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CPC Setting Aside of Sale
CPC Setting Aside of Sale
TABLE OF CONTENTS
TABLE OF CASES.......................................................................................................2
SYNOPSIS.....................................................................................................................3
Abstract.......................................................................................................................3
Research Questions.....................................................................................................3
Research Methodology...............................................................................................3
Topic Scheme.............................................................................................................3
INTRODUCTION..........................................................................................................4
SETTING ASIDE OF SALE ON DEPOSIT.................................................................4
Nature and Scope........................................................................................................5
Conditions...................................................................................................................6
Limitation Period........................................................................................................7
SETTING ASIDE SALE ON GROUNDS OF IRREGULARITY OR FRAUD..........9
Nature and Scope........................................................................................................9
Conditions.................................................................................................................10
Limitation Period......................................................................................................14
SETTING ASIDE SALE WHEN JUDGMENT-DEBTOR HAS NO SALEABLE
INTEREST...................................................................................................................15
Nature and Scope......................................................................................................15
Saleable interest........................................................................................................16
Limitation Period......................................................................................................16
CONFIRMATION OF SALE......................................................................................16
Nature and Scope......................................................................................................17
Notice........................................................................................................................18
CONCLUSION............................................................................................................19
BIBLIOGRAPHY........................................................................................................20
Books & Statutes......................................................................................................20
Articles......................................................................................................................20
Weblinks...................................................................................................................20
TABLE OF CASES
Kayjay Industries (P) Ltd. v. Asnew Drums (P) Ltd., (1974) 2 SCC 213.............18
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
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 Questions
1. What are various legal provision provided for setting aside of sale in the Code
of Civil Procedure, 1908?
2. What are the objectives of instituting such provisions in the Code and what is
their scope?
Research Methodology
A descriptive and doctrinal research methodology was used for this project.
Concerned statute and books of renowned authors were looked into for the
compilation of the present study. Several websites were looked into for
understanding the concept of present study. Moreover various articles and case laws
were referred inorder to clear the law point at the present time. Referring to all the
primary and secondary material mentioned above, the present study has been
compiled and presented to the concerned.
Topic Scheme
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 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 lis got settled by him from the Court even after spending decades
altogether.1
property sold at the time of the sale or at the time of making the application,
or acting for or in the interest of such person, may apply to have the sale set
aside on his depositing in court,—
(a) for payment to the purchaser, a sum equal to five per cent of the purchase
money, and
(b) for payment to the decree holder, the amount specified in the
proclamation of sale as that for the recovery of which the sale was ordered,
less any amount which may, since the date of such proclamation of sale, have
been received by the decree holder.
(2) Where a person applies under rule 90 to set aside the sale of his
immovable property, he shall not, unless he withdraws his application, be
entitled to make or prosecute an application under this rule.
(3) Nothing in this rule shall relieve the judgment debtor from any liability he
may be under in respect of costs and interest not covered by the proclamation
of sale.
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
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
3
Mohan Manucha v. Manzoor Ahmad, AIR 1943 PC 29 at p. 31.
4
T. L. Jagannatha v. B. H. Krishna, AIR 1962 Mad 99.
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. In Tribhuvandas Purshottamdas
Thakur v. Ratilal Motilal Patel,5 the Supreme Court held that provisions of Rule 89
are not intended to defeat the claim of the decree-holder or the auction-purchaser
unless the decree is simultaneously satisfied. Rule 89, therefore, requires that two
primary conditions relating to deposit must be fulfilled, namely, (i) the applicant
must deposit in the Court five per cent of the purchase money for payment to the
auction purchaser, and (ii) he must also deposit the amount specified in the
proclamation of sale, less any amount received by the decree-holder since the date of
proclamation of sale for payment to the decree-holder.
The provision of the rule regarding the two deposits is mandatory and in case
of failure to comply with any of them no sale can be set aside. 6 Such deposit must be
unconditional and not under protest. Further, it must be in cash and not by cheque or
Government promissory note.7 When the judgment creditor agrees to extend the time
5
1968 AIR (SC) 372.
6
Ibid.
7
T. L. Jagannatha v. B. H. Krishna, AIR 1962 Mad 99.
for payment of the amount for a specified period and in the meanwhile agrees to
receive interest accruing due on the amount of the decree, the condition requiring the
judgment debtor to deposit in Court for payment to the decree holder the amount
specified in the proclamation of sale for the recovery of which the sale was ordered
cannot be deemed to be complied with. 8 It is sufficient to observe that an order
setting aside a court sale, in execution of a mortgage decree cannot be obtained,
under Order 21 Rule 89 of the Code of Civil Procedure by merely depositing five
percent of the purchase money for payment to the auction purchaser and persuading
the decree-holder to abandon the execution proceedings. Furthermore, in case of
manifest illegality in conducting the sale, the court may take proceedings suo motu
and set aside the sale even after the expiry of the period of limitation prescribed
therefore.9
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.
