9911796707
TMI Blog1986 (11) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... tained a decree for Rs. 20,19,435.83 against appellants Nos. 1, 2 and 3, who were directors and guarantors of the first appellant, the company. The first execution was filed by the decree-holder-bank on April 30, 1964, which continued till January 30, 1973, and was closed as no bidders were forthcoming. On December 19, 1974, an application was filed for permission to sell certain assets mortgaged to the decree-holder for Rs. 11,00,000, which was permitted by the court, but ultimately the sale could not materialise. Thereafter, the decree-holder-bank filed a fresh execution application on May 9, 1975, praying execution of the decree by ( i ) sale of mortgaged property, as described in schedule II, appended to the execution application, ( ii ) sale of personal assets and properties of the judgment-debtors Nos. 2 and 3 to the extent necessary for satisfying the decree. The decree-holder also prayed that the execution should proceed against the mortgaged property and execution against judgment-debtors Nos. 2 and 3 may proceed simultaneously, as it was not possible to cover up the entire decretal amount and the highest bid earlier did not even reach half of the decretal amount which, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gain, the auction was stayed for the time being. By order dated December 15,1978, the judgment-debtor was allowed to sell the debris and a month's time was given for selling the remaining properties. The judgment-debtor-appellants Nos. 2 and 3, on February 15, 1979, prayed for three months time to make payment by means of another deal. On the date fixed, i.e. , July 5, 1979, the judgment-debtor was absent and his application dated February 15, 1979, was rejected. On July 10, 1979, he applied for setting aside the order, which was set aside on July 21, 1979, and the execution proceeded. Sale dates were called and fixed on September, 22, 28, 1979, by order dated August 2, 1979. The decree-holder-bank applied for sale-notice to be published in newspapers, which was allowed on August 23, 1979. The judgment-debtor-appellant No. 2 again applied on September 18, 1979, praying for final sale being stayed till the middle of December, 1979, on the ground that proposals for sale were being negotiated. He was granted time as applied for by him on September 28, 1979, and was directed to make payments by December 5, 1979, but instead of making such payments, the judgment-debtor-appellant No. 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on January 13, 1984, praying for acceptance of the highest bid. Judgment-debtor's application was dismissed. In the meanwhile, the judgment-debtor addressed yet another letter to the bank stating that he had a ready buyer prepared to pay Rs. 20,11,000 in full and final settlement of dues against court decrees, interest, cost and release of guarantors, but proposed payment by instalments (application filed with reply dated January 13, 1984). Finally, the executing court, on April 30, 1985, rejected the objection regarding description of property raised by the appellants on March 25, 1985, and April 6, 1985. This order was challenged in Civil Revision No. 173 of 1985 before this court, which was ultimately dismissed on August 26, 1985. June 11, 12, 1985, as sale dates were given by the Nazif on May 3, 1985. Respondent No. 1, on June 12, 1985, offered a bid of Rs 25 lakhs. On the same day, appellant No. 2 made an application for sale of the land and the bungalow separately proposing the land to be sold in plots and also objecting to their value shown in the proclamation as inadequate. This objection was replied to on June 13, 1985, raising a legal objection that the erstwhile directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xecuted and the court had no jurisdiction to execute the decree, ( iii ) that no notice under Order 21, rule 22, Civil Procedure Code, was ever issued in the present execution against the immovable properties nor were the properties ever attached in execution and in the circumstances, the entire proceedings of sale and confirmation and subsequent actions were without foundation and without jurisdiction; ( iv ) that since the mortgage decree was clearly contemplated under Order 34, rule 5, Civil Procedure Code, no execution could be levied against the mortgaged properties on the erroneous assumption of execution of a money decree, especially in view of the last provisions of the decree itself, ( v ) that the learned executing court has failed to appreciate that the entire proceedings before it are bad for want of jurisdiction inherently and, therefore, without any legal sanction or effect; ( vi ) that the learned executing court has also ignored the last clause of the decree which emphasizes that the decree as regards movables alone was final and executable, while as regards the immovable properties, it was specifically made preliminary and without applying for and obtaining a final ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther a final decree ought to have been drawn up before executing the decree as it is and ( iii ) can the sale be set aside on the ground that a final decree has not been passed. Shri Chitley strenuously urged whether such a question can be raised at