14 April 1954
Supreme Court


Case number: Appeal (civil) 93 of 1953






DATE OF JUDGMENT: 14/04/1954


CITATION:  1954 AIR  349            1955 SCR  108  CITATOR INFO :  D          1967 SC1344  (7,10)

ACT:    Civil Procedure Code (Act V of 1908), Order XXI, rules 84 and  85-Provisions  requiring  deposit of 26  per  cent  of- purchase money immediately after sale and payment of balance within 15 days of the sale-Whether  mandatory-Non-compliance with such provisions-Legal effect thereof on  sale--Inherent powers-Whether  can be exercised-Civil Procedure  Code-order 21,  rule  72-Decree-holder  not  to  bid  for  or  purchase property without permission-This provision directory.

HEADNOTE:    Held, that the provisions of rules 84 and 85 of Order XXI of  the Code of Civil Procedure requiring the deposit of  25 per  cent  of the purchase money immediately on  the  person being declared as a purchaser and the payment of the balance within  16  days  of the sale are  mandatory  and  if  these provisions are not complied with there is no sale at all. Non-payment of the price on the part of the defaulting  pur- chaser renders the sale proceedings as a complete nullity. The  inherent powers of the Court cannot be allowed to  cir- cumvent the mandatory provisions of the Code and relieve the purchasers of their obligation to make the deposit.                     109 Under  Order XXI, rule 72, of the Code of Civil Procedure  a decree-holder cannot purchase property at the  Court-auction in   execution  of  his  own  decree  without  the   express permission of the.  Court and that when he does so with such permission,  he is entitled to a set-off, but if he does  so without such permission, then the court has a discretion  to set  aside  the sale upon the application by  the  judgment- debtor, or any other person whose interests are affected  by the sale.  As a matter of pure construction this  -provision is directory and not mandatory. Rai  Radha Krishna and Others v. Bisheshar Sahai and  Others (49  1. A. 312), Munshi Md.  Ali Meah v. Kibria  Khatun  (15 Weekly  Notes (Cal.) p. 350) Sm.  Annapurna Dasi  v.  Bazley Karim Fezley Moula (A.I.R. 1941 Cal. 85), Nawal Kishore  and Others  v. Buttu Mal and Subhan Singh (I.L.R. 57 All.  658), Haji  Inam  Ullah v. Mohammad Idris (A.I.R. (30)  1943  All.



282),  Bhim Singh v. Sarwan Singh (I.L.R. 16 Cal.  33),Nathu Mal v. Malawar Mal and Others (A.I.R. 1931 Lah. 15) and A.B. Davar v. Thinda Ram (A.I.R. 1938 Lah. 198) referred to:

JUDGMENT:    CIVIL  APPELLATE  JURISDICTION : Civil Appeal No.  93  of 1953. Appeal  by  Special Leave granted by the  Supreme  Court  of India  by  its  Order dated the 5th March,  1951,  from  the Judgment  and -Decree dated the 28th January, 1949,  of  the High Court of Judicature at Bombay in Appeal from Order  No. 43  of 1947 arising out of the Order dated the  14th  April, 1947,  of  the Court of the Joint First Class  Sub-Judge  at Ahmedabad in Darkhast No. 249 of 1940. Appellant No. I in person for self and co-appellants. C.   K.  Daphtary,  Solicitor-General  for  India  (J.    B. Dadachanji and A. C. Dave, with him) for respondent No. 1. 1954.  April 14.  The Judgment of the Court was delivered by GHULAM   HASAN  J.-This  appeal  brought  by  the   auction- purchasers  by  special  leave raises the  question  of  the validity of a sale of certain properties which took place on August  13, 1942.  The respondents are  the  judgment-debtor and the legal representative of the deceased decree-holder. The  decree-holder applied on March 30, 1940, for  execution of his decree by sale of 4 lots of property 110 belonging  to  the  judgment-debtor.   The  properties  were valued  it  Rs.  1,50,000 and were  subject  to  a  previous mortgage   of   Rs.  60,000  existing  in  favour   of   the auction--purchasers.  It appears that under the terms of the mortgage-deed the mortgagees were entitled to proceed in the first  instance  against -the first 3 lots and  against  the fourth  lot only in the event of a deficiency in sale  price to cover the deceretal amount.  The first 3 lots with  which alone  we  are  concerned in the appeal  were  sold  to  the mortgagees  for  Rs. 53,510 on August 13, 1942.   They  were sold free from the encumbrance under the order of the  Court passed  at  the  instance  of  the  decree-holder  and   the mortgagees  but without notice to the  judgment-debtor.   It may,  however,, be noted that on the application of  certain third  parties  their right of annuity over  the  properties sought to be sold was notified in the sale proclamation.  On the  same date the mortgagees applied for a set-off  stating that the purchase price was Rs. 53,510 while the amount  due to  them was Rs. 1, 20,000.  The Court allowed  the  set-off then  and there.  It is important to bear in mind  that  the mortgagees  had  filed  no suit and obtained  no  decree  to recover the money due on the mortgage. The  order notifying the claim to annuity was challenged  by the  Judgment-debtor in’ revision to the High Court  but  it was  dismissed on November 10, 1943 by Sen J.  who  observed that as the sale had already taken place, the proper  remedy of  the  judgment-debtor was to move the Court  for  setting aside  the sale.  Thereupon the judgment-debtor  applied  on November  20, 1943, under Order XXI, rule 90, of  the  Civil Procedure  Code  to have the sale set  aside  (Exhibit  51). Allegations  imputing fraud and collusion to the  mortgagees were  made in the application, in particular it was  alleged that  the  3 lots were purchased at  a  grossly.  inadequate price by under-valuing them in the proclamation and that the mortgagees  not having paid 25% of the bid, the sale  should not  have  been  sanctioned in  their  favour.   While  this application  was pending, the judgment-debtor  made  another



