THE GROUNDS OF SETTING ASIDE AUCTION PROCEEINGS TAKEN IN EXECUTION

DECREE

Assignment No. 1

THE GROUNDS OF SETTING

ASIDE AUCTION PROCEEINGS
TAKEN IN EXECUTION DECREE

Submitted to: Sir Tanveer Iqbal

Submitted by: Mahnoor Paracha

2016-LLB-007

Fatima Jinnah Women University

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TABLE OF CONTENTS

SYNOPSIS........................................................................................................3
Abstract.......................................................................................................3
Research Question......................................................................................3
Topic Scheme...............................................................................................3
INTRODUCTION..............................................................................................4
SETTING ASIDE OF SALE ON DEPOSIT.............................................................4
Nature and Scope........................................................................................5
Conditions....................................................................................................6
Limitation Period.........................................................................................6
SETTING ASIDE SALE ON GROUNDS OF IRREGULARITY OR FRAUD................6
Nature and Scope........................................................................................6
Conditions....................................................................................................7
Limitation Period.........................................................................................9
SETTING ASIDE SALE WHEN JUDGMENT-DEBTOR HAS NO SALEABLE
INTEREST.......................................................................................................10
Nature and Scope......................................................................................10
Saleable interest........................................................................................10
Limitation Period.......................................................................................11
CONFIRMATION OF SALE..............................................................................11
Nature and Scope......................................................................................11
Notice........................................................................................................12
CONCLUSION................................................................................................12
CASE LAWS....................................................................................................13

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TABLE OF CASES

 Shams Ul Akbar Case (2012 S C M R 1243)

 Mohammad Khalil Case (2019 S C M R 321)

 Mohammad Ashraf Case (2019 S C M R 1004)

SYNOPSIS

Abstract

Order 21 of the Code of Civil Procedure deals with the solemn act of
execution of the decrees passed by the Courts from grassroots to the top. Order 21

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can be divided into various categories out of which Rules 89 to 92 deals with the
category of setting aside of sale. When a property is sold in execution of a decree, an
application for setting aside sale may be made under these provisions by the persons
affected and the grounds mentioned therein within the prescribed period of limitation.
The provisions of Rules 89 to 91 of Order 21 as to setting aside execution sale are
exhaustive.

Research Question

1. What are various legal provision provided for setting aside auction
proceedings taken in the execution of decree in the Code of Civil Procedure,
1908?

Topic Scheme

Topic 1 – Setting aside of sale on deposit

Topic 2 – Setting aside of sale on grounds of irregularity or fraud
Topic 3 – Setting aside of sale when judgment debtor has no saleable interest
Topic 4 – Confirmation of sale

INTRODUCTION

Order 21 of the Code of Civil Procedure deals with the solemn act of execution of the
decrees passed by the Courts from grassroots to the top. Ultimately, after the
judgment attains finality or where there is no stay in the execution by any Appellate
or Revisional Court, it is the Court of original jurisdiction which performs this sacred
act of implementation of the execution. It has been often seen that in view of less
number of units prescribed for execution of the decree, the executions are not given

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that much time and importance as required and desired. As such, the decrees are
required to be executed with force, so that the Decree Holder having a document
containing declaration of his rights may not feel cheated or helpless having earned no
fruits of the lisp got settled by him from the Court even after spending decades
altogether.1

Order 21 can be divided into various categories out of which Rules 89 to 92

deals with the category of setting aside of sale. When a property is sold in execution
of a decree, an application for setting aside sale may be made under these provisions
by the persons affected and the grounds mentioned therein. Such an application has
to be made within the prescribed period of limitation i.e. 60 days as provided for in
Art. 127 of The Limitation Act, 1963. But an application to set aside sale of
immovable property cannot be made on any other ground not covered by Rules 89 to
91.2 In other words, the provisions of Rules 89 to 91 of Order 21 as to setting aside
execution sale are exhaustive.

SETTING ASIDE OF SALE ON DEPOSIT

Rule 89 Order of the Code reads as:

89. Application to set aside sale on deposit.

Nature and Scope

Rule 89 deals with the setting aside of sale on the deposit of the amount
specified in the proclamation of sale. The underlying object of this rule is to give a
judgment-debtor the "last chance" of getting the sale set aside before it is confirmed
by the court.3 It is intended to afford an opportunity to the judgment-debtor, even
after the property is sold, to satisfy the claim of the decree-holder and to compensate

1
Adv. Niraj Jagtap, “Execution”, < https://nirajjagtap.wordpress.com/tag/movable-property> as accessed
on 09/04/2015 at 2:00 P.M.
2
Ganpat Singh v. Kailash Shankar, AIR 1987 SC 1443 at p. 1449.
3
Mohan Manucha v. Manzoor Ahmad, AIR 1943 PC 29 at p. 31.

