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2009 DIGILAW 522 (KER)

T. v. R. Fund VS Official Receiver

2009-06-22

K.M.JOSEPH, M.L.JOSEPH FRANCIS

body2009
JUDGMENT : K.M. JOSEPH, J. 1. These appeals are connected and therefore disposed of by this common judgment. The appellants in both the appeals are the same. In MFA.No.212/06, the appellants impugn the order of the Ist Additional District Judge, Thiruvananthapuram by which he allowed the application to execute the sale deed filed by the 1st respondent in favour of the auction purchaser. In the other MFA, by the order impugned, the Ist Additional District Judge, Thiruvananthapuram has rejected the application filed by the appellants to set aside the sale executed by respondent Receiver in favour of the auction purchaser. 2. It is by a common order that the orders were passed in the I.As. as aforesaid. By order in I.A.No.2135/03, the court had permitted the Official Receiver to dispose of 32 cents of property comprising Survey Nos.1998, 2000 and 2014 of Thycaud village. The Receiver conducted the sale of the property in favour of the 2nd respondent in the appeals on 10.4.2006 in a sum of Rs.32,15,000/-. It is thereupon that the appellants filed IA.1497/06 to set aside the sale alleging irregularities. This application has been rejected as already noticed. The court also granted permission to the Official Receiver to execute the sale deed in favour of the 2nd respondent auction purchaser. 3. We heard learned counsel for the appellants and learned counsel appearing on behalf of the 1st and 2nd respondents. 4. This application has been rejected as already noticed. The court also granted permission to the Official Receiver to execute the sale deed in favour of the 2nd respondent auction purchaser. 3. We heard learned counsel for the appellants and learned counsel appearing on behalf of the 1st and 2nd respondents. 4. Learned counsel for the appellants would submit that a notice of sale was given on 30.3.2006 and the sale was held on 10.4.2006 and this conduct of the 1st respondent has occasioned a breach of O. 21 R. 68 C.P.C. The provision reads as follows: “Time of sale.- Save in the case of property of the kind described in the proviso to R. 43, no sale hereunder shall, without the consent in writing of the judgment-debtor, take place until after the expiration of at least fifteen days in the case of immovable property, and of at least seven days in the case of movable property, calculated from the date on which the copy of the proclamation has been affixed on the Court-house of the Judge ordering the sale.” According to the learned counsel for the appellants, the gap of 15 days as mandated by the Rule has been observed in its breach and therefore clearly the court below ought to have allowed the application to set aside the sale and refused the application seeking permission to execute the sale deed. Learned counsel for the appellants points out that under S.5 of the Insolvency Act, the court has the same powers and has to follow the same procedure it has and follows in the exercise of original civil jurisdiction. The appellants in this regard rely on S. 5 of the Insolvency Act, which reads as follows: “5. General powers of Courts - (1) Subject to the provisions of this Act, the Court, in regard to proceedings under this Act, shall have the same powers and shall follow the same procedure as it has and follows in the exercise of original civil jurisdiction. (2) Subject as aforesaid, the High Court and the District Courts, in regard to proceedings under this Act in Courts subordinate to them, shall have the same powers and shall follow the same procedure as they respectively have and follow in regard to civil suits.” 5. Learned counsel for the first respondent would contend that the application filed for setting aside the sale itself is barred by limitation. Learned counsel for the first respondent would contend that the application filed for setting aside the sale itself is barred by limitation. She points out that the application is maintainable under S.72 of the Insolvency Act. It reads as follows: “72. Appeal to Court against Receiver.- If the insolvent or any of the creditors or any other 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.” According to her, the sale was held on 10.4.2006. The application was filed only on 30.5.2006. Though the vacation may have intervened the application should have been filed, according to her, on the re-opening day to render it within time. Learned counsel appearing on behalf of the 2nd respondent would contend that O.21 is not as such applicable to the sale conducted by the Receiver. 6. As far as the second question, namely whether the sale conducted by the Receiver on 10.4.2006 is in contravention of O. 21 R. 68, is concerned, it is clear that if O.21 R. 68 is applicable, there is violation of O. 21 R. 68. But, the question is as to whether O.21 R.68 is applicable to sale by a Receiver acting under the Insolvency Act. The Receiver under the Act cannot equated with the court. O. 21 R.68 speaks about the sale held by the court. In this connection, we may advert to certain decisions. In Cheda Lal v. Lachman Parshad & Ors. (AIR 1917 All.74), the Division Bench of the Allahabad High Court had occasion to take the view that the sale by the Receiver is an act of the Receiver and not a proceeding. That was a case where the highest bidder of the auction of the property sold by the Receiver failed to deposit 1/4th of the purchase money and property has been sold on loss. That was a case where the highest bidder of the auction of the property sold by the Receiver failed to deposit 1/4th of the purchase money and property has been sold on loss. The court proceeded to hold as follows: “I think that the powers conferred upon a Court and the duties imposed upon a Court by O.21, Civil P.C., have to do with the execution of Civil Court decree, the foundation of which is a decree for sale or an attachment duly effected in accordance with the provisions of the Order itself. The position of the Receiver is that of a man in whom certain property has become vested. It has no doubt vested in him as a