Achamma George v. Trio Packaging Company — 1993 DIGILAW 204 (KER)

Judgment :- John Mathew, J. These appeals arise from the execution proceedings in O.S. No. 154/1976 of the Additional Sub Court, N. Parur. The decree was one for money obtained by the State Bank of India, Cochin Branch, which is hereinafter referred to as the decree-holder against Trio Packaging Company, M.G. Road, Ernakulam, which is hereinafter referred to as the 1st judgment-debtor, for realisation of an amount of Rs. 2,41,083.77 and interest thereon. 2. The decree schedule property was sold in execution. The judgment debtor filed E.A. No. 606/88 to set aside the sale. Judgment-debtors 1 and 2 filed E.A. No. 60S/ 88 to set aside the sale. These applications were dismissed by the execution court by separate orders dated 22nd December, 1988. The 9th judgment-debtor has filed C.M.A. No. 8/89 and the judgment-debtors 1 & 2 have filed C.M.A. No. 41/89 against the respective orders dismissing their application to set aside the sale. In both these appeals the auction purchaser is impleaded as a respondent. He is hereinafter referred to as the auction purchaser. 3. The only point to be considered is whether the sale is liable to be set aside. 4. There are 10 judgment-debtors in the decree. Out of this the 1st judgment-debtor is the partnership and the other judgment-debtors are the partners of that firm. The decree is as follows: "Decree - It is ordered and decreed that the plaintiff is allowed to recover a sum of Rs. 2,41,083.77 with 14% interest on the principal amount of Rs. 2,39,704.67 from 11ll-76 till realisation and cost of the suit from defendants and plaint schedule property. The plaintiff will sell the property first and realise the amount. If only there is any balance, defendants will be personally liable. Time for payment is one month". Schedule A to the decree consists of raw materials, semi-finished goods and finished goods. Schedule B consists of items of machinery belonging to the first judgment-debtor - partnership. Schedule C is 8 acres 29.5 cents in different sub divisions of Sy. Nos 126 and 127 of Kothakulangara Village in Alwaye Taluk, and the factory building therein measuring about 10,000 sq. ft. with masonry and having asbestos roof and concrete slab and the appertinent structures in this plot. Schedule D consists of two motor vehicles. 5. Schedule C is 8 acres 29.5 cents in different sub divisions of Sy. Nos 126 and 127 of Kothakulangara Village in Alwaye Taluk, and the factory building therein measuring about 10,000 sq. ft. with masonry and having asbestos roof and concrete slab and the appertinent structures in this plot. Schedule D consists of two motor vehicles. 5. The first contention raised by learned counsel for the 91h judgment-debtor is that no notice under Order XXI Rule 22 of the Code of Civil Procedure was issued on E.P. No. 94/87and therefore, further proceedings in that E.P. was without jurisdiction. Learned counsel submitted that in column 6 of that E.P. the decree-holder mentioned that the previous E.P. No. 54/79 was dismissed on 5ll-1984. E.P. No. 94/87 was filed only on 9-4-1987, viz. after two years of the dismissal of the earlier E.P. Therefore, according to the learned counsel Rule 22 notice ought to have been issued. Such a contention was not taken in the execution court. In the appeal we permitted the appellant to raise such a ground since it relates to the jurisdiction of the execution court. The records originally received from the lower court did not contain the records relating to E.P. No. 54/79 and the E.P. filed in 1984. So we called for those records also from the lower court. On verification we find that E.P. No. 54/79 was filed on 17-3-1979 and was pending on 16ll-1984, on which dale the decree-holder filed a fresh E.P. No. 351/1984. That E.P. was dismissed only on 26-6-1986. Therefore, the entry made in column 6 of E.P.No. 94/87 that the E.P. was dismissed on 5ll-1984 is a mistake. Therefore, it was not necessary to issue Rule 22 notice on E.P. No. 94/87, which-was filed within two years of the dismissal of the earlier E.P. Therefore, there is no merit in the contention that Rule 22 notice ought to have been issued to the judgment-debtors. 6. The second ground is that on E.P. No. 94/87 no notice was issued to the judgment-debtor. A perusal of E.P. 94/87 discloses the following orders. E.P. filed on 9-4-1987. On 2-6-1987 Rule 66 notice was issued and posted to 21-7-1987 for return of notice. On 21-7-1987 Ds.1 and 2 appeared. J.Ds4and 10 were set ex pane. E.P. was posted to 19-8-1987 for return of notice of other J.Ds. and for objections of J.Ds.1 and 2. A perusal of E.P. 94/87 discloses the following orders. E.P. filed on 9-4-1987. On 2-6-1987 Rule 66 notice was issued and posted to 21-7-1987 for return of notice. On 21-7-1987 Ds.1 and 2 appeared. J.Ds4and 10 were set ex pane. E.P. was posted to 19-8-1987 for return of notice of other J.Ds. and for objections of J.Ds.1 and 2. On 19-8-1987 the court ordered fresh notice to judgment-debtors 5,6 & 9. For return of notice and objection the E.P. was adjourned to 25-9-1987. On 25-9-1987 the following order was passed. "No steps taken. E.P. dismissed as against J.Ds. 3,5,6,7,8 and 9. For objection of J.Ds.1 and 2 and steps against J.Ds. 4 and 10 to 22-10-87". The E.P. was again adjourned to 22-10-87, 25-11-87 and to 8-12-1987. The order of 8-12-1987 was as follows: "No steps taken against J.Ds. 4 and 10. E.P. dismissed as against J.Ds. 4 and 10. No objection filed by J.Ds.I and 2. For settlement of proclamation to 18-1-88". 