application  on January 15, 1947, challenging the sale as  a nullity on the ground that the purchaser had neither 111 made  the deposit required under rule 84 of Order  XXI,  nor paid  the balance of the purchase-price as required by  rule 86,  and praying for. resale of the property to realise  the price.   The order allowing set-off was attracted  as  being without jurisdiction.  No separate order was passed on  this application as the application Exhibit 51 was granted on the same  grounds.   The trial Court found that at the  time  of attachment on April 30, 1940, lots Nos.  I and 2 and lot No. 3 were valued at Rs. 40,000 each separately but at the  time of proclamation of sale on March 6, 1942, the first two were valued  at Rs. 45,000 and the third at Rs. 8,000 only.   The property  did  not  consist  of  mere  survey  numbers   but admittedly  had  bungalows, and superstructures and  in  the opinion  of the Court the subsequent valuation was bound  to mislead  bidders.  The.  Court, however, set aside the  sale on the ground that the provisions of Order XXI, rules 84 and 85,  had  not been complied with in that the price  was  not deposited  but a set-off was wrongly claimed and allowed  in the absence of the judgment-debtor by the Court which had no authority or jurisdiction.  The Court observed. "There  is  nothing to show that these  opponents  took  any permission from the Court to bid at the auction and in  fact they  could hardly have obtained any such  permission,  they being  mortgagees  whose  dues  had yet  to  be  proved  and determined.   If  they could ask for set-off,  there  is  no reason why they should not be required also to seek previous permission  from the Court to bid under Order XXI, rule  72, of  the Civil Procedure Code.  It may be noted that  one  of these  opponents  is  himself  a  pleader  and  he  was  not justified  in  taking such an unauthorised  order  from  the Court  without fully acquainting with all the facts.   Under all  these  circumstances, these opponents can  with  little justification  avoid the consequences of noncompliance  with the  provisions of Order XXI, rules 84 and 85,  referred  to above.   ’Without  proving their claim under  the  mortgage, they  have succeeded in purchasing for a  gross  under-value these  properties and even that value they have not paid  in Court   by   taking   recourse  to  the   device   of   set- off.................................  In my  opinion,  there could not be a 112 more fraudulent and materially irregular procedure than what has taken place in the present case at the instance of these mortgagees, to the great detriment and injury of the present applicant, viz., the judgment debtor." The Court held that the application under rule 90 was barred by  limitation but this being a case of a void sale and  not of  a mere material irregularity the Court was bound to  re- sell the property irrespective of any application being made by the judgment-debtor. The  High Court of Bombay (Chagla C. J.  and  Gajendragadkar J.) dismissed the appeal of the mortgagee-purchasers on  the ground  that  the order of the trial Court was  under  Order XXI, rule 84 and/or rule 86, of the Civil Procedure Code and therefore.  no appeal lay against such an order.   The  High Court   held   that  the  order  of  set-off   was   without jurisdiction  and  the subsequent deposit  of  the  purchase price  on December 14, 1945, made long after the period  had elapsed was of no avail. One of the auction-purchasers, who is a pleader, has himself argued  the appeal before us.  The principal question  which falls  to be considered is whether the failure to  make  the



