Dharmesh Bhanabhai vs Top Syringe Manufacturing Co. And ...
2007 Latest Caselaw 714 Bom

JUDGMENT

D.G. Karnik, J.

1. This appeal is directed against the order dated 9th March 2007 passed by a learned Single Judge on the Receiver's Report accepting the bid of the respondent 6, Ganpatbhai Ishwarbhai Patel, in the sum of Rs. 12,60,000/- for the properties bearing Survey No. 104 (Part) and Survey No. 103, [i.e. Gat No. 6 (Part), 14 and 69 (Part)] totally admeasuring 10 acres and 14 gunthas situate at Village Dhimaniya, Taluka Talasari, District Thane (hereinafter referred to as "the said property").

2. Grievance of the appellant, who is a decree holder in the suit, is that the sale has been confirmed at a price which is grossly inadequate. Learned Counsel for the appellant submitted that one Shailesh Kansara, who was present in the Court, is willing to purchase the said property in question at a sum of Rs. 40,00,000/- and to show his bonafide has also deposited Rs. 40,00,000/- in this Court in pursuance of the order dated 26th April 2007. Counsel therefore submitted that the learned Single Judge erred in accepting the Receiver's report and the private bid of respondent 6.

3. On the other hand, learned Counsel for the respondent 6 - the proposed purchaser submitted that the bid made by the respondent 6 has become final and all that is needed is to accept the bid by the Court. He submitted that at the time of auction, no bidder had come forward. The respondent 6 thereafter gave a private bid, which was higher than the only other private bid received and had also deposited the earnest money and further deposited a sum equivalent to 25% of the bid in the year 2004 itself. Unfortunately, the Court Receiver did not submit a report to the Court but on that count the respondent 6 should not be deprived of the purchase the property.

4. A brief reference to the facts is necessary in order to appreciate the rival submissions of the parties.

5. The appellant filed a suit bearing Suit No. 1993 of 1999 in this Court against the respondents 1 to 4 for recovery of money due under a mortgage. In the said suit, a consent decree was passed on 3rd May 1999 under which the respondents 1 to 4 were directed to pay to the appellant a sum of Rs. 38,43,680.82 together with interest thereon at the rate of 15% p.a. from 1st March 1999 till payment. The respondents 1 to 4 were however granted permission to pay the said amount in quarterly instalments of Rs. 5,49,097/- commencing from 12th October 1999 ending on 12th July 2001. The consent decree further provided that in the event respondents 1 to 4 committing default in payment of any two instalments, the appellant shall be entitled to enforce the mortgage by sale of the mortgaged properties; the Court Receiver shall stand appointed with a power to sell the mortgaged properties. In view of the default in payment of instalments committed by the respondents 1 to 4, this Court by an order dated 5th May 2000 directed the Court Receiver to take forcible possession of the mortgaged properties. Accordingly, forcible possession was taken by the Receiver on 20th June 2000. The Court Receiver proposed an auction sale of the mortgaged properties but on the date of auction, i.e. on 24th September 2002, the Court Receiver did not receive any valid offer for purchase. The Court Receiver, therefore, adjourned the matter sine die. It appears that two private offers were therefore received by the Court Receiver; first being for Rs. 10,00,000/- under a letter dated 22nd March 2003 and another for Rs. 12,60,000/- from the respondent 6 under a letter dated 16th June 2003. Both the offers were accompanied with pay orders for earnest amount of Rs. 25,000/-. The Court Receiver passed an order on 24th June 2003 recording that he would accept the offer of respondent 6 subject to sanction from the Court. Respondent 6 was required to deposit a sum of Rs. 3,15,000/- being 25% of his offer amount. Respondent 6 did not pay 25% of the amount within time. However, by an order dated 2nd August 2004 passed in Chamber Summons No. 1101 of 2003, the learned Single Judge condoned the delay in deposit of the balance amount of Rs. 2,90,000/- and directed acceptance of the pay order submitted by the respondent 6. It however appears that the pay order submitted by the respondent 6 was not encashed by the Receiver inadvertently, and the matter remained in cold storage for last more than two years. Thereafter the Court Receiver filed a report with the Court for accepting the offer made by the respondent 6 and for confirmation of sale of the mortgaged properties in favour of the respondent 6. By the order dated 6th March 2007, a learned Single Judge of this Court held that since the respondent 6 had deposited the pay order of Rs. 2,90,000/- representing shortfall to make up 25% of the bid amount and the same was not encashed by the Court Receiver, the purchaser cannot be blamed for it. The learned Single Judge ordered that since the respondent 6 had tendered the entire balance amount by a fresh pay orders the same should be accepted and the sale should be confirmed in his favour. That order is impugned in this appeal.

6. Learned Counsel for the appellant submitted that the order for confirmation of sale ought not to have been passed by the learned Single Judge inter alia on the following grounds:

(i) The respondent 1 had not deposited 25% of the money in time, that is to say at the time of giving an offer for purchase of the said property. He had only tendered Rs. 25,000/- along with the offer. The balance amount of Rs. 2,90,000/- to make up Rs. 3,15,000/-, being the 25% of the offered price, was paid subsequently by two pay orders dated 13th April 2004 for Rs.1,50,000/ and Rs. 1,40,000/- respectively. Therefore, the requirement of deposit of 25% of the amount under Order 21 Rule 84 of the Code of Civil Procedure (for short "the C.P.C.") were not satisfied.