It has to be noted that, earlier, the period for making an application for setting
aside the sale was thirty days under Article 127, Limitation Act, 1963. In 1974, the
Limitation Act was amended to extend the period of Limitation to file an application
for setting aside sale was extended from 30 day to 60 days. 10 However, In P.K. Unni
v. Nirmala Industries,11 the Supreme Court held that the limitation period for making
deposit in an application for setting aside a sale under Rule 89, Order 21 is 30 days
from the date of sale as prescribed under Rule 92(2) Order 21 of the Code.
8
Tribhuvandas Purshottamdas Thakur v. Ratilal Motilal Patel, 1968 AIR (SC) 372.
9
Nani Gopal Paul v. T. Prasad Singh, (1995) 3 SCC 579.
10
Justice A. N. Jindal, “Executions”, < http://cja.gov.in/data/Executions.pdf> as accessed on 09/04/2015
at 4:15 P.M.
11
(1990) 2 SCC 378.
“18. Having given our careful consideration to the question, we are of the
opinion that there is no anomaly and that there are no different periods of
limitation for making deposits and/or filing an application for setting aside
the sale. It is by virtue of Order 21 Rule 89 CPC that an application for
setting aside a sale and a deposit can be made. Order 21 Rule 89 CPC does
not prescribe any period within which the application is to be made or deposit
is to be made. All that Order 21 Rule 92 (2) provides is that if the deposit is
made within 30 days from the date of sale and an application is filed then the
Court would have no discretion but to set aside the sale. That does not mean
that if the deposit is made after 30 days the Court could not entertain the
application. If the deposit is made beyond the period of 30 days, but within
the period 60 days, then it will be within the discretion of the Court whether
or not to grant the application. Thus an application can be made within the
period prescribed under Article 127, Limitation Act. As an application can be
made within 60 days and, as stated above, no period for making a deposit is
prescribed under Order 21 Rule 91 (2) the deposit can also be made within 60
days. In our view, therefore, the view expressed in P.K. Unni's case that
Order 21 Rule 92(2) CPC prescribes a period of limitation for making a
deposit is not correct.”
In the recent matter of Ram Karan Gupta v. J. S. Exim Ltd.,13 it was held by
the Supreme Court that on setting aside the sale, amount must be paid by the
judgment debtor within a period specified in the rule and if the deposit is made after
the time limit, the application must be dismissed. The deposit made under Rule 89
Order 21, C.P.C. should be unconditional and unqualified and the decree holder or
the auction purchaser should be able to get the money at once.
12
2001(4) RCR (Civil) 267
13
AIR 2013 SC 24
(3) No application to set aside a sale under this rule shall be entertained upon
any ground which the applicant could have taken on or before the date on
which the proclamation of sale was drawn up.
Explanation : The mere absence of, or defect in, attachment of the property
sold shall not, by itself, be a ground for setting aside a sale 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,15 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
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. 16
Material Irregularity
17
Explanation to Rule 99.
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.19
Fraud
“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
18
Desh Bandhu Gupta v. N. L. Anand, (1994) 1 SCC 131.
19
Mobarak Ali v. Dinabandhu Sahu, AIR 1953 Ori 296.
20
AIR 2014 SCW 6196 SC
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. 21
Substantial Injury
Merely establishing irregularity or fraud is not sufficient to set aside the sale.
The applicant must establish that material irregularity or fraud has resulted in
substantial injury to the applicant. In Saheb Khan v. Mohd. Yusufuddin,24 the
Hon'ble Apex Court has further observed that “setting aside sale by merely
establishing a material irregularity or fraud will not do. The applicant must go
further and establish to the satisfaction of the Court that the material irregularity or
fraud has resulted in substantial injury to the applicant. Conversely even if the
applicant has suffered substantial injury by reason of the sale, this would not be
21
Ram Rijhan v. Razia Begum, AIR 1943 Pat 88 at p. 96.
22
(1866)10 Moo IA 454 (PC)
23
AIR 1923 PC 73.
24
AIR 2006 SC 1871.
sufficient to set the sale aside unless substantial injury has been occasioned by a
material irregularity or fraud in publishing or conducting the sale.”
Sometimes, however, there may not be express allegations and the same may
appear to be implicit from all the facts and circumstances alleged. Whether or not the
injury suffered by the applicant is substantial depends upon the facts of each case. It
should not be confined to pecuniary loss and, therefore, mere inadequacy of price is
no proof of substantial injury though it is one of the relevant factors to be
considered.26
Limitation Period
25
Justice A. N. Jindal, “Executions”, < http://cja.gov.in/data/Executions.pdf> as accessed on 10/04/2015
at 5:00 P.M.