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the auction-purchaser by paying him five per cent of the purchase money. The rule
being in the nature of a concession must be strictly compiled with. 4

The point that needs to be dealt with is that who can apply for setting aside the
sale. It is to be noted that any person claiming any interest as existing in the time of
the sale or at the time of making an application may avail the benefit of Rule 89. The
expression "interest" has a very wide import and should be construed liberally so as
to enable a party having any inchoate right to apply under this rule. Thus, following
persons are entitled to apply under Rule 89:

1. a judgment-debtor;
2. a co-sharer in the property;
3. a member of a Joint Hindu Family;
4. receiver;
5. a creditor of judgment-debtor;
6. a beneficial owner;
7. a lessee;
8. a mortgagee;
9. a person in possession of the property;
10. a benamidar, transferee, etc.

Conditions

Rule 89 provides for setting aside the execution sale on payment of five per
cent of the purchase price to the auction-purchaser and the entire amount specified in
the proclamation for sale to the decree-holder.

Limitation Period

An application to set aside a sale must be made within a period of sixty days
from the date of the sale as per Art. 127 of Limitation Act, 1963. The executing court
has no jurisdiction to entertain an application for setting aside a sale after the
prescribed period by invoking Section 148 of the Code or by applying Section 5 of
the Limitation Act.
4
T. L. Jagannatha v. B. H. Krishna, AIR 1962 Mad 99.

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SETTING ASIDE SALE ON GROUNDS OF IRREGULARITY

OR FRAUD

Rule 90 Order 21:

90. Application to set aside sale on ground of irregularity or fraud

Nature and Scope

A sale of immovable property in execution can be set aside on the ground of

material irregularity or fraud in publishing or conducting the sale, provided the
applicant proves that he has sustained substantial injury by reason of such irregularity
or fraud. The pre-sale illegalities committed in the execution are amenable to the
remedy under Section 47.5 Post-sale irregularities causing substantial injury to the
judgment-debtor are covered under Rule 90 of Order 21. The following persons have
been judicially held entitled to apply under this rule:

1. the decree-holder;
2. the auction-purchaser;
3. any person entitled to share in a rateable distribution of assets
4. any person whose interests are affected by the sale, e.g. a judgment-debtor,
legal representatives of a deceased judgment debtor, a real owner of the
property sold in execution of a decree against his benamidar; where the
judgment-debtor is a minor, his guardian; where the judgment-debtor is a
ward of court, court wards; a purchaser from the judgment-debtor pendente
lite, etc.

Conditions

In Kadiala Rama Rao v. Butala Kahna Rao,6 the Supreme Court held on a
plain reading of Rule 90, Order 21 of the Code that three factor should be taken into
account in a matter relating to the setting aside of the sale of an immovable property
5
 < http://www.shareyouressays.com/114379/legal-provisions-of-section-64-of-code-of-civil-procedure-
1908-c-p-c-india > as accessed on 09/04/2015 at 3:30 P.M.
6
(2000)3 SCC 87.

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in execution: (i) Material irregularity and fraud in publishing or conducting the sale,
(ii) The satisfaction of the Court dealing with such an application that the applicant
has sustained substantial injury by reason of such irregularity or fraud. (iii) No
entertainment of an application on a ground which the applicant could have taken on
or before the date of drawing up the proclamation for sale.

The crux here is that before a sale can be set aside under this rule, the
following conditions must be satisfied:

(1) There has been a material irregularity or fraud in publishing and conducting
the sale;
(2) Substantial injury has been caused to the applicant. 7

Material Irregularity

The expression "material irregularity" in Rule 90 refers to an irregularity on

the part of the court or its officers in the procedure to be followed before the property
is put up for sale. The following irregularities have been held to be material
irregularities within the meaning of Rule 90:

(i) omission to issue notice under Rule 22;

(ii) omission to publish sale proclamation under Rule 66;
(iii) omission to mention prior encumbrances in proclamation under Rule
66;
(iv) omission to state the revenue or rent payable on the land;
(v) omission to beat drum;
(vi) omission to give survey number of the property;
(vii) omission to hold sale at stated time and place;
(viii) sale after an order of stay of execution;
(ix) sale after satisfaction of the decree;
(x) default in payment of deposit under Rule 84 or balance of purchase
price under Rule 85, etc.

