G. v. HANAMSHET VS DADA CHINTAMANI PATRAVALI — 1986 DIGILAW 384 (KAR)

P. A. KULKARNI, J. ( 1 ) THIS is a revision by the applicant in I. A. 14 against the order dated 27-8-1982 passed by the Civil Judge, Belgaum, in Insolvency Petition 2 of 1962, dismissing the same. ( 2 ) I. A. 14 has been filed by the revision petitioner, alleging that the official receiver had sold the three properties bearing : (1) CTS. No. 41/a situate in Somwar Peth, Tilakwadi, Belgaum, (2) CTS. No. 4589/b of Shetti Galli, and (3) CTS. No. 4538 of Shetti Galli, Belgaum. The said three properties belonged to the insolvents. He alleged that there was no proper publication regarding the auction sale, held by the official receiver. As per the report given by the official receiver, she had published the notice regarding the auction sale in the newspaper called Lokadarshana, which has no wide publicity in the area of Belgaum City. The official receiver and the insolvents have colluded and the properties have been sold for highly inadequate price. CTS. No. 41/a measuring 4 guntas, where a building is constructed, has been sold only for Rs. 12,500/- in the public auction. CTS. No. 4589/b has been sold for Rs. 15,800/- and CTS. No. 4538 has been sold for Rs. 2,100/ -. Now the price of all the three properties would be more than three lakhs of rupees. One of the highest bidders A. P. Patil respondent 4 in the revision is the son-in-law of insolvent 1. The other highest bidder Hukumchand Kote is also the son-in-law of insolvent 1. The other highest bidder V. S. Patravali respondent 5 is the son of insolvent 1. V. S. Patravali is the permanent resident of Satara and Hukumchand Kote is a permanent resident of Latur. It cannot be understood as to haw they came to know about the date of auction sale. Either they must have been brought by the insolvents or the properties must have been purchased in their names by someone interested in the insolvents. In 1978 CTS. No. 41/a was worth Rs. 1,25,000/ -. The value of the other two properties was Rs. 60,000/- and Rs. 30,000/- respectively. The properties have been bid by these bidders at the lowest price in collusion with the official receiver. The properties have not been got valued by the Government approved valuer. In 1978 CTS. No. 41/a was worth Rs. 1,25,000/ -. The value of the other two properties was Rs. 60,000/- and Rs. 30,000/- respectively. The properties have been bid by these bidders at the lowest price in collusion with the official receiver. The properties have not been got valued by the Government approved valuer. So, it was requested that the sale held by the official receiver should not be confirmed and the official receiver may be directed to hold a fresh sale after giving due publicity in the newspapers like 'tarun Bharat' and 'nirdosh' and after duly sending notices to the creditors. If that is not done, the creditors would be put to irreparable loss. ( 3 ) THE official receiver and the bidders resisted the petition on the following grounds.- the present application filed under S. 151 of the Code of Civil Procedure was not tenable in view of the specific provision contained in S. 68 of the Provincial Insolvency Act, which is meant to challenge any act or decision of the official receiver, by means of an appeal within 20 days from the date of the act or the decision complained of. The petitioner had not filed any such appeal though the auction sale was held on 29-7-1978 in the Court after due publication of the proclamation of sale. The official receiver had apprised the petitioner of the auction sale by sending him a copy of the proclamation of sale, which was duly received by him. He was aware of the date, time and place of the auction sale. Similarly the other creditors of the insolvents were also duly informed of the date, time and place of the auction sale and the copies of the proclamation of sale were sent to them. But they too have not turned up and participated in the sale. Thus, it is not open to the petitioner to file application for setting aside the sale and to direct the official receiver to hold a fresh sale. The application is not only barred by limitation, but also barred by res judicata and estoppel. The Commercial Tax Officer, Belgaum had filed an appeal under S. 80 for setting aside the auction sale. He contended inter alia that he had not received the cyclostyled copy of the proclamation sent under certificate of posting to all the creditors. But the said application was dismissed. The Commercial Tax Officer, Belgaum had filed an appeal under S. 80 for setting aside the auction sale. He contended inter alia that he had not received the cyclostyled copy of the proclamation sent under certificate of posting to all the creditors. But the said application was dismissed. One Shankar Dundappa Kangle had also made a similar application in Misc. No. 79 of 1978 for setting aside the auction sale. That too was dismissed. There are as many as 46 creditors, out of them two have exhausted all their remedies and if rest of the creditors are allowed to file applications one after another, it will take years to close the insolvency petition. It is falsely alleged by the petitioner that the auction sale was held by the official receiver without giving due publicity. It is denied that the newspaper Lokadarshan, in which the