26
Radhey Shyam v. Shyam Behari, (1970) 2 SCC 405.
27
2010(7) R.C.R. (Civil) 467.
increased period of limitation, confirmation of the sale will have to await the expiry
of the increased period of limitation.
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.28 Further, it
is only the auction purchaser who can apply under this rule. 29 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
28
Kumarasami Chetti v. T.R. Subramania, AIR 1958 Mad 671
29
Ibid.
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.30
Limitation Period
CONFIRMATION OF SALE
Provided that, where any property is sold in execution of a decree pending the
final disposal of any claim to, or any objection to the attachment of, such
property, the court shall not confirm such sale until the final disposal of such
claim or objection.
(2) Where such application is made and allowed, and where, in the case of an
application under rule 89, the deposit required by that rule is made within
[sixty days] from the date of sale, or in cases where the amount deposited
under rule 89 is found to be deficient owing to any clerical or arithmetical
mistake on the part of the depositor and such deficiency has been made good
within such time as may be fixed by the court, the court shall make an Order
setting aside the sale:
Provided that no Order shall be made unless notice of the application has
been given to all persons affected thereby:
30
Ouseph Ouseph v. Devasia Chacko, AIR 1953 Trav-Co 619
Provided further that the deposit under this sub-rule may be made within sixty
days in all such cases where the period of thirty days, within which the
deposit had to be made, has not expired before the commencement of the
Code of Civil Procedure (Amendment) Act, 2002.
(3) No suit to set aside an Order made under this rule shall be brought by any
person against whom such Order is made.
(4) Where a third party challenges the judgment debtor title by filing a suit
against the auction purchaser, the decree holder and the judgment debtor
shall be necessary parties to the suit.
(5) If the suit referred to in sub-rule (4) is decreed, the court shall direct the
decree holder to refund the money to the auction purchaser, and where such
an Order is passed the execution proceeding in which the sale had been held
shall, unless the court otherwise directs, be revived at the stage at which the
sale was ordered.
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. 31 Once the order is made under Rule 92
confirming the sale, the title of the auction-purchaser relates back to the date of sale. 32
In the recent matter of Ganesh Pillai v. Sudevan,33 it was observed that in the
event of there being no application files as provided in Rule 89-91, then law
specifically provides for a third challenge to judgment debtor’s title by filling a suit
against auction purchaser, decree holder and judgment debtor by Sub rule (4) of Rule
92 of Order 21 of the Civil Procedure Code.
31
<http://mja.gov.in/Site/Upload/GR/Material%20on%20Execution%20of%20Decrees.pdf> as accessed
on 10/04/2015 at 6:30 P.M.
32
Section 65 of the Code of Civil Procedure, 1908.
33
AIR 2013 CC 1982.
While confirming a sale, the court must adopt a practical and realistic
approach. It may consider the fair value of the property, the general economic trends,
the large sum required to be produced by the bidder, the formation of a syndicate, the
futility of postponements and the possibility of litigation and several other factors
dependent on the facts of each case. No speaking order is necessary. “If the Court
has fairly, even if silently, applied its mind to the relevant considerations before it
while accepting the final bid, no probe in retrospect is permissible. Otherwise a new
threat to a certainty of court sales will be introduced.” 34
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. 35 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
34
Kayjay Industries (P) Ltd. v. Asnew Drums (P) Ltd., (1974) 2 SCC 213 at p. 220.
35
Statement of Objects and Reasons, 54th Law Commission Report at p. 207.
interest as ordered by the court. 36 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.37 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.
36
Rule 93 Order 21 of the Code of 1908.
37
Rule 94 Order 21 of the Code of 1908.
BIBLIOGRAPHY
Tandon M. P., The Code of Civil Procedure, 1908, 26th ed., Allahabad Law Agency,
Faridabad, 2008.
Takwani C. K., Civil Procedure, 7th ed., Eastern Book Company, Lucknow, 2014.
Das Jatindra Kumar, Code of Civil Procedure, Eastern Economy Edition, PHI
Learning Private Ltd., New Delhi, 2014.
Mulla, The Code of Civil Procedure, 17th ed., LexisNexis Butterworths Publications,
Delhi, 2007.
Sarkar, Code of Civil Procedure, 11th ed., Wadhawa Publications, Nagpur, 2006.
Articles
Weblinks
http://mja.gov.in/Site/Upload/GR/Material%20on%20Execution%20of
%20Decrees.pdf
http://www.shareyouressays.com/114379/legal-provisions-of-section-64-of-code-of-
civil-procedure-1908-c-p-c-india
http://www.nolo.com/legal-encyclopedia/setting-aside-sale.html
http://www.legalservicesindia.com/article/article/sale-of-immovable-property-1591-
1.html
www.indiankanoon.org
www.manupatra.com