The Supreme Court has held that a judgment debtor cannot seek to set aside an auction sale on grounds that could have been raised before the drawing up of the sale proclamation. The Bench of Justice Sanjay Kumar and Justice Alok Aradhe ruled that Order XXI Rule 90(3) of the Code of Civil Procedure, 1908 (CPC) creates a statutory bar against such belated pleas.
The Apex Court set aside a judgment of the Madras High Court which had invalidated an auction sale held in 2002 on the ground that the Executing Court failed to examine whether a part of the property would suffice to satisfy the decree.
Case Background
The appeal in G.R. Selvaraj (Dead), through LRs. v. K.J. Prakash Kumar and others arose from a suit for recovery of money.
- The Suit: Rasheeda Yasin (Decree Holder) filed O.S. No. 9158 of 1995 against Komala Ammal and K.J. Prakash Kumar for recovery of ₹3,75,000/- based on a loan of ₹2,00,000/-. An ex parte decree was passed on April 16, 1997.
- Execution: Execution Petition No. 199 of 1998 was filed to attach and sell a house property at Choolai, Chennai.
- The Sale: After multiple failed auctions and reductions in the upset price (from ₹16,25,000/- down to ₹11,00,000/-), the property was sold on September 12, 2002, to the appellant, G.R. Selvaraj, for ₹11,03,000/-.
The judgment debtors filed an application (E.A. No. 475 of 2002) under Order XXI Rule 90 CPC to set aside the sale, alleging irregularities in the reduction of the upset price. This application was dismissed by the Executing Court in 2004 and the dismissal was upheld by the First Appellate Court in 2007.
However, the Madras High Court, in a revision petition (C.R.P. (NPD) No. 2574 of 2007), set aside the sale on February 10, 2009. The High Court reasoned that under Order XXI Rule 66(2)(a) CPC, the Executing Court failed to verify if selling a portion of the property would be sufficient.
Arguments and High Court’s View
The High Court acknowledged the bar under Order XXI Rule 90(3) CPC—which prohibits setting aside a sale on grounds that could have been taken before the sale proclamation—but refused to apply it. Citing precedents, the High Court held that the sale of the entire property caused “substantial injury” and that the obligation to consider selling only a part of the property was independent of the judgment debtor’s objections.
Supreme Court’s Observations and Analysis
The Supreme Court scrutinized whether Order XXI Rule 90(3) CPC, inserted by the 1976 Amendment, would override the judgment debtors’ plea when they failed to raise the issue of “part sale” before the proclamation.
1. Statutory Bar under Order XXI Rule 90(3) CPC The Court noted that prior to 1977, Rule 90 did not contain sub-rule (3). The amended provision reads:
“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.”
2. Distinction from Pre-Amendment Precedents The Court clarified that the decisions relied upon by the High Court, specifically Ambati Narasayya vs. M. Subba Rao and Takkaseela Pedda Subba Reddi vs. Pujari Padmavathamma, were delivered in the context of the unamended Order XXI Rule 90 CPC.
3. Reliance on Desh Bandhu Gupta vs. N.L. Anand & Rajinder Singh The Bench cited the decision in Desh Bandhu Gupta (1994), which dealt with a post-amendment sale. In that case, the Court had observed that Rule 90(3) acts like a “caveat emptor” warning the judgment debtor to be vigilant. The Supreme Court quoted the relevant observation:
“If he [judgment debtor] had notice from court and acquiesced by taking no action before the date of sale, he would be precluded to assail its legality or correctness thereafter.”
4. Application to Facts The Court observed that unlike in Desh Bandhu Gupta, where the debtor was not served notice, the judgment debtors in the present case were:
- Put on notice at every stage of the upset price reduction.
- Participated in the proceedings to an extent.
- Failed to raise the objection regarding the sale of a part of the property at the appropriate stage (Order XXI Rule 66(2)(a) CPC).
The Court stated:
“Having failed to raise a material irregularity in the context of Order XXI Rule 66(2)(a) CPC at the appropriate stage… it is not open to them to now raise such a belated plea and blithely place the burden on the executing Court.”
Decision
The Supreme Court held that the judgment debtors were barred by Order XXI Rule 90(3) CPC from seeking invalidation of the sale. The Court observed that the High Court failed to give effect to the statutory bar.
The Court Ordered:
- The appeal filed by the auction purchaser was allowed.
- The Madras High Court judgment dated 10.02.2009 was set aside.
- The order of the Executing Court (confirming the sale) was restored.
Case Details:
- Case Title: G.R. Selvaraj (Dead), through LRs. v. K.J. Prakash Kumar and others
- Case No: Civil Appeal No. 8887 of 2011
- Coram: Justice Sanjay Kumar and Justice Alok Aradhe
