Topic: Smt. Laxmi Devi vs Sethani Mukand Kanwar

Smt. Laxmi Devi vs Sethani Mukand Kanwar
Supreme Court of India- Equivalent citations: 1965 AIR 834, 1965 SCR (1) 726 - Bench: Gajendragadkar, P.B. (Cj), Wanchoo, K.N., Hidayatullah, M., Mudholkar, J.R. - Date of Judgment: 09/10/1964

Transfer  of Property Act (4 of 1882), ss. 2(d), 5 and    100- Auction sale in execution of decree-If transfer of property- Charge-If enforceable against auction purchaser.

Code  of  Civil     Procedure (Act 5 of 1908), 0.    21,  r.     90-Substantial injury-What is-Application to set aside  auction sale-Averment regarding substantial injury-Necessity for.

The  2nd respondent obtained a money decree against the     3rd
respondent and in execution of that decree brought the    suit
property  to sale and the appellant purchased it.  Prior  to
the sale, however, there was a decree, in favour of the     1st
respondent,  for  arrears of maintenance, and  a  charge  in
favour    of the 1st respondent was declared over the  proper-
ties  of  the 3rd respondent, including the  suit  property.
The  1st respondent therefore filed an application under  0.
21, r. 90 of the Code of Civil Procedure, 1908, to set aside
the  sale.   The Executing Court dismissed  the     application
holding that she had failed to show any substantial  injury.
The order was set aside by the High Court on appeal.  In the
appeal    to  the     Supreme Court, it was    contended  that     the
application  should  be     dismissed as :     (i)  there  was  no
allegation  of    substantial injury in the  application,     and
(ii)  in  fact    the  1st respondent  had  not  suffered     any
substantial injury.

HELD : The appeal should be allowed.

While  s.  5 of the Transfer of Property Act,  1882  defines
"transfer of property" only as a transfer effected by act of
parties inter vivos, s. 2(d) provides that save as  provided
by Chapter IV of the Act, the provisions of the Act are     not
deemed    to affect transfers in execution of decrees.   Since
the  positive  provision  in s. 2(d)  prevails    over  s.  5,
Chapter IV and s. 100 in that Chapter would apply to auction
sales in execution of decrees.    Section 100 provides that  a
charge    shall  not be enforced against any property  in     the
hands of a person to whom the property has been     transferred
for  consideration  and without notice of the  charge.     The
result    would  be  that as a  consequence  of  the  material
irregularity in not referring to the charge in favour of the
1st  respondent in the proclamation of sale under 0. 21,  r.
66  of    the Civil Procedure Code, 1908, the  1st  respondent
would  not  be able to enforce the charge against  the    suit
property  purchased by the appellant in auction sale.    When
injury is thus implicit in the irregularity it would be     too
technical  to  dismiss the application on  the    ground    that
there  was  no    express averment of  substantial  injury  as
required by the proviso to 0. 21 r. 90(1) of the Code.     But
the  application  should however be dismissed,    because     the
injury    suffered  by the 1st respondent was not     in  fact  a
substantial injury. There were other propertiesto     the
charge    and  they  would  be  available     to  meet  all     her
legitimateby   way of maintenance. [731 C-D, G; 732  B;
733 E-G; 734 E-F; 735E-F, H]
Nawal  Kishore v. The Municipal Board, Agra,  I.L.R.  [1943]
AU.  453 (F.B.), R. L. Nanadkeolvar v. Sultan Jahan,  I.L.R.
31 Pat. 722 and
Munna  Singh  Allah  Singh v. Wasti Ram     Saraf    and  others,
A.I.R. 1960 Punj. 296, approved.
Arumilli  Surayya v. Pinisetti Venkataramanamma and  others,
A.I.R. 1940 Mad. 701 and Creet v. Ganga Ram Gool Rai, I.L.R.
[1937] 1 Cal. 203, overruled.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 247 of 1962. Appeal    from the judgment and order dated July 29, 1960, of the Rajasthan High Court in D. B. Civil Misc. Appeal No. 54 of 1957.

