1989 (8) TMI 341 - SC - Indian Laws

Summary

Issues Involved:

1. Applicability of Order 34 Rule 5 of the Code of Civil Procedure during the execution of an order of sale of mortgaged property u/s 32 of the State Financial Corporation Act, 1951.
2. Effect of an appeal on the confirmation of sale.
3. Nature of an order passed by the District Judge u/s 31 and 32 of the State Financial Corporation Act.
4. Right of redemption under Section 60 of the Transfer of Property Act.
5. Applicability of legal fiction in Section 32(8) of the State Financial Corporation Act.

Summary:

1. Applicability of Order 34 Rule 5 of the Code of Civil Procedure:
The court examined whether Order 34 Rule 5 of the Code of Civil Procedure (the Code) applies during the execution of an order of sale of mortgaged property u/s 32 of the State Financial Corporation Act, 1951. The court held that the provisions of Order 34 Rule 5, which permit redemption of the mortgage during the execution of a final decree for sale, are applicable in the execution of an order under Section 32 of the Act. This is because the legal fiction created by Section 32(8) of the Act mandates that the order of sale be executed as if it were a decree in a suit for sale.

2. Effect of an Appeal on the Confirmation of Sale:
The court considered the effect of an appeal on the confirmation of a sale. It was held that the sale does not become absolute until the appeal is decided. This principle was supported by precedents such as Chandra Mani v. Anarjan Bibi and Sri Ranga Nilayam Ramkrishan Rao v. Kandokari Chellayamma, where it was established that an appeal against an order refusing to set aside an execution sale renders the sale and its confirmation fluidal and nebulous until the appeal is disposed of.

3. Nature of an Order Passed by the District Judge u/s 31 and 32 of the Act:
The court clarified that an application u/s 31(1) of the Act is not akin to a suit for enforcement of a mortgage. The order passed u/s 32 of the Act is not a decree stricto sensu but is something akin to an application for attachment of property in execution of a decree at a stage posterior to the passing of the decree. This was supported by the decisions in Gujarat State Financial Corporation v. M/s. Natson Manufacturing Co. (P) Ltd. and M/s. Everest Industrial Corporation v. Gujarat State Financial Corporation.

4. Right of Redemption under Section 60 of the Transfer of Property Act:
The court reaffirmed the right of redemption under Section 60 of the Transfer of Property Act, which can only be extinguished by the act of the parties or by a decree of a court. The court held that the right of redemption had not been extinguished in the present case, as the sale had not become absolute due to the pendency of the appeals.

5. Applicability of Legal Fiction in Section 32(8) of the Act:
The court emphasized that the legal fiction created by Section 32(8) of the Act, which mandates that an order of sale be executed as if it were a decree in a suit for sale, extends to all provisions in the Code regarding the execution of a decree for sale of mortgaged property. This includes the right to redeem the mortgage under Order 34 Rule 5 of the Code, as long as the equity of redemption has not been extinguished.

Conclusion:
The court allowed the application under Order 34 Rule 5 of the Code filed by Maganlal, set aside the order of the High Court confirming the sale in favor of the first purchaser, and restored the order of the Additional District Judge setting aside the auction sale. The subsequent auction sale held in favor of the second purchaser was also set aside. The court directed the return of the mortgage deed to Maganlal and the striking off of the execution in full and final satisfaction. The sums deposited by the first and second purchasers, along with the interest accrued, were ordered to be returned to them. Appeals were allowed with no order as to costs.