trustee for other persons; but for all that he is in law the owner of the property. He has authority under the Provincial Insolvency Act, S.20, to sell the same, and his power of sale cannot be limited by the provisions of O.21, Civil P.C., as it would have to be if the contention for the respondents now before us were correct. Except that the Receiver is bound to act under the directions given him by the Court and that any person aggrieved by any act or decision of the Receiver has a right of appeal to the Court under S.22, Provincial Insolvency Act, the position of the Receiver is simple that of a private person owning certain property who is under the necessity to covert the same into cash as readily as possible. I think the consequences which would follow from fettering the Receiver by all the details of procedure which O.21, Act V of 1908 provides for execution of Civil Court decrees would be undesirable, and that there is nothing in S.47, Provincial Insolvency Act, which compels us to take such a view.” On the same lines is the judgment of a learned Single Judge of the Nagpur High Court reported in Kesheo Krishnaji v. Baliram Bakaramji & Anr. (AIR (38) 1951 Nagpur 388) and therein also the court took the following view, inter alia: “The sale by the Receiver is not a court- sale but a private sale. There is no provision requiring a Receiver to conduct such a sale in accordance with the provisions of O.21 C.P.C.” 7. (AIR (38) 1951 Nagpur 388) and therein also the court took the following view, inter alia: “The sale by the Receiver is not a court- sale but a private sale. There is no provision requiring a Receiver to conduct such a sale in accordance with the provisions of O.21 C.P.C.” 7. No doubt, learned counsel for the appellants referred us the decision of the Apex Court reported in P.Srinivasa Naicker v. Engammal ( AIR 1962 SC 1141 ). Therein, the court was dealing with a case under the Provincial Insolvency Act, 1920 and the court was dealing with the sale by a Receiver and the power of the court to set aside such sale. The Apex Court held as follows, inter alia :- “8. It may be accepted that the power of the court under S.68 is not hedged in by those considerations which apply in cases of auction sales in execution proceedings. Even so, the power under S.68 is a judicial power and must be exercised on well recognised principles, justifying interference with an act of the Receiver which he is empowered to do under S.59(a) of the Act. The fact that the act of the Receiver in selling properties under S.59(a) is subject to the control of the court under S.68 does not mean that the court can arbitrarily set aside a sale decided upon by the Official Receiver. 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 grounds for interfering with the discretion exercised by the Official Receiver. These grounds may be wider than the grounds envisaged in auction sales in execution proceedings. Even so, there must be judicial grounds on which the court will act in setting aside the sale decided upon by the Official Receiver. These grounds may be wider than the grounds envisaged in auction sales in execution proceedings. Even so, there must be judicial grounds on which the court will act in setting aside the sale decided upon by the Official Receiver. These grounds may be, for example, that there was fraud or collusion between the Receiver and the insolvent or the intending purchaser; 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; again, 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. These grounds and similar other grounds depending upon particular circumstances of each case may justify a court in interfering with the act of the Official Receiver in the case of a sale by him under S.59(a) of the Act.” 8. In our view, the decision of the Apex Court would not appear to advance the case of the appellants that when a Receiver sells property acting under the Act, it is bound to comply with the mandate of O. 21 R. 68. No doubt, in the decision of a learned single Judge in Balaji & Ors. v. Gopal Mali ( AIR 1927 Nagpur 262 ), the court took the view that the provisions of O. 21 are applicable to insolvency proceedings. The question was as to the period of limitation applicable to a petition to set aside a sale under the Insolvency Act. The sale was pending confirmation. The sale apparently was a court sale. 9. The upshot of this discussion would lead us to the conclusion that the sale effected by the Receiver acting under the Insolvency Act and after seeking permission from the court to effect the sale cannot be set aside for the sole reason that there is a transgression of the mandate of O. 21 R. 68. In this case, it has been pointed out to us that the sale was effected after issuing notice on 30.3.2006 which purported to give ten days notice. The sale was held after giving ten days notice. There were 14 bidders. It is also pointed out that the appellants were given individual notice. The creditors' association was also given notice. In this case, it has been pointed out to us that the sale was effected after issuing notice on 30.3.2006 which purported to give ten days notice. The sale was held after giving ten days notice. There were 14 bidders. It is also pointed out that the appellants were given individual notice. The creditors' association was also given notice. The price fetched is Rs.32,15,000/-. It is worthwhile to note as pointed out by the learned counsel for the respondent that this contention was not raised in the court below. In the light of the facts, the court below has correctly found that the sale is proper. 10. No doubt, 1st respondent has not raised in the court below the plea of limitation, which is raised before us. But it is a question of law on the admitted facts. As already noticed, the application was filed after the period of 21 days against what is provided under S.72 of the Act and it was barred. On the whole, we feel that the appeals do not show any merit. Accordingly, the appeals fail and they are dismissed. We do not express any view as to whether there is power under S. 5 of the Limitation Act for condoning the delay in filing the application under S. 72.