Bishan    Narain, Amar Chand Inani and B. P. Maheshwari,    for the appellant.

B. D. Sharma, for respondent No. 1.

The Judgment of the Court was delivered by Gajendragadkar C.J. This appeal arises out of an application made by respondent No. 1, Smt.    Mukand Kanwar,    challenging the validity of an auction sale held on the 14th May,    1954 in execution of a money decree passed in favour of Ratan Lal Dani,    Secretary, Hindu Charitable Aushdhalaya, Ajmer, respondent No. 2, and against Umrao Mal, respondent No. 3. The property sold at the auction sale is "old Daikhana" at Ajmer.    On the 24th June, 1950, Umrao Mal who was the owner of the property, mortgaged it to the appellant Laxmi Devi. Later,    respondent No. 2 obtained a money decree against respondent No.    3 for a large amount, and in execution of this money decree he brought the property in    question to sale. Auction sale was accordingly held on the 14th    May, 1954, and the appellant purchased the property    subject to the preexisting mortgage in her favour. The    amount    due under the mortgage was Rs. 33,264 and as auction-purchaser, the appellant    paid Rs. 2,800 whereby    she purchased the equity    of redemption    vesting in respondent    No. 3,    the judgment-debtor. It is the validity of this sale that is challenged in the present proceedings.

Long before the mortgage was executed, respondent No. 3    had executed in favour of his mother, respondent No. 1, a docu- ment whereby her maintenance was guaranteed. This document had created charge over certain properties belonging to respondent No.    3. On    the strength    of this document, respondent No. 1 sued- respondent No. 3 (civil suit No.    233 of 1952). In this suit, she claimed arrears of    maintenance and asked for a declaration that the properties specified in the plaint, which were the same as the properties covered by the    previous agreement between    the parties,    were subject to    a charge for    her maintenance. The trial Court gave her a decree for arrears of maintenance, but declined to make the declaration as to charge    claimed by her.    This decree, was pronounced on    the 31st July, 1952. Against this decree, respondent No. 1 preferred An appeal (No. 80 of 1952) to the Judicial Commissioner, Ajmer. Her appeal succeeded and    the charge over the properties was declared in    her favour.    This decision was pronounced on the 10th February, 1954. After the auction sale was held on the 14th May, 1954, it was challenged by two separate applications, one was made by respondent No.    3, the judgment-debtor, on the    28th June, 1954, and the other by respondent No. 1 on the    same date. Both these applications were made under 0. 21 r. 90 of    the Code of Civil Procedure. The application made by respondent No. 3 was dismissed on the 30th April, 1955, while    the application made by respondent No. 1 went to a trial.    The Executing Court which heard this application    tried three issues.    The first issue was whether the sale had    been vitiated by any irregularity as required by 0. 21 r.    90. The second was whether respondent No. 1 was a person whose interests had been affected by the impugned sale; and    the third was whether the irregularity alleged by respondent No. 1 had caused substantial loss to her. All these issues were decided    in favour of respondent No. 1. In the    result,    the impugned sale was set aside on the 4th May, 1955. The appellant challenged the correctness of this decision before    the Judicial Commissioner, Ajmer. It was urged on behalf    of the    appellant that the application made by respondent No. 1 did not satisfy the requirements of 0. 21 r. 90 of the Code inasmuch as appropriate allegations    had not been made in the application showing that substantial injury    had been suffered by respondent No. 1 by reason of the irregularities which, according to her, had vitiated the said sale. This plea was rejected    by -the Judicial Commissioner. It was then urged that respondent No. 1    was not competent to make the said application. The Judicial Commissioner did not    accept even this plea. The    last argument which was pressed before the Judicial    Commissioner was that the finding recorded by the Executing    Court    that respondent No.    1 had suffered substantial injury was    not justified, and that    in fact, the    appellant had    no opportunity to lead her evidence on that issue, because    all the three issues on which the Executing Court had made    its findings had been framed by it at a very late stage of    the proceedings.