all. According to him, objections raised by the appellants before the executing court were barred by limitation. The doctrine of res judicata also applied to the case and the appellants were estopped from raising such objections, as they failed to raise the same at the proper stage. Objections which could and ought to have been raised in view of Explanations IV and VII to section 11, Civil Procedure Code, indisputably were not raised by the appellants. Order 21 contemplates different stages when objections are raised regarding execution of a decree, their scope and nature as prescribed and as one moves ahead from stage to stage, the scope and nature of objections is proportionately curtailed. The appellants could well have raised an objection at the stage when a notice under sub-rule (1) of rule 22 of order 21 was issued. Then, under rule 23 which provides a second stage, next, under rule 66 a third stage, for the appellants to ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence has to be made to the impugned order. The executing court has noted the important words of the decree "this decree be treated as an ex parte final decree, as regards the money decree and its satisfaction by sale of the hypothecated movable properties and it should be treated as an ex parte preliminary decree for the sale of mortgaged immovable property". It was on this basis that the executing court observed that it could be said that the decree is partly final and partly preliminary, so far as the mortgaged immovable property was concerned. Shri Sanghi, learned counsel appearing for respondent No. 1, referred to Order 34, which relates to suits relating to mortgage of immovable property. Rule 2 of Order 34, relates to preliminary decree in a foreclosure suit and rule 4 is regarding preliminary decree for sale, while rule 5 of Order 34 speaks of final decree in a suit for sale. He also referred to forms of decrees prescribed under these Rules. (Appendix "D" of Code of Civil Procedure). Form No. 5A relates to preliminary decree for sale and Form No. 6 is the form of final decree for sale. The form of decree, which has been used in the instant case, is Form No. 1 of dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plaintiff with further interest at the rate of 6% per annum on the principal amount of Rs. 17,96,922.11 and the cost of the suit on or before March 1, 1964, or any later date up to which, time for payment may be extended by the court, ( ii ) that on such payment and on payment thereafter before such date as the court may fix of the amount specified in sub-clause ( i ), including cost and future interest till the date of payment, the plaintiff shall bring into court all such documents in possession or power relating to the mortgage property; ( iii ) that it is further ordered that the money realised by such sale shall be paid into court and shall be duly applied (after deduction therefrom of the expenses of sale in payment of the amount payable to the plaintiff under the decree and under any further orders that may be passed in this suit and in payment of any amount which the court may adjudge as due to the plaintiff in respect of costs together with interest as may be payable under the decree and that the balance, if any, shall be paid to the defendants or other persons entitled to receive the same; ( iv ) and it is hereby further ordered that if the money realised by such sale sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t conclusively, determines the rights of the parties with regard to all or any of the matters in controversy in the suit and may be either preliminary or final. For an adjudication to be a decree, three essential conditions are necessary, namely, (1) that the adjudication must be given in a suit; (2) the suit must start with a plaint and culminate in a decree; and (3) that the adjudication must be formal and final and must be given by a civil or revenue court See Diwan Brothers v. Central Bank of India, AIR 1976 SC 1503. The word "execution", in its widest sense, signifies the enforcement of, or for giving effect to, the judgments or orders of courts of justice. It is not the case of the appellants that the court passing the decree had no jurisdiction to try the suit and pass a decree therein. Their objection precisely is that, in the absence of final decree passed by the court, mortgaged immovable properties could not have been proceeded against in execution of the decree, as it is. The objection that the decree was inexecutable, there being no inherent lack of jurisdiction in passing the decree and no inherent defect in the decree, is not well founded and the executing co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed of guarantee executed by them on November 30, 1959 (annexure J to the plaint). The balance stated above stands confirmed by the defendant-appellant No. 1. The plaintiff, therefore, prayed for the following reliefs: ( i )A decree for Rs. 22,10,435.83 with interest at the rate of 6% from the date of suit till payment in full; ( ii )Hypothecated goods be ordered to be sold and sale proceeds be applied to the satisfaction of the decree; ( iii )Sale of mortgaged property: ( iv )If the hypothecated goods and immovable properties fall short of complete satisfaction of the decree, other immovable or