deposit under Order XXI, rules 84 and 85, is only a material irregularity  in the sale which can only be set aside  under rule 90 or whether it is wholly void.  It is argued that the case  falls within the former category and  the  application under rule 90 being barred by limitation, the sale cannot be set aside.  It is also contended that the Court having  once allowed the set-off and condoned the failure to deposit, the mistake of the Court should not be allowed to prejudice  the purchasers  who would certainly have deposited the  purchase price but for the mistake.  We are of opinion that both  the contentions  are devoid of substance.  In order  to  resolve this controversy a reference to the relevant rules of  Order XXI  of the Civil Procedure Code will be  necessary.   These rules are 72, 84, 85 and 86: "  72.  (1)  No holder of a decree  in  execution  of  which property  is sold shall, without the express  permission  of the Court, bid for or purchase the property. 113 (2)  Where a decree-holder -purchases with such  permission, the  purchase-money and the amount due on, the  decree  may, subject to the provisions of section 73, be set off  against one another......................... (3)  Where a decree-holder purchases, by himself or  through another  person, without such permission, the Court may,  if it thinks fit, on the application of the judgment-debtor  or any  other person whose interests are affected by the  sale, by           order          set          aside           the sale  .............................................. "84.  (1)  On every sale of immovable  property  the  person declared  to  be the purchaser shall pay  immediately  after such  declaration a deposit of twenty-five per cent. on  the amount of his purchase-money to the officer or other  person conducting  the  sale, and in default of such  deposit,  the property shall forthwith be resold. (2)  Where  the  decree-holder  is  the  purchaser  and   is entitled  to set off the purchase-money under rule  72,  the Court may dispense with the requirement of this rule. "  85.  The full amount of purchase-money -payable shall  be paid by the purchaser into Court before the Court closes  on the fifteenth day from the sale of the property : Provided that, in calculating the amount to be so paid  into Court, the purchaser shall have the advantage of any set-off to which he may be entitled under rule 72. 86.  In  default of payment within the period  mentioned  in the  last  preceding  rule, the deposit may,  if  the  Court thinks  fit,  after defraying the expenses of the  sale,  be forfeited to the Government, and the, property shall be  re- sold,  and the defaulting purchaser shall forfeit all  claim to  the property or to any part of the sum for which it  may subsequently be sold." The scheme of the rules quoted above may be shortly  stated. A  decree-holder  cannot  purchase property  at  the  Court- auction  in execution of his own decree without the  express permission  of the Court and that when he does so with  such permission,  he is entitled to a set-off, but if he does  so without such permission, then 15 114 the  Court has a discretion to set aside the sale  upon  the application  by  the judgment-debtor, or any  other  ’person whose  interests  are affected by the sale (Rule.72).  As  a matter  of  pure construction this  provision  is  obviously directory  and  not mandatory - See Rai  Radha  Krishna  and Others  v.  Bisheshar Sahai and Others (1).   The  moment  a person  is  declared  to be the purchaser, he  is  bound  to