This plea was upheld by the Judicial Commissioner, and    so, he set    aside the finding of the Executing Court on    that issue and sent the case back for disposal in accordance with law, with a direction that the issue    as to    substantial injury should be tried afresh.    This order was pronounced on the 26th August, 1955.

After remand, the Executing Court considered the issue as to substantial injury and held that respondent No. 1 had failed to show any substantial injury. As    a result of    this finding, it ordered that her application under 0. 21 r. 90 should be dismissed, and the sale should be confirmed.    This order was pronounced on the 27th April, 1957. Aggrieved by this order, respondent No. 1 preferred an appeal, and since the High, Court of Judicature at Rajasthan had then come into existence, her appeal was heard by    the said High Court. The High Court has held that the Executing Court was in    error in coming to the conclusion    that respondent No.    1 had not proved substantial injury.    The contentions raised by    the appellant    in support of    the ultimate decision reached by    the Executing    Court    were rejected by the High Court, and as a result, the application made by respondent No. 1 was allowed and the impugned    sale set aside. This appellate order was pronounced on the    29th July, 1960. It    is against this order that the    appellant has come to this Court    with a certificate granted by    the said High Court. Thus, it willbe noticed that the sale which took place on the 14h May, 1954    still remains to be confirmed.

On behalf of the appellant, Mr. Bhasin Narain has conceded that as a person holding a charge over the property sold at the auction sale, respondent No. 1 can rely on s. 100 of the Transfer of Property Act and as such was competent to    make the application under    0. 21 r. 90. Order 21, r. 90(1) provides, inter alia. that where any immovable property    has been sold in    execution of a decree, any person whose interests are affected by the sale, may apply to the Court to set    aside the sale on the ground of    a material irregularity or fraud in publishing or conducting it. There is a proviso to this rule which is relevant for our purpose. This proviso lays down that no sale shall be set aside on the ground of irregularity or fraud unless upon the facts proved,    the Court is satisfied that    the applicant    has sustained substantial injury by reason of such    irregularity or fraud. While conceding that respondent    No. 1    was entitled to make an application as a person whose interests were affected by the impugned sale, Mr. Bishan Narain argues that if the application made by her is properly construed, it would appear that the material allegations of fact which must be made by the applicant invoking 0. 21 r. 90(1),    have not been made; and so, the said    application should    be. dismissed on that ground alone. On the merits, he contends that there is no evidence on which a finding can be made in favour of respondent No. 1 that she has suffered substantial injury by reason of any irregularity committed in the conduct of the sale.

The application made    by respondent No. 1 is no doubt somewhat defective, because it does not, in terms, allege that as a result of    the irregularity alleged in    the application, respondent No. 1 has suffered    substantial injury.    The application avers that before the impugned auction    sale was held, a proclamation had been issued,    but the said proclamation did not refer to the charge in favour of respondent    No. 1 which had already been recognised by decree in a suit between respondent No. 1 and respondent No. 3 and that naturally attracts the provisions of 0. 21 r. 66 of the    Code.    Order 21 r. 66(2) (e)    requires that    the proclamation shall be drawn up and shall specify as fairly and accurately    as possible any incumbrance to which    the property sought to be sold is liable. The failure to mention    the charge in favour of respondent No. 1 would, therefore, constitute an irregularity within the meaning of