7. Therefore, the execution petition was dismissed as against J.Ds. 3 to 10 and it was proceeded only against J.Ds.1 and 2. So the question is whether the sale of the decree schedule property without notice to judgment-debtors 3 to 10 is valid. The relevant portions of Order XXI Rule 66 C.P.C. are as follows: "66. Proclamation of sale by public auction.-(1) Where any property is ordered to be sold by public auction in execution of a decree, the Court shall cause a proclamation of the intended sale to be made in the language of such court. The relevant portions of Order XXI Rule 66 C.P.C. are as follows: "66. Proclamation of sale by public auction.-(1) Where any property is ordered to be sold by public auction in execution of a decree, the Court shall cause a proclamation of the intended sale to be made in the language of such court. (2) Such proclamation shall be drawn up after notice to the decree-holder and the judgment-debtor, and shall state the time and place of sale, and specify as fairly and accurately as possible (a) the property to be sold; or where a part of the properly would be sufficient to satisfy the decree, such part, (b) the revenue assessed upon the estate or part of the estate, where the properly to be sold is an interest in an estale or in part of an estate-paying revenue to the Government; (c) any incumbrance to which the property is liable; (d) the amount for the recovery of which the sale is ordered; and (c) every other thing which the Court considers material for a purchaser to know in order to judge of the nature and value of the property: Provided that where notice of the date for settling the terms of the proclamation has been given to the judgment-debtor by means of an order under R.54, it shall not be necessary to give notice under this rule to the judgment-debtor unless the Court otherwise directs: Provided further that nothing in this rule shall be construed as requiring the Court to enter in the proclamation of sale its own estimate of the value of the properly, "but the proclamation shall include the estimate, if any, given, by cither or both of the parties." (Sub-rules (3) & (4) omitted as unnecessary for the present discussion) 8. Admittedly no order under R.54 (attachment of immovable property) was passed in this case, since the property is charged under the decree. A proclamation of sale is meant for the information of intending purchasers. Some aspects to be required to be decided pursuant to Rule 66(2) notice are purely administrative in nature. They are fixing of the upset price, details of the sale proclamation and dale of sale. These decisions does not affect the rights, liabilities or equities of the parties to the decree. But the decisions so far as it affects the rights, liabilities or equities of the parties will be a judicial order. They are fixing of the upset price, details of the sale proclamation and dale of sale. These decisions does not affect the rights, liabilities or equities of the parties to the decree. But the decisions so far as it affects the rights, liabilities or equities of the parties will be a judicial order. For example, the directions regarding the properly to be sold, or where a part of the property would be sufficient to satisfy the decree, which is that part, the amount for the recovery of which the sale is ordered, will affect the rights liabilities of the parties. Rule 66(2) specifies that the proclamation shall be drawn up after notice to the decree-holder and the judgment-debtor. Obviously the provision as to the notice to the judgment-debtor is intended to give him an opportunity to raise any objection he may have to the proposed sale. Admittedly no notice under Rule 66(2) was issued to the judgment-debtors 3 to 10. In fact, there was no execution proceedings against them since the E.P. stood dismissed as far as they were concerned. No opportunity was given to judgment-debtors 3 to 10 to raise any objection to the proposed sale or the details to be specified in the proclamation. According to the 9th judgment-debtor the property which was proposed to be sold viz. 8 acres and 29.5 cents together with the factory building measuring about 10,000 sq.ft. need not have been sold to realise the decree amount in this case. According to her, only a part of the property was sufficient to satisfy the, decree. However, she did not get any opportunity to point out this important aspect before settlement of proclamation. 