deposit 25 per cent. of the purchase-money unless he happens to  be  the decree-holder, in which case the Court  may  not require him to do so (Rule 84). The  provision regarding the deposit of 25 per cent. by  the purchaser  other than the decree-holder is mandatory as  the language  of  the  rule suggests.  The full  amount  of  the purchase-money  must  be paid within fifteen days  from  the date  of the sale but the decree-holder is entitled  to  the advantage  of  a set-off.  The provision  for  payment  is,. however, mandatory... (Rule 85).  If the payment is not made within  the  period  of  fifteen days,  the  Court  has  the discretion to forfeit the deposit, and there the  discretion ends but the obligation of the Court to re-sell the property is imperative.  A further consequence of non-payment is that the defaulting purchaser forfeits all claim to the  property (Rule 86). It  is not denied that the purchasers had not  obtained  any decree  on  foot  of their mortgage and  the  claim  of  Rs. 1,20,000  which they put forward before the execution  Court had   not   been  adjudicated  upon  or   determined.    The mortgagees, one of whom is a pleader, applied on the day  of the  sale claiming a set-off on foot of the  mortgage.   The Court without applying its mind to the quest-ion immediately passed  the  order  allowing the set-off.   This  claim  was obviously  not  admissible under the provisions of  rule  84 which  applies  only to the decree-holder.   The  Court  had clearly no jurisdiction to allow a set-off.  The  appellants misled  the Court into passing a wrong order  and  obtaining the  advantage of a set-off while they knew  perfectly  well that  they  had got no decree on foot of  the  mortgage  and their claim was undetermined.  There was default in (1)  49 I.A. 312. 115 depositing  25  percent of the  purchase-money  and  further there  was  no payment of the full amount of  the  purchase- money  within fifteen days from the date of the sale.   Both the  deposit  and the payment of  the  purchase-money  being mandatory under the combined effect of rules 84 and 85,  the Court  has the discretion to forfeit the deposit but it  was bound  to  re-sell  the property with  the  result  that  on default  the purchaser forfeited all claim to the  property. These provisions leave no doubt that unless the deposit  and the payment are made as required by the mandatory provisions of  the rules, there is no sale in the eye of law in  favour of the defaulting purchaser and no right to own and  possess the property accrues to him. In  two  cases  decided by the Calcutta  High  Court,  viz., Munshi  Md.   Ali  Meah  v.  Kibria  Khatun  (1),  and   Sm. Annapurna  Dasi v. Bazley Karim Fazley Moula (2),  the  sale was  held  to be no sale where the purchaser had  failed  to deposit  the  balance of the purchase-money as  required  by rule  85.  A similar view was taken by a Division  Bench  of the  Allahabad  High Court in Nawal Kishore  and  Others  v. Buttu  Mal and Subhan Singh (3).  The provisions of rule  86 were  held to be mandatory in another decision of  the  same Court,  Haji  Inam Ullah v. Mohammad Idris (4), and  it  was held  that the Court was bound to re-sell the property  upon default  irrespective of any application being made  by  any party to the proceedings. -The case of Bhim Singh v.  Sarwan Singh  (5)  was  a  case of failure to  make  a  deposit  as required  by section 306 of the Code of 1882  (corresponding to rule 85 of the present Code).  The Court treated it as  a material  irregularity in conducting the sale which must  be enquired  into  upon  the  application  under  section  311, (corresponding to rule 90 of the present Code), and not by a



separate  suit  to set aside the sale.  The  Court  did  not apply  its  mind to the question whether the  provisions  of section  306 being mandatory the sale should not be  treated as  a nullity for non-compliance with those provisions,  The decision of (1)  15 Weekly Notes (Cal.) P. 350. (2)  A.I.R. 1941 Cal. 85. (3)  57 All. 658. (4)  A.I.R. (30) 1943 All; 282. (5)  16 Cal. 33. 116 a  single  Judge (Tapp J.) in Nathu Mal v.  Malawa  Mal  and Others  (1)  is distinguishable upon its facts.   There  the auction-purchaser  had actually tendered the money  but  the payment  was  postponed by consent of  parties  pending  the disposal of the objection by the judgment debtor.  We do not agree with the remark made in that case that the  provisions of  rule  85  are intended "to be  directory  only  and  not absolutely  mandatory." A Division Bench of the  same  Court (Tek  Chand  and Abdul Rashid JJ.) held in A.  R.  Davar  v. Jhinda Ram (2), that the Court had no jurisdiction to extend the  time  for the payment of the balance of  the  purchase- money under rule 85 and must order resale under rule 86. Having  examined the language of the relevant rules and  the judicial  decisions  bearing  upon the  subject  we  are  of opinion  that  the  provisions of the  rules  requiring  the deposit of 25 per cent. of the purchase-money immediately on the person being declared as a purchaser and the payment  of the  balance  within 15 days of the sale are  mandatory  and upon  non-compliance with these provisions there is no  sale at all.  The rules do not contemplate that there can be  any sale  in  favour of a purchaser without  depositing  25  per cent.  of the purchase-money in the first instance  and  the balance  within 15 days.  When there is no sale  within  the contemplation  of these rules, there can be no  question  of material  irregularity  in the conduct of  the  sale.   Non- payment of the price on the part of the defaulting purchaser renders  the  sale proceedings as a complete  nullity.   The very fact that the Court is bound to resell the property  in the  event of a default shows that the previous  proceedings for sale are completely wiped out as if they do not exist in the   eye  of  law.   We  hold,  therefore,  that   in   the circumstances of the present case there was no sale and  the purchasers acquired. no rights at all. It was urged before us that the Court could allow a  set-off in  execution  proceedings under its inherent  powers  apart from  the  provisions of Order XXI, rule 19,  of  the  Civil Procedure Code.  We do not think that the inherent powers of the Court could be invoked to (1) A.I.R. 1931 Lah. 15. (2) A.I.R. 1938 Lah. 195. 117 circumvent the mandatory provisions of the Code and  relieve the purchasers of their obligation to make the deposit.  The appellants  by misleading the Court want’ to benefit by  the mistake  to which they themselves contributed.  They  cannot be allowed to take advantage of their own wrong; The appeal fails and is dismissed with costs.                                     Appeal dismissed.