notice of proclamation of sale was published, has no wide publicity in the area of Belgaum city. It has a wide circulation of over 8000 copies per day. The official receiver was not interested in the insolvents and had no reason to collude with them. At the time of the auction, twelve bidders participated. Out of them three were the highest bidders and their bids were accepted. So far as the enquiries of the official receiver go, the bidder Shri A. P. Patil is not the son-in-law of insolvent 1 and his permanent residence is not Satara. So also, Hukumchand Kote is not the son-in-law of insolvent 1. It is correct that Sri V. S. Patravali is the son of insolvent 1. But he has separated from his father in the year 1961. The petitioner without knowing anything has rushed to the Court with the frivolous application. He has not explained as to why there is such an inordinate delay in making the application. The price for which the properties were sold was not the lowest and was not nominal. One of the properties is subject to mortgage of Rs. 17,378-68 from the year 1961. Naturally the above properties could not fetch the usual price since what was sold was the right, title and interest of the insolvents. The very fact that none of the 46 creditors turned up to offer any higher price at the auction sale is an indication that the properties being old buildings, subject to litigation, etc. Naturally the above properties could not fetch the usual price since what was sold was the right, title and interest of the insolvents. The very fact that none of the 46 creditors turned up to offer any higher price at the auction sale is an indication that the properties being old buildings, subject to litigation, etc. , were sold for proper price. ( 4 ) THE auction-purchasers have also resisted the petition. ( 5 ) THE Court below dismissed the petition on the ground that it was barred by limitation and also on the ground that I. A. 10 filed by the Commercial Tax Officer was dismissed. Hence, the revision. ( 6 ) THE learned counsel Sri Joshi urged that I. A. 10 had been filed by the Commercial Tax Officer questioning the sale held by the official receiver in favour of the three bidders. I. A. 10 was filed in the year 1978 and it was dismissed on 13-6-1979. As can be seen from the order dated 13-6-1979 passed by the Court, it appears that I. A. 10 was rejected on the ground that it was a formal application. The Court concerned has remarked at the fag end of para 10 of its order, as -"the application filed by the Commercial Tax Department appears to be a formal one. "it appears to be an application filed by the creditor, who knew nothing about the relationship between the bidders and the insolvents or about the value of the properties or anything at all. Therefore, it cannot be said that I. A. 10 was disposed of purely on merits. Therefore, the dismissal of I. A. 10 does not operate as an estoppel so far as the other creditors are concerned. It does not appear therefrom that all the creditors were parties to that application. Therefore, the order passed on I. A. 10, in my opinion, does not bar the present petition either by way of res judicata or by estoppel or any other principle known to law. ( 7 ) ANOTHER application filed by one of the creditors namely Shankara Dundappa Kangle in Misc. Case No. 79 of 1978, it is submitted by the learned counsel Sri Joshi as well as the learned senior Counsel Sri Datar and others, was dismissed as not pressed. Therefore, it was not a decision rendered on merits. ( 7 ) ANOTHER application filed by one of the creditors namely Shankara Dundappa Kangle in Misc. Case No. 79 of 1978, it is submitted by the learned counsel Sri Joshi as well as the learned senior Counsel Sri Datar and others, was dismissed as not pressed. Therefore, it was not a decision rendered on merits. Therefore, it does not also bar the present petition. ( 8 ) THE learned counsel Sri Joshi then urged that the sale had been held on 29-7-1978 by the official receiver and that the present application I. A. 14 had been filed on 28-6-1980. According to him, under S. 68 of the Provincial Insolvency Act, the present petition was barred by limitation. For that purpose, he relied on Gangadhar Revappa Umbaranikar v. Shankar Vithoba Gholasgaonkar, (1971) 73 Bom LR 461. It was a case where the receiver exercising his powers under S. 59 of the Provincial Insolvency Act, 1920, sold the insolvent's property at an auction sale and made a report to the Insolvency Court that he had carried out the sale after getting the sanction of the Court and that the auction-purchaser was the highest bidder and prayed for confirmation of sale. The Court passed an order confirming the sale. It is thereafter, the creditors of the insolvent made an application to the Insolvency Court for setting aside the sale. In the said case, the question was whether the confirmation of sale amounted to an act of the Court. That was an application filed after the confirmation of sale. Therefore, the question of limitation of 20 days or 21 days was held to be applicable to that case. Therefore, the Bombay case will not be of much help to Mr. Joshi. ( 9 ) THEN he relied on Hans Raj v. Rattan Chand, AIR 1967 SC 1780 . It was a case where an application complaining of an act of the receiver attaching property in which insolvent