Case Note & Summary
The case arose from Suit No. 2 of 1966 filed by United Bank of India against Hanuman Foundrie Ltd. for foreclosure and sale of hypothecated property. Pursuant to a preliminary decree, the court receiver sold the hypotheca, and the appellant became the highest bidder for Rs.60 lakhs, paying only Rs.5 lakhs initially. The sale was confirmed in his favour on 29 August 1990. Respondents Nos. 1 and 2 sought impleadment in the suit, but the single Judge denied it. On appeal, the Division Bench impleaded them and directed the single Judge to hear them before ejectment by order dated 2 March 1992. The Division Bench deprecated the single Judge's chamber orders, observing that there were other offers of higher denomination and magnitude on the field, and that the court should have scrutinised those offers with due application of mind. The Supreme Court took suo motu judicial notice of the illegality pointed out by the Division Bench. It rejected the appellant's contention that an application under Order 21 Rule 89 or 90 or Section 48 CPC must be filed within limitation, holding that the court or appellate court would not remain a mute or helpless spectator to obvious and manifest illegality committed in conducting court sales. The Court also noted that the appellant had deposited only Rs.5 lakhs and the balance amount was assured to be deposited only after delivery of possession, which was illegal. Accordingly, the sale and confirmation dated 29.8.1990 were set aside. The matter was remanded to the High Court with a direction that the appropriate single Judge conduct the sale by open auction after due publication so that all intending bidders could participate. The Court further held that since the suit was for foreclosure and the preliminary decree had become final, it was not open to any party to widen the scope of the suit or the sale made pursuant to the preliminary decree. Any other right or remedy had to be worked out elsewhere according to law. The Court expressed no opinion on the rights, if any, of respondent Nos. 1 and 2 in the property. The appeal was allowed with no orders as to costs.
Headnote
A) Civil Procedure - Court Sales - Setting Aside - Code of Civil Procedure, 1908, Order 21 Rules 89, 90, Section 48 - The High Court Division Bench deprecated the single Judge's chamber orders bringing property to sale at Rs.60 lakhs despite higher offers on the field. The Supreme Court held that it could take suo motu judicial notice of the illegality and set aside the sale and confirmation dated 29.8.1990, even though normally an application under Order 21 Rules 89 or 90 or Section 48 CPC must be filed within limitation. Held that this court or appellate court would not remain a mute or helpless spectator to obvious and manifest illegality committed in conducting court sales. (Paras 3-5) B) Civil Procedure - Court Sales - Payment of Sale Consideration - Code of Civil Procedure, 1908 - The appellant had deposited only Rs.5 lakhs and balance amount was assured to be deposited only after delivery of possession. Held that such mode of payment was illegal and contributed to vitiating the sale. (Para 4) C) Civil Procedure - Foreclosure Suit - Scope of Proceedings - Code of Civil Procedure, 1908 - Since the suit was for foreclosure and the preliminary decree had become final, it was not open to any party to widen the scope of the suit or the sale made pursuant to the preliminary decree. Held that any other right or remedy had to be worked out elsewhere, according to law, and not in the suit. (Para 5)
Issue of Consideration
Whether the Supreme Court can suo motu set aside a confirmed court sale due to manifest illegality in the conduct of the sale, and whether fresh open auction should be ordered.
Final Decision
Appeal allowed; sale and confirmation dated 29.8.1990 set aside; matter remanded to High Court with direction that appropriate single Judge conduct sale by open auction after due publication; parties barred from widening scope of suit; no costs.
Law Points
- Court cannot remain mute spectator to obvious and manifest illegality in court sales
- sale must be by open auction after due publication
- confirmation of sale illegal where higher offers ignored
- balance payment after possession illegal
- parties cannot widen scope of suit after final preliminary decree
