Case Note & Summary
The appellant, Paul, was the auction purchaser of a property measuring 2 acres 43 cents in Village Managiri, Madurai District, Tamil Nadu. The property belonged to respondent No. 1, T. Mohan, who had stood as a guarantor for one Rajendran, who had taken a chit from respondent No. 2, Shriram Chits Tamil Nadu Ltd. Rajendran defaulted on payments, and an ex parte award was passed against the guarantor under Section 64(1)(A) of the Indian Chit Funds Act, 1982. The chit company filed an execution petition, and the property was auctioned on 01.03.2010, with the appellant being the highest bidder for Rs. 1,77,000. The auction was confirmed on 04.03.2010. Within a week, the guarantor's son repaid the entire dues to the chit company, which issued a no-dues certificate. On 10.03.2010, the guarantor filed an application under Order XXI Rule 89 and Section 151 CPC to set aside the auction. The executing court dismissed the application on 01.04.2014 for non-compliance with Order XXI Rule 89 CPC, and a sale certificate was issued to the appellant on 21.07.2014. The guarantor then filed a civil revision petition before the High Court, which was allowed on 02.08.2018, setting aside the auction and directing the guarantor to deposit the auction amount with 9% interest, and the auction purchaser to be refunded. The Supreme Court, in the appeal by the auction purchaser, upheld the High Court's decision, noting that the guarantor had paid the entire dues within a week, the application was also under Section 151 CPC, and substantial justice had been done. The question of law regarding Order XXI Rule 89 CPC was left open.
Headnote
A) Civil Procedure - Auction Sale - Setting Aside - Order XXI Rule 89 CPC and Section 151 CPC - The High Court set aside an auction sale where the guarantor had paid the entire dues within a week of the auction and obtained a no-dues certificate, and had filed the application under Section 151 CPC. The Supreme Court held that in the peculiar facts and circumstances, substantial justice had been done and declined to interfere, keeping the question of law open (Paras 8-10).
B) Chit Funds - Guarantor Liability - Indian Chit Funds Act, 1982 Section 64(1)(A) - The guarantor was directed to pay the amount due under an ex parte award. The Supreme Court noted that the guarantor was not the borrower and had paid the entire amount, and the auction was set aside to prevent substantial injury (Paras 2-8).
Issue of Consideration
Whether the High Court was justified in setting aside the auction sale and allowing the guarantor's revision petition despite non-compliance with Order XXI Rule 89 CPC, given that the entire dues were paid within a week of the auction and the guarantor had filed the application under Section 151 CPC.
Final Decision
The Supreme Court dismissed the civil appeal, upholding the High Court's order setting aside the auction sale. The Court directed that the question of law regarding Order XXI Rule 89 CPC is kept open. No order as to costs.
Law Points
- Order XXI Rule 89 CPC
- Section 151 CPC
- Indian Chit Funds Act 1982 Section 64(1)(A)
- inherent powers of court
- auction sale set aside
- guarantor rights
- substantial justice
Case Details
Civil Appeal No. 6146 of 2019
Uday Umesh Lalit, Vineet Saran
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Nature of Litigation
Civil appeal against High Court order setting aside auction sale of property in execution of an award under the Indian Chit Funds Act.
Remedy Sought
The appellant (auction purchaser) sought to set aside the High Court's order that quashed the auction sale and directed refund of the auction amount.
Filing Reason
The appellant challenged the High Court's decision to set aside the auction sale despite the guarantor's non-compliance with Order XXI Rule 89 CPC.
Previous Decisions
The executing court dismissed the guarantor's application to set aside the auction on 01.04.2014. The High Court allowed the civil revision petition on 02.08.2018, setting aside the auction.
Issues
Whether the High Court was justified in setting aside the auction sale despite non-compliance with Order XXI Rule 89 CPC.
Whether the guarantor's payment of entire dues within a week of auction and filing under Section 151 CPC warranted invocation of inherent powers.
Submissions/Arguments
Appellant argued that the revision was rightly dismissed for non-compliance of Order XXI Rule 89 CPC and the auction was valid.
Respondent No. 1 argued that the petition before the Deputy Registrar was not maintainable, no prior notice was issued, the upset price was low, and the entire amount was paid within a week, with a no-dues certificate, and the application was also under Section 151 CPC.
Ratio Decidendi
In the peculiar facts and circumstances of the case, where the guarantor had paid the entire dues within a week of the auction and obtained a no-dues certificate, and the application to set aside the auction was filed under Section 151 CPC as well, the High Court was justified in setting aside the auction to prevent substantial injury, and the Supreme Court declined to interfere as substantial justice had been done.
Judgment Excerpts
Without laying down any law with regard to the issue relating to the application or noncompliance of Rule XXI Order 89 CPC, in the peculiar facts and circumstances of this case, we are not inclined to interfere with the view taken by the High Court.
The High Court further held that the present case was that of a real fraud committed by the borrower, and the guarantor had lost his property and was knocking the doors of the High Court to save his right to hold the suit property.
Procedural History
The respondent No. 2 filed a petition under Section 64(1)(A) of the Indian Chit Funds Act, 1982 before the Deputy Registrar of Chits, Madurai South, resulting in an ex parte award on 21.01.2002. The chit company filed Execution Petition No. 21 of 2003 before the Ist Additional Subordinate Judge, Madurai. The property was auctioned on 01.03.2010 and confirmed on 04.03.2010. The guarantor filed EA No. 208 of 2010 under Order XXI Rule 89 and Section 151 CPC on 10.03.2010. The executing court dismissed the application on 01.04.2014. The guarantor filed a civil revision petition before the High Court, which was allowed on 02.08.2018. The auction purchaser appealed to the Supreme Court, which dismissed the appeal on 24.04.2020.
Acts & Sections
- Indian Chit Funds Act, 1982: Section 64(1)(A)
- Code of Civil Procedure, 1908 (CPC): Order XXI Rule 89, Section 151