had no interest arose and it was held that the application should be filed under S. 68, but not under S. 4 of the Act. Therefore, limitation of 21 days was attracted. Therefore, the said Supreme court decision also will not be of much help to Mr. Joshi. ( 10 ) IN this case, the sale has been held on 29-7-1978. The application I. A. 14 has been filed on 28-6-1980. Therefore, limitation of 21 days was attracted. Therefore, the said Supreme court decision also will not be of much help to Mr. Joshi. ( 10 ) IN this case, the sale has been held on 29-7-1978. The application I. A. 14 has been filed on 28-6-1980. It was rejected by the trial Court on 27-8-1982. The present revision petition has been filed on 9-10-1982. After the present revision was filed, the lower Court has passed an order on 22-10-1982 confirming the sale. Therefore, the application filed by the creditor was long prior to the confirmation of sale by the lower Court. ( 11 ) THE learned Senior Counsel Sri Datar relied on Mohammad v. Official Receiver, AIR 1931 Lab 133 (1 ). It reads as -"the land of an insolvent who belonged to an agricultural tribe had been sold by the Official Receiver and the proceedings of sale were submitted to the District Judge for confirmation or otherwise. In the meantime the insolvent presented an application more than 21 days from the date of the sale, objecting to the sale of the land on the ground that the same could not be sold under the provisions of the Punjab Alienation of Land Act. Held : that as the District Judge was competent to refuse to confirm the sale on the ground that the land could not be sold under the provisions of the Punjab Alienation of Land Act, because the proceedings were already before him on a report submitted by the Official Receiver, therefore the fact that the attention of the District Judge had been invited to the illegality of the action of the Official Receiver by the insolvent did not affect the question and no question of limitation governing the application could arise. "therefore, whenever an illegality or irregularity committed by the Official Receiver has been brought to the notice of the Court, before the confirmation of sale, the question of limitation of 21 days prescribed by S. 68 of the Provincial Insolvency Act would not arise. Publication of the sale, holding of the sale and sending of a report by the official receiver to the Court for the approval of the Court and confirmation of sale, each one of them constitute a separate act by itself. The limitation would start from the commencement of any one of those acts. Publication of the sale, holding of the sale and sending of a report by the official receiver to the Court for the approval of the Court and confirmation of sale, each one of them constitute a separate act by itself. The limitation would start from the commencement of any one of those acts. As already stated above, the sale has been confirmed in this case after the present revision petition is filed. Therefore, I. A. 14 would be in time. Therefore, the principle laid down in the said Lahore case would be applicable to the facts of the present case. ( 12 ) SRI Datar then relied on Ramaswami Reddiar v. Official Receiver, South Arcot, AIR 1941 Mad 827 . It has been laid down in the said case, as -"the acts of an Official Receiver in holding a sale of the insolvent's assets, in confirming it and in executing a sale deed in favour of the purchaser can all be the subject of an application under S. 68. On each of the aforesaid occasions there is a cause of action and consequently an application under S. 68 to set aside the sale filed within 21 days of the execution of the sale deed in favour of the purchaser after confirmation of sale must be held to be within time. " ( 13 ) SRI Datar then relied on Sayyed Khasim Sahib v. Official Receiver, Guntur, AIR 1946 Mad 89. It lays down as"but the Receiver being an officer of the Court, when it comes to the knowledge of the Court that his action in any particular respect is objectionable, the Court has inherent powers to rectify his errors or mistakes or to reverse or modify his acts or decisions. This decision does not stand alone. It lays down as"but the Receiver being an officer of the Court, when it comes to the knowledge of the Court that his action in any particular respect is objectionable, the Court has inherent powers to rectify his errors or mistakes or to reverse or modify his acts or decisions. This decision does not stand alone. The same view was expressed by a Division Bench of the Calcutta High Court in Hareshwa Ghosh v. Rakhal Das Ghose, (1913) 20 Ind Cas 683 (2), where relying upon three English cases the learned Judges held that when a Receiver has been appointed, he becomes an officer of the Court, and if he is about to act in excess of his authority, it is competent even to a stranger to bring that fact to the notice of the Court, which has inherent power to review the conduct of the Receiver, so that the stranger may not be prejudiced by an unlawful act of its own officer. "this Madras decision is an authority for the principle that even a third party can bring to the notice of the Court the various illegalities and irregularities committed by the Official Receiver, who is an officer of the Court. Therefore, even under S. 151 of the Code of Civil