0. 21 r. 90(1).    This position is also not in dispute. The contention, however, is that the application made by respondent No. 1 does not show what injury she has suffered as a result of the said irregularity, and that, it is argued,    constitutes a serious infirmity in the    application which would entail its dismissal. On the other hand,    Mr. Sharma for respondent No. 1 has relied on the fact that    the auction    sale would virtually wipe out    or extinguish    the rights    which have accrued to respondent No. 1 by virtue of the charge declared by a decree in her favour, and he    has suggested that the legal consequence flowing from the    fact that the auction sale has been held without notice of    the charge    in favour of respondent No. 1    itself    constitutes substantial injury to the interests of respondent No. 1. This argument is based on the latter part of S. 100 of    the Transfer of Property Act. We will presently refer, to    this provision. At this stage, it is enough to state that if Mr. Sharma    is right in contending that an auction sale of immovable property which has followed the    proclamation issued    under 0. 21 r. 66 in which no reference to a charge is made, materially affects the rights of the charge-holder, some injury would automatically flow from the irregularity alleged    in the application filed by respondent No. 1,    and so, it would not be appropriate to    hold that the said application should be dismissed on the ground that no substantial injury has    been alleged as required by the proviso to 0. 21 r. 90(1). It is true that before an application made under 0. 21 r..90 can succeed, the applicant has to show that the impugned sale was, vitiated by a material irregularity or fraud in publishing or conducting it; and as required by the proviso, it is also necessary that he should show that in consequence of the said    irregularity or fraud    he had sustained substantial injury. Therefore, Mr. Bishan Narain is right when he contends that the application made by respondent No. 1 ought to contain an allegation in regard to the material irregularity as well as an allegation-as to    substantial injury. But, in our opinion, in a case like the present, where substantial injury is alleged to be implicit in the material irregularity set out in the application, it would be, too technical to hold that the application should be dismissed on the preliminary ground that no    specific or express    averment has been made as to    substantial injury suffered by respondent No. 1.

Now, in dealing with the question as to whether respondent No. 1    can be said to have alleged that she has suffered substantial injury by    reason of the    fact that she    has alleged    a material irregularity which, in law,    necessarily leads to substantial injury, it is necessary to consider the question as to whether the latter part of s.    100 of    the Transfer of Property    Act applies to    the present case. Section    100 deals with charges, and it provides when a person    can be said to have a charge on the property;    and adds that all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge. It is common ground that respondent No. 1    can claim to be charge-holder as defined by s. 100. That takes us    to the latter part of s. 100.    This part provides, inter alia,    that save as    otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of a person    to whom such property    has been transferred    for consideration and without notice of the charge.    Mr. Sharma contends that the auction-purchaser holds the property as a result of the auction sale, and in that sense, the property must be held to have been transferred to him. He adds    that the charge was not notified in the proclamation, and so, the auction purchaser has no notice of the charge, and the    sale is undoubtedly supported by consideration. In other words, the case of the appellant directly falls under this part of s. 100, and so, respondent No. 1 would not be able to enforce her charge    against    the property purchased by the appellant at the auction sale. That, according to him, constitutes substantial injury. This argument raises the question as to whether the relevant provision of s. 100 takes in the cases of auction purchase at all. For answering this question, it is necessary to refer to two other provisions of the Transfer    of Property Act. Section 2(d) provides that nothing herein contained shall be deemed to affect, save as provided by S. 57    and Chapter IV of this Act, any transfer by operation of law or by, or    in execution of, a decree or order of    a Court of competent jurisdiction. The effect of this provision is that the provisions of the Transfer of Property Act will not apply to any    transfer by operation of law or    by, or in execution of,    a decree or order of a    Court of competent jurisdiction.    This provision is clear and emphatic.    It says that nothing in the Transfer of Property Act will apply to the transfers just indicated; and that would naturally take in the whole of S. 100. But there is an exception made to this provision by S. 2(d) itself by the saving clause, and this exception covers cases provided by    s. 57    and Chapter    IV. Chapter IV deals with mortgages of immovable property and charges.. and includes sections    58 to 104. Section    100, therefore, falls within Chapter IV; and,    the result    of the saving clause is that s. 100 would apply to transfers by operation of law. There    is, therefore, no doubt that if the question as to the applicability of    the latter    part of S. 100 to cases of auction sales had to be determined only by reference to S. 2(d), the answer would clearly be in favour of such applicability. It is    true that when S. 2(d) was originally enacted,    the latter    part of S. 100 was not included in the    Transfer of Property Act; this was added in 1929 by S. 50 of Act 20 of 1929.    That, however,    would make no    difference to    the interpretation of the relevant clause in s. 2(d). The    fact that the saving clause included in s. 2(d)    as it    was originally enacted, could not have taken in the latter    part of s. 100, makes no difference to its construction, because as soon as the latter provision was added to    S. 100, it became a part of the provisions contained in Chapter IV    and automatically fell within the terms of the saving clause. If the legislature had intended that the provision added to s. 100 in 1929 should not fall within the saving clause, an appropriate provision would have been made by    amending S. 2(d) in that behalf. Therefore, s. 2(d) by itself clearly supports Mr. Sharma's contention that the appellant who is an auction-purchaser would be able to claim immunity against the enforcement of the charge in favour of respondent No. 1 by virtue of the provisions contained in the latter part of s. 100.