9. The word 'judgment-debtor' is defined in S.2(10) of the C.P.C. as any person against whom a decree has been passed or an order capable of execution has been made. Therefore, it cannot be disputed that the 9th judgment-debtor came within the definition of the word 'judgment'-debtor'. Therefore, it is clear that the direction to issue notice under Rule 66(2) to the judgment-debtor was not observed in this case. 10. The contention of the auction purchaser as well as the decree-holder is that the 9th judgment-debtor is only a partner of the 1st judgment-debtor-partnership firm. Therefore, it is clear that the direction to issue notice under Rule 66(2) to the judgment-debtor was not observed in this case. 10. The contention of the auction purchaser as well as the decree-holder is that the 9th judgment-debtor is only a partner of the 1st judgment-debtor-partnership firm. According to the learned counsel appearing for them, notice to the 1st judgment-debtor through the 2nd judgment-debtor will be sufficient notice to all other judgment-debtors who are partners of 1st judgment-debtor firm. Although Order XXX provides for suits by or against firms, some of the High Courts have held that the principles of that order applies to execution proceedings also. See In re Malabar Forests & Rubber Co. AIR 1932 Bom. 334 and Alekh Chandra v. Krishna Chandra - (28) AIR 1941 Pat. 596. Therefore, the further question to be considered is whether in execution proceedings for the sale of the partnership property which is charged under the decree notice is necessary to the partners who are shown as judgment debtors in the decree or whether it is sufficient if notice is given to the partnership and its Managing Partner only. 11. Under Order XXX Rule 1 C.P.C. any two or more persons claiming or being liable as partners may sue or be sued in the name of the firm. Even if it is taken that the provisions under Order XXX Rule 1 C.P.C. applies, the execution petition was not in proper form because only one partner viz. the 2nd judgment-debtor alone was given notice as representing the 1st judgment-debtor firm. Order XXX Rule 3 only provides for the service of notice on the firm by serving that notice upon any one or more of the partners. S.24 of the Partnership Act which provides that notice to a partner operates as notice to the firm, cannot be relied on in support of the contention that notice to the firm will amount to notice to a partner. Under S.24 of the Partnership Act, a notice to a partner may be binding on the partnership if he habitually acts in the business of the firm and the notice is a notice of any matter relating to the affairs of the firm. S.18 of the Partnership Act provides that a partner is the agent of the firm for the purposes of the business of the firm. S.18 of the Partnership Act provides that a partner is the agent of the firm for the purposes of the business of the firm. However, S.18 does not make the firm an agent of the partners. Payment of a debt due to a partner, to the firm will not discharge the debt in the absence of proof of express or implied authorisation by the partner. See Powell v. Brodhurst -(1901) 2 Ch. 160. We are of the view that a partnership firm is not the agent of the partners. Therefore, the notice given to the 1st judgment-debtor firm cannot be taken as notice to other judgment-debtors who happened to be the partners of that firm. 12. Moreover, by the decree in this case all the partners are made personally liable in case the decree is not realised by the sale of the partnership properties. This is a further reason to hold that notice to all judgment-debtors regarding the sale of the property was essential. We, therefore, hold that the sale is vitiated by material irregularity in publishing and conducting it. 13. There was difference of opinion between the different High Courts on the question whether a sale without notice was void or only voidable. The Kerala High Court in Govinda Menon v. Varkey (1970 KLT 440 = AIR 1971 Ker. 8 FB) and the Andhra Pradesh High Court in M.P.N. Reddi v. Maddivenkayya - AIR 1977 A.P. 234 held that the sale was only voidable and not void. However, the Madras High Court injagannath v. Perumal Naidu - AIR 1955 Mad. 233 held that such a sale is void. The Supreme Court in Dhirendra Nath v. Sitdhir Chandra - AIR 1964 SC 1300 clarified the position as follows: "(6) this raises the question whether such a sale is a nullity. If a provision of a statute is only directory, an act done in contravention of the provision is manifestly not a nullity. S.35 of the Act is couched in a mandatory form and it casts in terms a duty on the court to comply with its provisions, before a sale is held. Prima facie the provision is mandatory; at any rate, we shall assume it to be so for the purpose of these appeals. S.35 of the Act is couched in a mandatory form and it casts in terms a duty on the court to comply with its provisions, before a sale is held. Prima facie the provision is mandatory; at any rate, we shall assume it to be so for the purpose of these appeals. (7) Even then, the question arises whether an act done in breach of the mandatory provision is per force a nullity Where the court acts without inherent jurisdiction, a party affected cannot by waiver confer jurisdiction on it, which it has not. Where such jurisdiction is not wanting, a directory provision can obviously be waived. But a mandatory provision can only be waived if it is not conceived in the public interests, put in the interests of the party that waives it." 14. However, in the present case this aspect is not of much importance since the judgment-debtors 1 and 9 have filed petitions to set aside the sale/therefore, even in case the sale is not void, it can be set aside if there is material irregularity in publishing or conducting the sale resulting in substantial injury to the judgment-debtors. We have already found that the failure to issue notice to judgment-debtors 3 to 10 was a material irregularity. The material irregularity is in the procedure to be followed before the property is put up for sale. Thus there is material irregularity in publishing or conducting the sale. Then the further question is whether the judgment-debtors suffered substantial injury as a result of the material irregularity. 