Procedure, the Insolvency Court can rectify the illegality or the irregularity committed by the receiver by exercising its inherent powers under S. 151 of the Code of Civil Procedure. Similar principle is laid down in J. V. Venkatakrishna Ayyar v. The Official Receiver, AIR 1950 Mad 311 . ( 14 ) THUS, the said authorities relied on by the learned counsel Sri Datar clearly lay down that whenever any act of illegality or irregularity committed by the official receiver is brought to the notice of the Court, even by a third person, the Court can, by exercising its inherent power under S. 151 of the Code of Civil Procedure, rectify those illegalities. It means that at any stage of the proceedings, the Court can rectify the illegalities and irregularities committed by the official receiver. It means that at any stage of the proceedings, the Court can rectify the illegalities and irregularities committed by the official receiver. ( 15 ) SECTION 68 of the Provincial Insolvency Act reads, as -"if the insolvent or any of the creditors or any of the person is aggrieved by any act or decision of the receiver, he may apply to the Court, and the Court may confirm, reverse or modify the act or decision complained of and make such order as it thinks just; provided that no application under this Section shall be entertained after the expiration of twenty-one days from the date of the act or decision complained of. "as already stated above and as laid down by the decisions above referred to, publication of sale by itself amounts to an act or decision within the meaning of S. 68 of the Act. Thereafter, holding of the sale by itself amounts to an act or decision within the meaning of S. 68 of the Act. Thereafter submitting the report to the Court for accepting the sale would amount to an act or decision within the meaning of S. 68 of the Act. Confirmation of sale by itself would amount to a separate act or decision within the meaning of S. 68. Therefore, the period of limitation of 21 days prescribed by S. 68 would commence from the date of occurrence of any one of these acts. ( 16 ) IN this case, the sale has taken place on 29-7-1978. The sale has been confirmed on 22-10-1982. I. A. 14 has been filed on 28-6-1980. Therefore, the present application is well within time, even if the application falls within the ambit of S. 68 of the Act. Therefore, the lower Court committed an error in dismissing the petition on the ground that the same was barred by limitation. ( 17 ) THE Supreme Court has laid down in P. Srinivasa Naicher v. Engammal, AIR 1962 SC 1141 , as to what circumstances would be relevant in setting aside the sale held by the official receiver. Therefore, the lower Court committed an error in dismissing the petition on the ground that the same was barred by limitation. ( 17 ) THE Supreme Court has laid down in P. Srinivasa Naicher v. Engammal, AIR 1962 SC 1141 , as to what circumstances would be relevant in setting aside the sale held by the official receiver. The Supreme Court has laid down, as -"it is true that the Court has to look in insolvency proceedings to the interest in the first place of the general body of creditors; in the second place to the interest of the insolvent, and lastly, where a sale has been decided upon by the official receiver to the interest of the intending purchaser in that order. Even so, the decision of the official receiver in favour of a sale should not be set aside unless there are good and judicial grounds for interfering with the discretion exercised by the official receiver. "the Supreme Court has referred to the various grounds on which the sale held by the official receiver can be set aside. They are - (1) There was fraud or collusion between the receiver and the insolvent or the intending purchaser; (2) The Court may also interfere if it is of opinion that there were irregularities in the conduct of the sale which might have affected the price fetched at the sale; and (3) Even though there may be no collusion, fraud or irregularity, the price fetched may still be so low as to justify the Court to hold that the property should not be sold at that price. There would be innumerable circumstances affecting the sale held by the official receiver. The said grounds enumerated by the Supreme Court are illustrative, but not exhaustive. ( 18 ) IT is urged that there was no proper publication of proclamation of sale in various languages spoken in Belgaum; that there has been gross inadequacy of price; that the bidders in the case are the close relatives of the insolvents; that there has been collusion between the insolvents and bidders and that the sale is vitiated by fraud etc. ( 19 ) THE learned counsel Sri thipperudrappa, who claims to be appearing for some of the insolvents, also does not support the sale. ( 19 ) THE learned counsel Sri thipperudrappa, who claims to be appearing for some of the insolvents, also does not support the sale. ( 20 ) ALL these and other matters pleaded by the petitioner in his petition will have to be gone into by the Court below. ( 21 ) THEREFORE, under these circumstances, the order passed by the Court below is set aside. The revision is allowed. The matter is remanded to the Court below for fresh disposal according to law and in the light of the directions given above. Revision allowed. --- *** --- .