movable properties belonging to defendant No. 1 be sold and proceeds applied to the satisfaction of the balance of the decretal amount; ( v )If the amount under the above should fall short of satisfaction of the decree, then the movable or immovable properties belonging to defendants be ordered to be sold and the proceeds be applied to the satisfaction of the balance of the decree. Comparing the operative part of the judgment and the decree, the following omissions in the decree were pointed out by Shri Chitley, but notwithstanding these omissions, learned counsel maintained that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y later stage, raise any objection as to the executability of the decree. Thereafter, comes the stage under rule 66 of Order 21, which provides for proclamation of sale by public auction in execution of a decree and sub-rule 2 of rule 66 again requires notice to the judgment-debtor, and before coming to an objection under rule 90 to set aside the sale on ground of irregularity or fraud (as in the instant case the decree-holder-bank having been granted leave on August 5, 1981, to bid). Rule 72A and rule 89 of Order 21 were the stages at which objections could have been raised, but were not raised. Of course, the scope and nature of such objections is considerably reduced and curtailed as one proceeds ahead of the stage of notice, as contemplated by rule 22 of Order 21. Shri Chitley contended that objections, which could and ought to have been raised, as regards executability of the decree, at the earliest opportunity, at the stage of notice under rule 22, indisputably not having been raised, such an objection cannot be raised at this belated stage and that too in the second round of execution proceedings instituted more than a decade back on May 9, 1975, the first execution applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the mortgaged properties by private sale on December 23, 1974. This was an occasion for raising any objection with regard to the sale of mortgaged immovables on the ground which is now being raised, viz ., absence of a final decree. On May 9, 1975, another application for execution came to be filed, which included the remaining items of mortgaged properties, including lands, buildings and machinery, as set out in the schedule appended to the execution application, with a prayer by the decree-holder to sell the mortgaged property described in the schedule and sale of personal assets and properties of appellants Nos. 2 and 3. A simultaneous execution against mortgaged property and properties belonging to appellants Nos. 2 and 3 was prayed to be sold by public auction and the decree-holder-bank to be permitted to bid. Notices were issued to the judgment-debtors, who were duly served. They entered appearance on April 6, 1976, and Shri Mujumdar, advocate, appearing on their behalf, prayed for some time, which was granted. But no reply was filed till July 3, 1976. Again, on July 21, 1976, time was sought by Shri Mujumdar for filing a reply. Accordingly, time was granted. On Februa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... newspapers. On September 5, 1979, it was the judgment- debtors who submitted another proforma for sale proclamation. Thus, from the above narration of events and facts, it is clear that at no stage in the execution proceedings, the judgment-debtor-appellants raised the objection which is now being raised and pressed. The following dates and events, as detailed hereunder would further show the conduct of the judgment-debtor-appellants: On September 18, 1979, judgment-debtor No. 2 made an application stating that proposals were being negotiated and prayed for stay of sale, till middle of December, 1979. On September 28, 1979, judgment-debtor applied for time for payment and prayed for adjournment of sale. Time was granted till December 5, 1979, to make payment. On December 5, 7, 1979 the judgment-debtor applied for three months' time and adjournment of sale and time till February 22, 1980 was allowed making it clear that in default, sale will proceed without further proclamation. On December 7, 1979, the court ordered adjournment and decree-holder had no objection to such adjournment of two months, provided the sale was to continue. On February 22, 1980/ February 15, 1980, the judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be accepted. The doctrine of constructive res judicata is fully attracted to the facts of this case. The objection, which is now being raised, ought to have been raised at the earliest stage when a notice under Order 21, rule 22, Civil Procedure Code, was served on the judgment-debtor-appellants, more than a decade back on April 6, 1976. Shri Chitley also contended that the appellants are estopped from raising such an objection by their own conduct as has been revealed during the execution proceedings and as set forth above in the foregoing paragraphs. There are a few other events which deserve to be noted. When objection under Order 21, rule 90, Civil Procedure Code, was filed, the objection was with regard to the area and the fact that the director's bungalow alone was worth 10 lakhs, which had been under valued. Judgment-debtor-appellant No. 2 addressed letters to the decree-holder-bank (which have been placed on record along with reply