15. In E.A.No.606/88 filed by the 9th judgment-debtor it was stated that the properties were worth Rs.50 lakhs on a modest estimate. In E.A.No.608/88 filed by judgment-debtors 1 and 2 to set aside the sale it was stated that the factory building having an area of 200 ft. x 60ft., together with the adjoining office building will be worth Rs.14 lakhs. The landed property having an extent of 8 acres 29.3 cents has road frontage on three sides and one cent of that property will be worth Rs.5,000/-. It was also mentioned that the machinery in the building was worth more than Rs.1 crore. In the proclamation schedule the upset price was only fixed as Rs.3 lakhs. The extent of the building was shown as 10000 sq.ft. only. Around the property there is granite wall and barbed wire fence. It was also mentioned that the machinery in the building was worth more than Rs.1 crore. In the proclamation schedule the upset price was only fixed as Rs.3 lakhs. The extent of the building was shown as 10000 sq.ft. only. Around the property there is granite wall and barbed wire fence. There are several trees in the property which alone will be valued at Rs.1 lakh. In the affidavit dated 9th May, 1987 filed by the Manager of the S.I.B. Division of the decree-holder Bank in support of the draft sale proclamation, it was mentioned as follows: "The factory building is a large one of about 10,000 square feet constructed of R.C.C. slab-roof and asbestos covered with solid foundation etc., and the land to be sold is 8 acres 29 cents and 500 square feet. The land has been sold by the Government in the Industrial area and is understood to be capable of holding only by persons to whom such industrial licence is granted. The value of the factory is estimated at Rs.three lakhs and the value of the site about 3 lakhs." We were unable to find out from the records what was the upset price fixed for the court sale. In the proclamation notice available in the file that column is left blank. However, the bid was staled at Rs.5,30,000/- and was closed for Rs.5,32,000/- which is below the estimate of the decree-holder. During the pendency of these C.M.As. this court by order dated 7-8-1990 directed the learned Government Pleader to ascertain the compensation to be paid by the Government for resuming the land from the judgment-debtors. Although several adjournments were granted, the statement dated 3-3-1993 was filed only after commencement of the hearing of these appeals. Along with that statement the General Manager, District Industries Centre, Ernakulam filed a copy of me letter dated 29ll-1990 from the Director of Industries and Commerce to the Secretary to Government, industries Department valuing one cent of the decree schedule property at Rs.3,000/- per cent. The 7 acres of property to be resumed was thus valued at Rs.21 lakhs. We are of the view that we can safely adopt this as a reasonable valuation of the property. The judgment-debtors have also filed a report of the valuers K.G. Sukumaran & Co. valuing the building alone at Rs.10.66 lakhs. The 7 acres of property to be resumed was thus valued at Rs.21 lakhs. We are of the view that we can safely adopt this as a reasonable valuation of the property. The judgment-debtors have also filed a report of the valuers K.G. Sukumaran & Co. valuing the building alone at Rs.10.66 lakhs. Therefore, only the sale of a portion of the property was sufficient to satisfy the decree. Judgement-debtors 3 to 10 were denied any opportunity to point out this aspect to the execution court. Accordingly we hold that there was material irregularity in publishing and conducting the sale resulting in substantial injury to the judgment-debtors. 16. However, we are not inclined to set aside the sale without any condition. The auction took place on 5-8-1988. The auction purchaser has deposited the bid amount. Under the circumstances we direct that the sale will be set aside on condition that the auction price together with 12% interest thereon from the respective dates of deposit of the amount together with an additional amount calculated at 5% of the bid amount, as well as the entire cost of execution inclusive of the cost of stamp-papers (if the stamp-papers are already utilised) are deposited by the judgment-debtors in the execution court for payment to the auction purchaser. If there is any balance amount in deposit in court, that may be adjusted towards the amount payable by the judgment-debtors and refunded to the auction purchaser. The judgment-debtors are given six months' time from this date for depositing the amount. The judgment-debtors will apply to the execution court to fix the amount of cost to be deposited by them. If the fixation of the amount of cost is delayed, the execution court may grant appropriate further time to deposit the cost. On such deposit the sale will stand set aside. In case the amounts specified above are not deposited within time, the sale will stand confirmed and the C.M.As. will stand dismissed. C.M.As are disposed of as above. There will be no order as to costs.