7
Laxmi Devi v. Mukand Kanwar, AIR 1965 SC 834 at p. 837

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Further, the following irregularities have been held not to be material

irregularities under Rule 90:

(i) absence of, or defect in attachment;8

(ii) omission to mention exact time of sale in sale proclamation;
(iii) omission to record reasons for adjournment of sale;
(iv) omission to specify share of the judgment-debtor in the property;
(v) omission to give notice to a receiver when he is not in possession of
property;
(vi) omission to send a copy of the decree to the executing court;
(vii) misdescription of the property in sale proclamation when the parties knew
the property to be sold;
(viii) omission to mention value of the property;
(ix) omission to issue a fresh proclamation after sale is adjourned;
(x) any other ground which the applicant could have taken on or before the
sale proclamation was drawn up, etc.

There is a distinction between irregularity and material irregularity in

conducting the sale and it must be established that by reason of illegality or
irregularity in conducting the sale, the judgment-debtor has sustained substantial
injury.9

Rule 22-A of Order 21 declares that where any property is sold in execution
of a decree, the sale shall not be set aside merely on the ground that the judgment-
debtor had died between the date of issuance of proclamation of sale and the date of
sale and the legal representatives of such judgment-debtor were not brought on
record. The court may, however, set aside such sale if it is satisfied that the legal
representatives of the judgment-debtor were prejudiced.10

Fraud

8
Explanation to Rule 99.
9
Desh Bandhu Gupta v. N. L. Anand, (1994) 1 SCC 131.
10
Mobarak Ali v. Dinabandhu Sahu, AIR 1953 Ori 296.

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“Fraud” means that “which is dishonest and morally wrong”. Such fraud must
be in publishing or conducting the sale. Fraud must be established beyond reasonable
doubt by clear and cogent evidence; general and vague allegations and suspicious
circumstances are not enough. Though the onus of proving fraud is on the party
alleging it, it is open to a court to draw an inference of fraud from the established
facts taken together as a whole.

It is, however, not necessary that the auction-purchaser should also be a party
to the fraud. It is sufficient if fraud on the part of the decree-holder is established. A
mere understanding between intending purchasers agreeing not to bid against one
another is not by itself objectionable and unlawful. But if such an agreement has been
arrived at with a dishonest intention and oblique motive with a view to prevent the
best price from being obtained; it would be fraudulent and invalid. 11

Limitation Period

The Period of limitation is same as provided for Rule 89 of Order 21 of the

Code in Art. 127 of the Limitation Act, 1963 i.e. 60 days. It has to be noted that the
advantage of increased period of limitation was also extended to Rule 90 and 91 of
Order 21 of the Code to set aside a sale in execution of a decree. In view of the
increased period of limitation, confirmation of the sale will have to await the expiry
of the increased period of limitation.

SETTING ASIDE SALE WHEN JUDGMENT-DEBTOR HAS

NO SALEABLE INTEREST

Rule 91 Order 21:

91. Application by purchaser to set aside sale on ground of judgment debtor

having no saleable interest.

11
Ram Rijhan v. Razia Begum, AIR 1943 Pat 88 at p. 96.

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Nature and Scope

Rule 91 enables the auction-purchaser to apply for setting aside the sale on the
ground that the judgment-debtor had no saleable interest in the property. In court
auction sales, there is no warranty of title and the sale carries with it no guarantee that
the property is the property of the judgment-debtor. The auction purchaser takes the
risk and bears the loss. His only remedy is to apply under this rule for setting aside
the sale. This provision is an exception to the general rule of caveat emptor (let the
buyer beware). The rule is intended for the protection of an innocent auction-
purchaser and it cannot, therefore, be invoked where the purchaser knew at the time
of sale that the judgment-debtor had no saleable interest in the property.12 Further, it
is only the auction purchaser who can apply under this rule. 13 A decree-holder
auction-purchaser can also apply. A judgment-debtor cannot apply under this rule.

Saleable interest

The expression "no saleable interest" means no saleable interest at all. Hence,
where the judgment-debtor has some saleable interest, however small it may be, this
rule does not apply and the sale cannot be set aside on the ground that the judgment-
debtor did not have full saleable interest in the property.14

Limitation Period

The Period of limitation is same as provided for Rule 89 and 90 of Order 21

of the Code in Art. 127 of the Limitation Act, 1963 i.e. 60 days. Similar to the law
provided for in other two rules, confirmation of the sale will have to wait till the
expiry of the increased period of limitation.

