1992 (4) TMI 265 - HC - Indian Laws

Summary

Issues Involved:
1. Fraud in the conduct of the auction.
2. Illegality and material irregularity in the holding of the auction.
3. Bar of the present suit due to a previously instituted suit.
4. Gross inadequacy of the sale price and its impact on the validity of the sale.
5. Appropriate reliefs and costs.

Summary:

Issue 1: Fraud in the Conduct of the Auction
The plaintiff proved that the defendants committed fraud during the auction held on 6-7-1974. The auction was described as a "stage-managed farce" to enable defendant No. 2 to acquire the property for a pittance. The plaintiff's representative was prevented from participating, and the auction lacked transparency, with no bids being invited. The sale proclamation falsely described parts of the property and omitted crucial details, leading to a fraudulent sale.

Issue 2: Illegality and Material Irregularity in the Holding of the Auction
The plaintiff demonstrated that the auction was marred by material irregularities and illegalities. The sale proclamation lacked the estimated value of the property and the reserve price, which are essential for attracting potential buyers. Additionally, the exact amount of property tax due was not specified, and the rental income was not mentioned, further deterring potential bidders. These omissions constituted significant irregularities affecting the auction's fairness.

Issue 3: Bar of the Present Suit Due to a Previously Instituted Suit
The present suit was not barred by the previously instituted Suit No. 4643 of 1974. The earlier suit, which was not pursued after the plaintiff failed to comply with a condition for an interim injunction, challenged the right to auction before it took place. In contrast, the current suit sought to declare void the result of the auction held on 6-7-1974. The different causes of action in the two suits negated the defense contention of non-maintainability.

Issue 4: Gross Inadequacy of the Sale Price and Its Impact on the Validity of the Sale
The property was sold at a grossly inadequate price of Rs. 61,000/-, significantly lower than its estimated value of Rs. 2,84,321/-. The inadequacy of the price itself was evidence of fraud, as the sale fetched only about 25% of the property's real value. The low price, coupled with the irregularities in the sale proclamation, indicated collusion between the defendants, rendering the sale invalid.

Issue 5: Appropriate Reliefs and Costs
The court declared the auction sale held on 6-7-1974 void and not binding on the plaintiff. The defendants were permanently enjoined from taking further steps to complete the sale. Each party was ordered to bear its own costs due to the complexity of the issues involved.

Order:
Declared that the auction sale of the suit property held on 6-7-1974 by M/s. Gandhi & Co., Auctioneers under the instructions of defendant No. 1, is void and not binding upon the plaintiff. Defendants are hereby permanently injuncted against taking any further steps to complete the aforementioned sale. Costs in suit to be borne as incurred.