(ii) The price offered by the respondent 6 is far less than the market value. The said property in question is valued at Rs. 40,00,000/- or more. Another bidder has made an offer for purchase of the said property at Rs. 40,00,000/- and has deposited the entire sum of Rs. 40,00,000/- in pursuance of the permission granted by this Court by its order dated 26th April 2007. This itself indicates that the said property is valued far more than Rs. 12,60,000/- for which the sale has been confirmed. The Court should take into consideration this fact and set aside the order of confirmation of sale passed by the learned Single Judge.

7. Rule 82 onwards of Order 21 of the C.P.C. contain provisions relating to sale of immovable properties in execution of decrees. Rule 82 says that sale of an immovable property in execution of a decree may be ordered by any court other than a Court of Small Causes. Rule 83 says that where an order for the sale of an immovable property has been made, if the judgment debtor satisfies the court that the amount of decree may be raised by mortgage or lease or private sale of the property or some part thereof, or any other immovable property of the judgment debtor, the court may on his application postpone the sale of the property on such terms and for such period as it thinks proper to enable him to raise the amount. Sub-rule (3) of Rule 83 provides that that rule shall not apply to the sale of property directed to be sold in execution of a decree for enforcement of a mortgage or a charge on such property. Rule 84 says that on every sale of immovable property, the person declared to be purchaser shall pay immediately after such declaration a deposit of 25% of the amount of purchase money with the officer or the person conducting the sale and in default of such deposit the property shall be resold forthwith. Rule 85, which is material for our consideration, says that the full amount of the purchase money payable shall be paid by the purchaser in the Court before the Court closes on the fifteenth day from the sale of the property. Rule 86 provides for forfeiture of money already deposited if the full purchase money is not paid within time as provided in Rule 85 and further provides for re-sale of the property. Further rules contained in Order 21 of the C.P.C. are not relevant for the purpose of deciding this appeal.

8. In the present case, the public auction was held on 24th September 2002. However, no offer for purchase of the said property was received at the public auction. It is not clear from the records whether the Court thereafter permitted and allowed the Court Receiver to sell the said property by a private contract. It however appears that the Court Receiver subsequently received two private offers; one for Rs. 10,00,000/- and another for Rs. 12,60,000/- from the respondent 6 under a letter dated 16th June 2003. Each of the offers was accompanied by pay order of Rs. 25,000/- by way of earnest money. By an order dated 14th June 2003 (Exhibit-D to the petition), the Court Receiver accepted the offer of the respondent 6 to purchase the said property for Rs. 12,60,000/- subject to sanction of the Court. In terms of Rule 84 of Order 21 of the C.P.C., the respondent 6 ought to have immediately deposited 25% of the purchase money, that is to say he ought to have deposited further sum of Rs. 2,90,000/- being the difference between the 25% of the purchase price and Rs. 25,000/- paid as an earnest. He failed to do so. This however may not be a ground for setting aside the sale as by an order dated 2nd August 2004 passed in Chamber Summons No. 1101 of 2003, the Court has condoned the delay in depositing the money and directed the Court Receiver to accept the two pay orders dated 13th April 2004. The order dated 2nd August 2004 passed by the learned Single Judge condoning the delay has not been appealed and has become final.

9. It appears that pay orders deposited by the respondent 6 with the Court Receiver in pursuance of the order dated 2nd August 2004 were not encashed by him. The respondent 6 cannot be faulted for non-encashment of the pay orders by the Court Receiver and in the impugned order, the learned Single Judge has therefore rightly held that the respondent 6 had complied with his obligation in that regard.

10. Under Rule 85 of Order 21 of the C.P.C., the respondent 6 was required to deposit the full purchase money payable within 15 days from the date of the sale of the properties. Only thereupon the Court could have confirmed the sale. As stated earlier, by an order dated 24th June 2003, the Court Receiver accepted the offer of the purchaser. Further condition mentioned in his order that the acceptance was subject to the sanction of the Court was only a requirement of law. Admittedly, the respondent 6 did not deposit the balance 75% of the amount within a period of 15 days of the Court Receiver communicating to him of the acceptance of his offer. Though the exact date on which the respondent 6 tendered the balance amount of Rs. 9,45,000/- is not clear from the records of the appeal, the same was tendered sometime in the beginning of the year 2007. Thereafter, the Court Receiver made his report No. 37 of 2007 to the Court and by the impugned order dated 9th March 2007, the Court has directed the acceptance of the money. In our view, the learned Single Judge erred in directing the acceptance of the balance amount and that too without passing any order expressly extending the time for deposit. Rule 85 of Order 21 of the C.P.C. clearly prescribes the time limit of 15 days for deposit of the balance money. On acceptance of the offer by the Court Receiver by an order dated 24th June 2003, the respondent 6 ought to have deposited the balance consideration within 15 days of the communication of the order by the Court Receiver, i.e. some time in July 2003 itself and, in any event, ought to have deposited the balance consideration within 15 days from 2nd August 2004 when the Court condoned the delay in depositing the initial deposit of 25% required under Rule 84 of Order 21 of the C.P.C. The respondent 6 having failed to comply with the provisions of Rule 85 of Order 21 and even having failed to apply for any extension of time (we express no opinion whether the Court could have extended the time if so applied as that question does not arise in this appeal), the learned Single Judge erred in accepting the Court Receiver's report and directing acceptance of the balance consideration of Rs. 9,45,000/-.