This position, however, has become somewhat complicated by reason    of the provisions contained in s. 5 of the Transfer of Property Act. Section 5 provides, inter aria, that in the following sections "transfer of property" means an    act by which a living person conveys property, in present or in future,    to one or more other living    persons. In other words, in terms, the definition of the expression "transfer of property" as used in all the sections of the Transfer of Property Act is intended to take in transfers    effected by acts of parties inter vivos, and an auction-sale clearly is not such an act. Section 5 would, therefore, appear to exclude auction sales from the purview of s. 100 altogether. This result would appear to be consistent with the provision in the preamble of the Act which says that the Transfer of Property Act was enacted because it was thought expedient to define    and amend certain parts of the law relating to    the transfer of property    by act of parties. That is    the position which emerges from the reading of s. 5 coupled with the preamble; and that naturally raises the question as to how to reconcile these two inconsistent positions. In our opinion, the positive provision contained in s.    2(d) must prevail over the definition of "transfer of property" prescribed by s. 5. No doubt, the purpose of the definition is to    indicate the class of transfers to    which    the provisions of the Transfer of Property Act are intended to be applied; but a definition of this kind cannot over-ride the clear and positive direction contained in the specific words used by s. 2 (d).    As we have already seen, the result of the saving clause enacted by s. 2(d) is to emphasise    the fact that the provisions of s. 57 and those contained in Chapter IV must apply to transfer by operation of law.    Such a positive provision cannot be made to yield to what    may appear to be the effect of the, definition prescribed by s. 5, and so, we are inclined to hold that notwithstanding    the definition prescribed    by s. 5, the latter part of s.    100 must be deemed to include auction sales.

This question    has been considered by our High Courts on several    occasions, and, on the whole, the majority    view appears to be in favour of the conclusion which we have just indicated. In Nawal Kishore v. The Municipal Board, Agra, (1), this question was referred to a Full Bench of the Allahabad High    Court,    because there    appeared to be a conflict between two previous decisions of (1)I.L.R. [1943] All. 453.

Division Benches of the said High Court on    this point. These two decisions were Rai    Indra Narain    v. Muhammed Ismail(1), and    Municipal Board, Kanpore v.    Roop Chand Jain(2). In the first decision, the Allahabad    High Court had taken the view that auction sales do not fall within the purview    of the latter part of s. 100, while in    the latter case, a contrary view had been accepted. The    Full Bench preferred that latter view to the former. Since this    Full Bench decision was pronounced in the Allahabad High Court, auction-purchasers have been consistently held to fall under the latter part of S. 100. It has been held by the    Full Bench that when the relevant clause in the latter part of S. 100 speaks of any property in the hands of person to    whom such property has been transferred, the concept of transfer is wide enough to include transfers effected    by acts of parties    as well as transfers effected by operation of    law. The same view has been accepted by the Patna High Court in R. L.    Nanadkeolvar v. Sultan Jehan(3), and by    the Punjab High Court in Manna Singh Al1ah Singh v. Wasti Ram Saraf and Others(1). The decision of    the Madras High Court in Arumilli Surayya v. Pinisetti Venkataramanamma and Ors.(5) and the decision of the Calcutta High Court in Creet v. Ganga Ram Gool Raj,(1) which appear to support the contrary view do not, in our opinion, correctly represent the    true legal position in this matter.    Therefore, we must deal with the present appeal on the basis that as a result of    the failure of the proclamation to refer to the charge in favour of respondent No. 1, she would not be able to    enforce    her charge    against the property purchased by the appellant by auction sale; and that means that the impugned sale has been conducted in a materially irregular manner and as a conse- quence of the said irregularity, some injury has resulted to respondent No. 1.

