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TMI Blog1974 (3) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... ") plays the role of decree-holder in the present case. It had lent a sum of ₹ 10 lakhs to the first respondent, which is a drum manufacturing private limited company, in May 1961, on the security by way of mortgage of its land, factory building, plant and machinery situate at Kalwa, District Thana. Respondents 2 and 3 had guaranteed the repayment of the said loan. It is also seen from the facts that in or about 1964 the Dena Bank, now a nationalised institution but not a party to these proceedings had also advanced to the first respondent a sum of ₹ 20 lakhs presumably on the security of its plant and machinery and raw material stocks, although this aspect is not quite clear from the record and is not perhaps very relevant for the disposal of this appeal. We would only like to make it clear that the rights and remedies of the said Bank, whatever they are, against the appellant of the other respondents, are not dealt with in this appeal. The first respondent which had taken the loan for an industrial purpose defaulted in making repayment and so a notice was issued to it by the fourth respondent, the Corporation, under s. 30 of the State Financial Corporation Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a that. the machinery not fixed to the earth had not been shown separately. In August, 1968, the judgment debtor again prayed for postponement to enable him to raise funds to discharge the debt privately and the District Judge acceded to the request conditionally. The prayer was made on August 7, 1968 and the Court directed the judgment debtor to deposit ₹ 1-1/2 lakhs by October, 15, 1968 and postponed the sale till the last week of October. The judgment debtor could not deposit the preliminary sum by the time fixed. Even so, the sale did not take place on October 29, 1968 since the Corporation and the Bank wanted the description of the machinery to be inserted in the proclamation of sale. Early in December the judgment debtor applied that the sale should be of the whole property in one lot, which was turned down by the Court on December, 12, 1968 since the sale in two lots was a course already consented to by him and the move was purely dilatory. However, the judgment-debtor moved the High Court and obtained stay of sale, and the appeal was withdrawn by him on February 26, 1969 whereupon he filed a suit for declaration that the order for sale was without jurisdiction. When ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the two lots of only ₹ 5,65,000/-and Rs, 5,00,000/- respectively, in the latter case ₹ 40,000/- less than on the previous occasion. After considerable persuasion by the Judge, the appellant agreed to raise the offer for both lots together to a gross sum of- ₹ 11,50,000/- and making an intelligent guess on the given circumstances the Court approved the sale, which is now being challenged in these proceedings as an insensible and injurious sanctioning of the sale, ignoring the hopeful prospects of higher prices had the auction been adjourned and better and fuller publicity given. Certain salient facts may be highlighted in this context. A court sale is a forced sale 'and, notwithstanding the competitive element of a public auction, the best price is not often forthcoming. The judge must make a certain margin for this factor. A valuer's report, good as a basis, is not as good as an actual offer and variations within limits between such an estimate, however careful, and real bids by seasoned businessmen before the auctioneer are quite on the cards. More so, when the subject-matter is a specialised industrial plant, which has been out of commission for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conduct of the sale or the price tendered. Nor do the proceedings disclose an unfair under- value on account of the absence of effective bidders or inertness of the Judge. On both occasions there were about 30 or 40 biddeRs.The judgment debtor. the second charge holder the Indian Oil Corporation and other leading industrial concerns interested in the drum industry were represented. All the bidders on the 28th August were told of the next auction date and most of them participated passively or actively in the September sale. On both the sale dates the judges (they were different on the two days) were keen on maximising the' price. A total of ₹ 11,10,000/- was the highest bid in late August and in early September the best offer for lot No. 2 sagged from ₹ 5,40,000/- to ₹ 5,00,000/-.This downward trend could have persisted if further postponements of sale had taken place and the judge did his best to boost the total price to ₹ 11.5 lakhs and- finalised it taking no chances by adjourning the auction. The trend of to-day may be the silhouette of tomorrow and the reduced offer for lot No. 2 this time may well infect lot No. I next time. The Court did a good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the sale would not be a proper exercise of judicial discretion." Be it by a receiver, commissioner, liquidator or court this principle must govern. This proposition has been propounded in many rulings cited before us and summed up by the High Courts. The expressions 'material irregularity in the conduct of the sale' must be benignantly construed to cover the climax act of the court accepting the highest bid. indeed under the Civil Procedure Code it is the court which conducts the sale and its duty to apply its mind to the material factors bearing on the reasonableness of the price offered is part of the process of obtaining a proper price in the course of the sale. Therefore failure to apply its mind to this aspect of the conduct of the sale may amount to material irregularity. Here substantial injury without material irregularity is not enough even as material irregularity not linked directly to inadequacy of the price is insufficient. And where a court mechanically conducts the sale or routinely signs assent to. the sale papers not bothering to see if the offer is too low and a better price could have been obtained and in fact the price is substantially ina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n when given the opportunity, produce buyers by private negotiation. 'Not even a value's report was produced by him, we are satisfied that the District Judge had committed no material irregularity in the conduct of the sale in accepting the highest offer of the appellant on September 3, 1969. Shri Parekh has levelled a number of criticisms of the court sale which we regret are more captious than substantial, more fictitious than genuine. Complaining about the rains in Bombay that day-, i.e. September 3, dissecting the Corona Electricals' valuation for minor omissions and errors, holding up the exaggerated figure of about ₹ 6 lakhs as the market value of the property and other like circumstances can hardly convince anyone that the hoped-for happy day would arrive when a handsome price would be forthcoming if the auction were adjourned ad libitum at the instance of the judgment debtor. Prima 'facie it may look a little odd that a financial organisation in the public sector, with a special responsibility to the people not to play with public funds or advance for shady enterprises or persons should have readily lent a huge amount of ₹ 10 lakhs on a valuatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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