the present case at the instance of these mortgagees, to the great detriment and injury of the present applicant, viz, the judgment-debtor".The Court held that the application under Rule 90 was barred by limitation but this being a case of a void sale and not of a mere material irregularity the court was found to re-sell the property inrespective of any application being made by the judgment-debtor.5. The High Court of Bombay (Chagla, C. 1 and Gajendragadkar, J.) dismissed the appeal of the mortgagee-purchasers on the ground that the order of the trial court was under Order 21, Rule 84 and/or Rule 86, C.P.C. and therefore no appeal lay against such an order. The High Court held that the order of set-off was without jurisdiction and the subsequent deposit of the purchase price on December 14, 1945, made long after the period had elapsed was of no avail.

Court's reasoning:
ut for the mistake we are of opinion that both the contentions are devoid of substance.It is not denied that the purchasers had not obtained any decree on foot of their mortgage and the claim of Rs. 1,20,000 which they put forward before the execution court had not been adjudicated upon or determined. The mortgagees, one of whom is a Pleader, applied on the day of the sale claiming a set off on foot of the mortgage. The Court without applying its mind to the question immediately passed the order allowing the set-off. This claim was obviously not admissible under the provisions of rule 84 which applies only to the decree-holder. The court had clearly no jurisdiction to allow a set off. The appellants misled the court into passing a wrong order and obtaining the advantage of a set-off while they know perfectly well that they had got no decree on foot of the mortgage and their claim was undetermined,There was default in depositing 25 percent of the purchase money and further there was no payment of the full amount of the purchase money within fifteen days from the date if the sale. Both the deposit and the payment of the purchase money being mandatory under the combined effect of rules 84 and 85, the Court has the discretion to forfeit the deposit but it was bound to re-sell the property with the result that on default the purchaser forfeited all claim to the property. These provisions leave no doubt that unless the deposit and the payment are made as required by the mandatory provisions of the rules there is no sale in the eye of law in favour of the defaulting purchaser and no right to own and possess the property accrues to him.Having examined the language of the relevant rules and the judicial decisions bearing upon the subject we are of opinion that the provisions of the rules requiring the deposit of 25 per cent. of the purchase money immediately on the person being declared as a purchaser and the payment of the balance within 15 days of the sale are mandatory and upon non-compliance with these provisions there is no sale at all. The rules do not contemplate that there can be any sale in favour of a purchaser without depositing 25 per cent of the purchase money in the first instance and the balance within 15 days. When there is no-sale within the contemplation of these rules, there can be no question of material irregularly in the conduct of the sale. Non-payment of the price of the part of the defaulting purchaser renders the sale proceedings as a complete nullity. The very fact that the court is bound to re-sell the property in the event of a default shows that the previous proceedings for sale are completely wiped out as if they do not exist in the eye of law. We hold, therefore, that in the circumstances of the present case there was no sale and the purchasers acquired no rights atdo not think that the inherent powers of the Court could be invoked to circumvent the mandatory provisions of the Code and relive the purchasers of their obligation to make the deposit. The appellant by misleading the court want to benefit by the mistake to which they themselves contributed. They cannot be allowed to take advantage of their own wrong.