CONFIRMATION OF SALE

Rule 92 Order 21:

12
Kumarasami Chetti v. T.R. Subramania, AIR 1958 Mad 671
13
Ibid.
14
Ouseph Ouseph v. Devasia Chacko, AIR 1953 Trav-Co 619

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92. Sale when to become absolute or be set aside

Nature and Scope

The above mentioned rule states that no sale of immovable property shall
become absolute until it is confirmed by the court. Where no application to set aside
the sale is made under Rule 89, 90 or 91 or where such application is made and is
disallowed by the court, the court shall make an order confirming the sale, and
thereupon the sale shall become absolute. 15 Once the order is made under Rule 92
confirming the sale, the title of the auction-purchaser relates back to the date of sale. 16

Further, while looking at the bare provision, it must be noted that Proviso to
sub-rule (1) of Rule 92, as added by the Amendment Act of 1976, enacts that where a
claim against an attachment in execution of a decree has been made but the property
attached has been sold pending the determination of such claim, the sale should not
be confirmed by the court before the final disposal of such claim. 17 Furthermore, an
order setting aside a sale or refusing to set aside a sale under Rule 92 is appealable.

Notice

As per Proviso to sub-rule (2) of Rule 92, a notice of the application must be
given to all persons likely to be affected by the order thereon before an order for
setting aside a sale is made. Since the object of giving notice is to give an opportunity
of hearing to the interested party, if he is aware of the application, then the absence of
a formal notice does not vitiate the proceedings.

CONCLUSION

In order to conclude, researcher observes that when a property is sold in

execution of a decree, an application for setting aside sale may be made under the
above mentioned provisions by the persons affected and the grounds mentioned

15
<http://mja.gov.in/Site/Upload/GR/Material%20on%20Execution%20of%20Decrees.pdf> as accessed
on 10/04/2015 at 6:30 P.M.
16
Section 65 of the Code of Civil Procedure, 1908.
17
Statement of Objects and Reasons, 54th Law Commission Report at p. 207.

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therein within the prescribed period of limitation. Referring to the bare provisions of
Order 21, it can be concluded that if a sale of immovable property has been set aside,
the purchaser is entitled to refund of the purchase money paid by him with or without
interest as ordered by the court. 18 An application under this rule can be filed within
three years from the date of the order setting aside the sale. Whereas if the sale has
become absolute, the Court shall grant a certificate in favour of the purchaser which
shall bear the date on which the sale became absolute and also specify the property
sold and the name of the purchaser.19 Issuance of certificate is merely a formal
declaration by the court and neither extinguishes nor creates any title. The object of
such a certificate is to avoid any controversy regarding the identity of the property
sold and the purchaser thereof. It is just a ministerial act.

CASE LAWS

 Shams Ul Akbar Case (2012 S C M R 1243)

In this case, Respondent No. 3 filed a suit before the Civil Court Sawabi and due to the
petitioner’s non appearance the case was declared in respondent’s favor and Court
appointed an Auctioneer to conduct an auction of the attached articles. Being the highest
bidder respondent was declared successful and deposited 1/4th of the purchase price at the
spot and remaining amount was deposited in the treasury within 7 days of proceedings.

The Respndent No.4 objected and filed a petition before learned Executing Court and
was accepted. The petitioner in reply filed appeal before Additional District Judge which
was dismissed. Learned council for the petitioner contended that the petitioner have
purchased the vehicles in Auction conducted by Auctioneer and deposited money in
time. Sale notice was published in newspaper “Ausaf”.

As per Order XXI, Rule 68 of the Code provided that no sale without the consent in
writing of the judgment debtors can take place until after expiry of at least 15 days in
case of immoveable property and 30 days in case of immoveable property calculated
from the date of which a copy of promulgation has been affixed on the court house of
Judge ordering the same. In this case, the property was auctioned on the very day when
the notice was published in the newspaper. Here, it was a material irregularity and the
sale was rightly set aside by the Executing court. Petition was dismissed.