11. There is yet another reason why we are not inclined to confirm the sale of the said property in question in favour of the respondent 6. The properties were not sold by public auction. On account of non-receipt of any bid at the time of public auction, the Court Receiver appears to have accepted the private offer of the respondent 6 to purchase the said property. Though there is nothing on record to show that the Court Receiver was permitted to sell the said property by a private contract, we assume in favour of the respondent 6 that the Court Receiver was so authorised. When a property is to be sold in execution of a decree of a Court, the Court Receiver or the officer conducting the sale must take due care to ensure that the property fetches fair price. Taking into consideration that the auction sale is a forced sale, even a private sale on account of failure to receive appropriate bid at a public auction also is a kind of forced sale, the bid/offer received may fall short of market value but the sale cannot be at a price so low as the Court considers unfair. In the present case, the said property in question is are offered to be purchased by the respondent 6 for Rs. 12,60,000/- and that offer has been accepted by the Court. Shailesh Kansara, a third person, has offered to purchase the properties in question for Rs. 40,00,000/- and has deposited the entire amount of Rs. 40,00,000/- in the Court. The offer made by Shailesh Kansara, therefore, is a genuine and bonafide offer. The difference in the price offered by Shailesh Kansara and the offer of the respondent 6 accepted by the Court stares us. It is true that offer has been made by Shailesh Kansara in the Court and that too after the Court Receiver's report was accepted by the Court by its order dated 9th March 2007. If the difference in the price would have been small, we may not have been inclined to consider the offer of Shailesh Kansara and set aside the order of the learned Single Judge accepting Court Receiver's report to confirm the sale in favour of the respondent 6. However, the contention of the appellant has been that the sale ought not to have been confirmed as the offer made by the respondent 6 is far less than the market value of the said property and, in our view, he has established that. In our view, when a property is sold under a Court order in execution of a money decree, the Court is required to ensure that the interests of all the parties before it are protected. One of the interested parties would naturally be a decree holder who wants to get maximum money out of sale of the property so as to recover all his decretal dues. So also that of the original owner would be interested that the fair value is received for the property so that after satisfying the decretal dues, the balance sum comes to him. The owner of the property as well as the decree holder of the property would both be persons interested to ensure that the property fetches fair value. We again repeat that fair value may not necessarily be just equivalent of the market value considering that the purchaser of the property, bearing in mind uncertainty of litigation and uncertainty of the sale in his favour being confirmed and also taking into consideration the possibility of the litigation that he may face at the hands of the owner of the property who feels aggrieved by compulsory sale of his property, may make an offer at a discount. The price, though somewhat less than the market price, must be fair. Shailesh Kansara in the present case also faces the same prospect of litigation at the hands of not only of the original owner but also at the hands of the respondent 6 who may feel aggrieved in the event his offer is not accepted. Despite that, he has offered to purchase the said property at Rs. 40,00,000/- which clearly indicates that fair market value of the said property with all its risks as on today is not less than Rs. 40,00,000/-.

12. The respondent 6 had not even deposited the entire amount of consideration in the year 2003 which he ought to have deposited and had deposited only 25% of the value and that too was a delayed payment though the delay was condoned. He therefore did not tender the balance price within the statutory period of 15 days provided under Rule 85 of Order 21 of the C.P.C. He therefore cannot be heard to say that the appellant wants to take advantage of rise in prices between the intervening period. Respondent 6 also wants to take the same advantage of rise in prices without having paid the price when it ought to have been paid.

13. In the circumstances, the order of the learned Single Judge confirming the sale in favour of the respondent 6 cannot stand. Accordingly, the impugned order is set aside. The sale in favour of the respondent 6 is set aside. The Court Receiver is directed to readvertise the properties for sale forthwith and conduct the fresh sale. The offer made by Shailesh Kansara to purchase the said property for Rs. 40,00,000/- shall be regarded as an offer for purchase of the said property at the said public auction and he shall be at liberty to improve upon the said offer. In the event the Court Receiver does not receive any offer in excess of Rs. 40,00,000/- in the public auction, the offer made by Shailesh Kansara shall stand accepted and the same shall stand confirmed in his favour. In the event any offer of more than Rs. 40,00,000/- is received, the sale and confirmation shall be subject to the order of the learned Single Judge. The Receiver shall act expeditiously and conduct the sale within a period of two months hereof by completing all the necessary formalities. The amount of Rs. 40,00,000/- eposited by Shailesh Kansara shall remain in Court till then, and shall be regarded as an earnest/deposit towards the offer that he may make.