Case Note & Summary
The dispute arose from a suit filed by the first respondent bank for recovery of mortgage amount by sale of 44 acres out of 80 acres of land belonging to respondents 2, 3 and 7 in Tamil Nadu. Pending the suit, respondents 2 and 3 were adjudged insolvents in I.P.No.15/1978, and the official assignee was directed to sell their interest in the 44 acres by public auction. Initially no one came forward to bid; the appellant offered Rs.67,500, which was later raised to Rs.77,500. The learned single judge accepted the offer on 26 July 1982 and confirmed the sale on 18 August 1982. On appeal, respondent No.9 offered Rs.16,28,000 and respondent No.8 offered Rs.1,50,000, later raised to Rs.2,50,000. The Division Bench of the Madras High Court directed respondent No.9 to deposit 10% of the upset price, but he failed to do so. The official assignee reported that neighbourhood land value ranged between Rs.4,000 and Rs.15,000 per acre, and the 44 acres would fetch Rs.3,35,000 at Rs.7,600 per acre as of December 1990. The High Court set aside the sale and directed re-auction fixing the upset price offered by respondent No.8. Pending proceedings in the Supreme Court, respondent No.7 offered to deposit Rs.20,00,000, but did not comply. The Supreme Court initially dismissed the appeal by a short order on 17 July 1995, but on mention by respondents' counsel, recalled that order on 24 July 1995 and heard the matter on merits. The appellant contended that it had made the highest offer when no one else bid and that the Division Bench erred in setting aside the sale after respondent No.9 failed to deposit 10% of his offer. The respondents argued that the sale price of Rs.77,500 for 44 acres was grossly inadequate given the official assignee's market value report. The Supreme Court reiterated the settled legal position that while court sales should be sustained, equal endeavour must be made to fetch adequate price to satisfy the decree debt and pay surplus to the judgment debtor. The Court found that the sale price was highly inadequate, and the single judge should have invited tenders or conducted an open auction to obtain a better price. The Division Bench was therefore right in setting aside the sale and directing re-auction under Order XXI of the Code of Civil Procedure, 1908. The Supreme Court further directed that if the official assignee had kept the deposited amount in interest-earning security, the principal with interest should be refunded to the appellant. If the amount was used to discharge outstanding debts of respondents 2 and 3, the appellant would be entitled to 18% per annum interest from the date of deposit until repayment. The sale was to be conducted keeping in view this interest liability. The appeal was disposed of without costs, and the appellant was allowed to participate in the auction and withdraw the amount if successful.
Headnote
A) Civil Procedure - Execution and Court Sales - Validity of Court Sale - Code of Civil Procedure, 1908, Order XXI - Court sale of 44 acres for Rs.77,500 was confirmed by single judge despite no higher bidders; Division Bench set aside sale after noting higher offers and official assignee's report that market value ranged Rs.4,000-15,000 per acre; Supreme Court held that while court sales should be sustained, equal endeavour must fetch adequate price to satisfy decree and surplus to judgment debtor; single judge should have invited tenders or open auction; High Court rightly directed re-auction. Held that sale was invalid for inadequacy of price. B) Civil Procedure - Court Sale Refund and Interest - Code of Civil Procedure, 1908, Order XXI - Appellant deposited Rs.77,500 for purchase; High Court gave no direction for refund/compensation; Supreme Court directed official assignee to refund principal with interest if kept in interest-earning security; if amount used to discharge debts, appellant entitled to 18% per annum interest from date of deposit till repayment; sale should be conducted keeping interest liability; appeal disposed of without costs. Held appellant is entitled to refund/interest.
Issue of Consideration
Whether the confirmed court sale by the learned single judge was valid in law given the inadequacy of price and subsequent higher offers, and whether the Division Bench was justified in setting aside the sale and ordering re-auction.
Final Decision
Appeal disposed of; Division Bench's order setting aside sale and directing re-auction upheld; official assignee directed to refund Rs.77,500 with interest (or 18% per annum if used to discharge debts); appellant may participate in auction and withdraw amount; no costs.
Law Points
- Court sale should be sustained but also fetch adequate price
- equal endeavour should be made to fetch adequate price to satisfy decree debt and surplus to judgment debtor
- sale confirmed for grossly inadequate price is invalid
- re-auction under Order XXI CPC is appropriate
- appellant entitled to refund with interest