 Mohammad Khalil Case (2019 S C M R 321)

18
Rule 93 Order 21 of the Code of 1908.
19
Rule 94 Order 21 of the Code of 1908.

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We have heard the learned counsel for the parties and perused the record with their
assistance. It is clear and obvious to us that land measuring 25 acres situated at Mouza
Marakka, Tehsil and District Lahore was sold for a paltry sum of Rs, 2.6 Million which
translates into Rs,96,635 per acre. This amount was not only much less than the actual
market value of the land, but was also substantially less than the DC rate which was in
the sum of Rs,6,06,400/- per acre. Calculated as per this criteria and not considering the
real market value of the land, the value of 25 acres calculated at the DC rate came to
Rs,15,160,000/- We are therefore in no manner of doubt that the land in question was
indeed sold at a throw away price causing substantial injury and loss to the Judgment
Debtor. There was a huge gulf between the value represented by the auction price and
the real market value and there is no plausible or reasonable explanation for such
difference. Further, there is evidence on record that the auction proceedings were not
conducted at the spot.
This fact casts serious doubts upon the sanctity of the auction and the entire process
which led to such auction. It is now well settled that the Court has the power to set aside
any auction if the same is proved to have been conducted in an unlawful or irregular
manner or the property has been sold at a throw away price. We are unable to agree with
the assertion of the learned counsel for the petitioner that inadequacy of the sale price
cannot constitute basis for setting aside a sale.
Thus, in a situation where a property was sold for less than its value, by availing the
benefit of this rule, the judgment debtor or any other person holding interest in such
property may challenge the sale and retrieve the property from the purchaser by
depositing the purchase price together with 5% of such price in Court.
It needs no reiteration that an auction is always subject to confirmation by the Court. Till
such time that such confirmation is granted by the Court, after hearing all concerned
parties and in accordance with law, the powers available to the Court under Order XXI,
Rules 89 and 90 can always be exercised. Upon coming to the conclusion that a property
has been sold for less than its market value, the Court is not denuded of its jurisdiction to
set aside such sale on account of inadequacy of price alone. The record indicates that the
executing court never confirmed the auction. Therefore, no vested right had accrued in
favour of the auction purchaser and the argument of the learned ASC for the Petitioner in
this regard is totally misconceived.

 Mohammad Ashraf Case (2019 S C M R 1004)

It is settled law that where an order or judgment is challenged through separate
proceedings be it appeals or petitions, some of which are within time, while the others
have been filed beyond the period of limitation, all such appeals or petitions ought to be
decided on merit especially when an orders in one appeal or petition (within time) would
apply to the other appeal or petition, which may be barred by limitation. Consequently, it
is appropriate to decide all three Civil Petitions on merits.
Without dwelling further on this aspect of the matter, we are constrained to observe that
there can be no escape from the fact that even in the absence of an Objection Petition,
learned Executing Court is not required to automatically confirm an auction
mechanically and without application of mind by not even, considering the law
applicable. Such is the law laid down by this Court in the case reported as National Bank
of Pakistan and 117 others v. SAF Textile Mills Ltd. and another (PLD 2014 SC 283).

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In the instant case, there is no denying of the fact that 10 separate properties were
directed to be auctioned at the "sites" at the same time. As per the case of the Respondent
Bank, the said properties are allegedly within one mile radius (this is disputed by the
Petitioners). Be that as it may, it is a. physical impossibility that an auction of 8
properties as alleged could be held at the same time at 8 different places even if the said
properties were approximately within a radius of a mile. It appears that the auction was
not held at a site in violation of the terms of the proclamation. Similarly, we have noticed
that there are no bid sheets available on the record, the same having not been prepared by
the Court auctioneer. It is also not clear that 25% of the auction price of each of the said
properties were deposited on the fall of the hammer. There is some reference of the
subsequent deposit through encashment of cheques. In the aforesaid circumstances, it
cannot be safely held that the properties were auctioned in accordance with the law, nor
can it be held that such auction, with obvious legal flaws, could have been confirmed by
the Court even if the Objection. Petition was not maintainable. It appears that the learned
Courts below abdicated their jurisdiction and responsibility, in this behalf.
The impugned judgment dated 06.06.2016 of the learned Lahore High Court as well as
the judgment of the learned Execution Court dated 14.05.2015 are set aside. The auctions
are set aside along with all ancillary actions. The sale price received by the Respondent
Bank shall be refunded to the auction purchaser along with mark up at the rate of 5% per
annum. The possession of the properties shall be taken over by the learned Banking
Court from the auction purchaser and the properties shall be put to auction again and this
time hopefully in accordance with the law.

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