dated April 24, 1984) stating that he had a buyer, who was ready to pay Rs. 20,11,000 in full and final settlement of dues against court decrees, interest, costs and release of guarantors, but the payment was proposed to be made by instalment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is one more important point raised by Shri Chitley, which relates to the "locus standi" of the appellants in maintaining this appeal. The determination of this point involves consideration of applicability of certain provisions of the company law, as regards dissolution and winding-up of a company, its effect on the properties, vis-a-vis the rights of the directors and shareholders of a dissolved company. The appellant company has been ordered to be wound up by the High Court of Rajasthan on March 25, 1965, in Company Case No. 12 of 1964. By a subsequent order passed on November 5, 1981, the company has been dissolved and its name has been directed to be struck off from the register of the Registrar of Companies. The contention advanced by learned counsel for the respondents, Shri Chitley, is that appellants Nos. 2 and 3 had no right to represent the company, appellant No. 1, in view of the winding up and dissolution of appellant No. 1 and have no "locus standi" to file the appeal. Appellants Nos. 2 and 3, who have submitted and signed the appeal-memo at the end have not disclosed in what capacity, whether as a director of the company or on any authority they claim, they have pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r an adjournment. The prayer is declined. He was informed of the application of Shri Sagar Chand several days ago. The applicant, State Bank of Indore, claims to be a secured creditor. A secured creditor is outside the liquidation proceedings and not bound to take rateably with other secured creditors. The applicant is permitted to prosecute the execution application in the Court of the Additional District Judge, Indore". With this order, the respondent-bank, as a secured creditor, is fully entitled to proceed against the mortgaged property in execution of its decree. There is nothing wrong in proceeding against the mortgaged property. The Supreme Court in M. K. Ranganathan v. Govt. of Madras, [1955] 25 Comp Cas 344, quoting Lord Wrenbury, has explained the position of a secured creditor in the following words (p. 351): "The phrase 'outside the winding-up' is an intelligible phrase if used, as it often is, with reference to a secured creditor, say a mortgagee. The mortgagee of a company in liquidation is in a position to say the mortgaged property is, to the extent of the mortgage, my property. It is immaterial to me whether my mortgage is in winding up or not. I remain out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for sale and seeing the whole deal through. It was contended that the executing court had erred in holding that the sale which began on June 11, 1985, without any sanction of the court, was a proper sale, merely because it continued on June 12, 1985. A perusal of the order sheets goes to show that in the marginal column, against the order sheet entry dated April 30, 1985, the sale dates as reported by the Nazir were June 11, 1986, on the spot and June 12, 1985, in the court. The order sheet dated April 30, 1985, reads as follows: "D. H. by Shri Gagaonkar, advocate, J. D. by Shri Rege, advocate, Order passed. Objection dismissed. On payment of P.F., proclamation be issued after taking sale date from Nazarat. The description of property shall be as per schedule in exhibit P-4 (mortgage-deed) of the original suit. Put up on June 12, 1986, for S.D". No doubt the subsequent order sheet dated May 3, 1985, recites that the sale date given by the Nazir is June 12, 1985, and by order sheet dated April 30, 1985, the case was directed to be put up on June 12, 1985, for sale date. On June 10, 1985, on receiving a stay order from the High Court, the warrant of sale, if already issued, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... promptitude with which steps were taken, it does not reflect any illegality or irregularity. The other points as regards publication, paper publication, price of the land sold, ceiling on property, false bidder, area and description of property have been rightly dealt with by the learned judge of the executing court. In the circumstances and for the foregoing reasons, this appeal fails and is liable to be dismissed, not merely on the ground of maintainability but also on merits. It is accordingly dismissed. There shall be no order for costs. For the same reasons, the connected Civil Revision No. 377 of 1985, which is also directed against the order dated October 1, 1985, passed by the executing court, is also liable to be dismissed and is accordingly dismissed, without any order as to costs. The argument was advanced Oil behalf of the appellants that there could be no. res judicata or estoppel against the objections raised by the appellants, as, they basically related to jurisdiction, but sub-rules (2) and (3) of rule 90 of Order 21, Civil Procedure Code, provides a complete answer to the objection raised and it may also be noted that mere irregularity or fraud standing by itse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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