That raises the question as to whether the said injury    can be said to amount to substantial injury within the meaning of proviso to 0. 21 r. 90(1); and this inevitably would be a question of fact. The High Court appears to have held    that as soon as it is shown that the charge would become unenforceable against    the appellant auction-purchaser by virtue    of the provisions of S. 100, it follows as a matter of law    that respondent No. 1 has suffered    substantial injury, and so, the impugned sale must be set aside. We are not prepared to accept this view. We do not think it can be reason-

(1) I.L.R. [1939] All. 885.

(2) I.L.R. [1940] All. 669.

(3) I.L.R. (1952) 31 Pat. 722.

(4) A.I.R. 1960. Punj. 296.

(5) A.I.R. .1940 Mad. 701.

(6) I.L.R. [1937] 1 Cal. 203.

ably assumed as a matter of law that in every case where a charge has become unenforceable against an auction-purchaser by reason of    the fact that it was    not shown in    the proclamation preceding the auction sale, it follows that the charge-holder has suffered substantial injury. Whether or not the injury suffered by the charge-holder is substantial, must depend upon several relevant    facts.    How    many properties have been sold at the auction sale; how many    out of them were the subject-matter of the charge; what is    the extent of the claim which the charge-holder can legitimately expect to enforce against the properties charged, these    and other relevant matters must be considered before deciding whether    or not the injury suffered by the charge-holder is substantial. It is from this point    of view that    the material facts in the present case must now be considered. Properties which are the subject-matter of the    charge    are five in number.    Out of these properties, it is property No. 3 alone which has been sold at auction sale.    It appears that properties Nos.    1 and 2 have already ceased to be available to the charge holder, and so, the consideration of the question as to whether the injury suffered by respondent No. 1 is substantial, must depend upon the relative values of properties    Nos. 4    and 6. This    question has    been considered by the Executing Court when the matter was    sent back to that Court by the Judicial Commissioner and    the Executing Court has made a definite finding that the injury suffered by respondent No.    1 cannot be said to    be substantial. According to it, properties Nos. 4 and 6 which would be available to respondent No. 1 would be enough to meet all her legitimate claims against the judgment-debtor, respondent No.    3. The value of Property No. 4 is    Rs. 1,18,967 whereas the value of property No. 6 is    Rs. 1,25,464. The Executing Court has taken into    account    the amount which respondent No. 1 is entitled to claim by way of maintenance from respondent No. 3, has also borne in    mind the fact that respondent No. 1 is an old lady past 70 years of age and has come to the conclusion that, on    the whole, the sale of property No. 3 to the auction-purchaser cannot be said to have caused substantial injury to her. In    our opinion, it is difficult to differ from this conclusion; and so, it follows that though respondent No. 1 has been able, to show that her charge could not be enforced    against    the appellant, it is not shown that this circumstance has caused substantial injury to her. The result, therefore, is    that the requirement of the proviso to 0. 21 r. 90 of the Code is not satisfied in the present case.

We ought to add that pending the appeal before this Court, respondent No. 3, Umrao Mal has died leaving behind him    his mother    respondent No. 1 and his widow, and the estate of Umrao Mal has    devolved on these two widows; and    so, respondent No.    1 has now become the owner of part of    the properties against which she would otherwise have    been entitled to proceed in execution of tier maintenance decree. The result is, the appeal is allowed, the order passed by the High Court is    set aside and the application made by respondent No.    1 under 0. 21 r. 90 is dismissed. There would be no order as to costs throughout.

Appeal allowed.